China outpaces US, boom for Australia

HSBC have predicted that China will take over the US as the world’s leading trading nation by 2016
Article by- Rhiannon Sawyer, Dynamic Export

This news will be welcomed by Australian exporters who will be able to drive an increase in international business over the next five years. HSBC Global Connections expects Australia’s trade growth to be up to 25 percent higher than average world trade growth.

An increase of nearly seven percent in Australia’s trade each year for the next five years will be driven by China’s growth as the world’s top trading nation, with Australia’s infrastructure and agriculture contributing significantly to this large gain.

While world trade is expected to grow by nearly four percent over the next five years, Asia’s is expected to grow by nearly double that at six and a half percent.

“These findings provide a good reason for optimism about Asia’s and Australia’s prospects in an otherwise challenging global environment. Businesses need to identify their opportunities now to ensure they are financially and strategically prepared for the expected acceleration in trade in coming years,” said James Hogan, head of commercial banking for HSBC Bank Australia.

Demand for infrastructure expertise will be a boon for Australian businesses architectural and structural engineering sectors, with exports in architecture plans expected to grow by 25 percent annually for the next five years.

While this predicted growth is based on China’s rising trade, Australia will also have  growing trade with other trade partners in Asia, with the fastest growing including Indonesia, Thailand, Korea and India and coal, agriculture, oil and gold as the main export sectors.

HSBC’s Global Connections is a quarterly report spanning 37 countries and covering the top 10 sectors for exports and imports in each country.

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Going international a boost for sales

Expanding overseas is proving to be the best boost of revenue for Australian companies.

Article by- Rhiannon Sawyer, Dynamic Export

A new Regus report suggests that 62 percent of companies are reporting high revenues than those that concentrate only on the Australian market. After polling more than 12,000 companies around the world, the Regus Global Survey also showed that 78 percent of Australian firms that already operate internationally intend to expand further in the next few years, with companies in the ICT and manufacturing and production industries indicating that they are the more likely to grow offshore.

While 40 percent of global companies on average are looking to expand into international markets, only 34 percent of Australian companies operating domestically plan to expand, below the global average. Regus regional vice president South East Asia, Australia and New Zealand said: “Our results indicate that in the current economic climate, Australian firms concentrating on the domestic front risk being left behind in fiercely competitive global markets.
“The findings should act as a wakeup call for these businesses and encourage them to find more effective and cost-efficient ways of moving cross-border in order to enhance their earnings and spread their risk.”

Property lease times and the decision over whether to have an Australian or local presence looking after the company internationally are among the bigger concerns for companies who are yet to expand. Willems said that these concerns aren’t necessarily viable.  “While property and people are perceived as potentially major challenges, the wide availability of flexible workspace options around the globe make the ‘property’ element more perception than reality. Technology in particular, has been a key enabler in helping firms overcome the difficulties of setting up a fixed office space. The phenomenon of the virtual office for example, has provided a platform for firms of all sizes to access global markets of scale but at a fraction of the cost.
“The ‘people’ issues however, do require careful judgement.  Decisions about whether to install a local manager or one from the company’s home country are critical and largely rest on whether sales are handled mainly through a few major distributors, or with direct contact amongst a wide range of customers. Such decisions will depend on the type and size of the business and the industry of operation.”

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Bega Cheese exports to Middle East

Bega Cheese and the Victorian state government have announced the expansion of the company’s Tatura facility in response to a new export deal to the Middle East.
Article by- Rhiannon Sawyer, Dynamic Export

The $7.8 million expansion will generate added investment and jobs in the dairy industry, and will mean the company’s production capacity of cream cheese at the Tatura facility will increase from 15,000 tonnes to 22,000 tonnes.

Victorian Minister for Innovation, Services, and Small Business Louise Asher joined Bega Cheese‘s CEO Aidan Coleman to make the announcement at the Gulfood trade fair in Dubai.
“This announcement is a clear sign of the strength of Victoria’s dairy industry, and in particular, the opportunities present for our clean, safe and reliable dairy exports to the Middle East region,” Asher said. ”I am pleased Bega Cheese has recognised the opportunities in the Middle Eastern market and has joined me on Victoria’s largest ever trade mission to the region.”

Coleman added, “We are proud to be working with the Victorian Coalition Government on these ongoing trade and investment projects, including the Dairy Nutriceuticals to Asia Program which aims to significantly increase our export of infant formula, and other nutritional powders to Asia and the Middle East.”

Minister for Agriculture and Food Security Peter Walsh welcomed the announcement in Melbourne, saying that Victorian exports of dairy to the Middle East and North Africa grew by almost 18 percent from 2009-10 to 2010-11 and were worth $272 million.
The Tatura dairy facility is already exporting to key markets in the Gulf region, including the United Arab Emirates, Kuwait and Saudi Arabia.

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Australia in the Asia century

The Australian Government has embarked on the development of a White Paper on “Australia in the Asian Century”. The work on the paper is being led by DR Ken Henry AC and will be completed by mid 2012. Considerable public, including business, consultations have been undertaken resulting in a wide range of people being canvassed on social, political and business aspects of our position in Asia and where it’s likely to be in the future.

I think the introduction to the Terms of Reference is worth repeating, “The greatest influence on the future prosperity of Australia is the dramatic shift of economic power and as a result, strategic weight to Asia” “This shift has been underway for some time but has never been more rapid or more profound for Australia’s interests“.  “We are a decade into the Asian Century. Is Australia ready to take advantage of the great opportunities this transformative event will bring” Is Australia prepared for the changes – here at home and in our external relations – that will also come? What do we need to do to better prepare Australia”

This is very timely exercise and we commend the Government for the initiative. From a business perspective I can hear people saying so what’s different? sixty plus percent of our exports are already going to Asia and logic says that will simply continue as it’s done for the last ten or fifteen years. What I think we fail to grasp is four things, first, the rate of growth is nothing short of phenomenal, ten years ago China was by international standards deemed an emerging economy, today its already the world’s second biggest economy and rapidly heading for number one. Second we seem to be transfixed on China and India while countries like Indonesia and Vietnam to name just two have substantial potential as they too are driven by the massive increase in their very business savvy middle class. Third, we are not the only players on the block, the USA, Germany, UK and many other are out there driving their export capability, probably much harder than we are. Finally this middle class we refer to is not only getting bigger, its well educated, very brand conscience and rapidly adopting western behaviours in many of the things they do and wear and in particular many of the things they choose to eat.

Having had the pleasure of working in a number of Asian countries I have gained some insight into where I think Australia stands and what have been the drivers in us acquiring that position. Interestingly some quite small things have made an important contribution. The first is respect for the management of our economy. I recall when I was working with a few different countries before and after the “Asian meltdown” Before it, the broad perception of Australia was a steadily growing economy, three of four percent growth with not much happening, no real excitement a sort of steady as she goes mentality. After, when Australia clearly survived almost unscathed, the rhetoric was different. No more “we are the Tiger economies and you simply don’t fit”, replaced by “you must be doing something right, how can we learn from the Aussie experience?”  The same thing is occurring now, while we may not be seen as a truly dynamic, there remains a sound level of respect which I think will last us a very long time. Australia too should not underestimate the contribution Universities and other places of learning have contributed to our business strength in Asia. Many leading business men and women and government officials particularly in South East Asia and India were educated here in Australia. Many now occupy positions of influence, money and importantly they know the business behaviour of Australians which is vital to building a sound and workable relationship. 

Having this respect and knowledge of our business culture is an important building block for the future. But a building block it is. We too need a better understanding of the business culture in different Asian countries and we too need to make sure that we continue to play a significant role in educating the middle class of Asia.

On the subject of business culture, we urge the Government to work with the private providers in making sure there are funds to train our exporters in this fundamental aspect of doing business in different Asian countries. Let’s see no more money wasted on language courses for exporters that no one has the time or inclination to endure, instead focus on how our neighbours think in terms of business and I’m sure greater outcomes will result. And let’s see Government really get behind the continued development of inbound education, it paid enormous dividends in the past and will continue to in the future. And finally, don’t underestimate the value of the media, Radio Australia played a massive role in positioning Australia in Asia and given the rapidly expanding communication opportunities, we need to be leaders in the field as we were twenty five years ago.

And one word of caution, Asia is not one culture, its many very diversified, colourful and exciting cultures. Australian’s must never assume one size fits all, it doesn’t.

 We wish Dr. Henry and his team at DFAT well with this important initiative.    

Ian Murray, Executive Director- Australian Institute of Export

The sweet smell of success

Kenkoku Kinen No Hi (National Foundation Day) is celebrated on the 11th of February each year in Japan. Early Japanese history books suggest that on this day in the year 660 BC, the first Japanese emperor, Emperor Jimmu, was crowned.

This tradition is just a small part of Japan’s rich history, a history that has seen Japan grow to become a thriving business hub. In fact Japan is the third largest global economy and Australia’s second largest trading partner, both in terms of two-way trade and export. In 2010/11 Australian exports to Japan amounted to A$46.8 billion.

For the founders of Perfect Potion, Salvatore Battaglia and Carolyn Stubbin, Japan has been an important market in their business strategy. Since opening their first store in Brisbane in 1991, Salvatore and Carolyn have worked to make shopping at Perfect Potion a ‘total customer experience’. This concept is now led by their 70 staff who work across eight Australian stores and 10 stores in Japan.

‘We had a distributor in Japan for more than 10 years but they never understood our brand.’ Salvatore says. ‘Our vision is to provide customers with an experience that is the most sought after in the world. Having our brand with a distributor meant that it was just another brand among thousands of other skincare products. But we’ve never seen ourselves like that because there is a whole experience around Perfect Potion.’ 

 

Photo courtesy of Perfect Potion 2012

Salvatore says the secret to the success in Japan has been in setting up a separate company with a business partner, a Japanese national. ‘The fact that she speaks English well and is very business savvy – plus has a strong passion for Perfect Potion – has made it very easy.’

Solid protection of the company’s intellectual property (IP), like its brand, before exporting was also essential. ‘It is so important before you enter a country for export that your brand name is going to be protected. We have our trade mark protected in Australia, Japan, Singapore and the UK.’

To ensure the brand is well and truly covered, Perfect Potion employed the services of an experienced local patent and trade mark attorney firm in Brisbane. ‘We have really good trade mark attorneys. Without their help, there was no way we could register the IP worldwide. They’ve been able to achieve everything from their offices here in Australia’, Salvatore says.

The attorneys liaise with relevant IP specialists in Japan, lodging all applications and coordinating IP searches for all markets. ‘And where they have needed to contact somebody overseas, they have done so on our behalf.’

So far the experience has been very positive. ‘In all honesty, I’d say it’s easier to set up shops in Japan than it is to set up in Australia!’ Salvatore says. ‘I find people very reliable, in terms of organising others to do things. If someone says something will be done by a certain date, it is done by that date.’

Although there haven’t been any infringements of their trade marks to date, regular communication with their Japanese partners means they can be alerted to any potential problems quickly.

Photo courtesy of Perfect Potion 2012

For other companies looking to crack the Japanese market, or indeed any international market, Salvatore has some advice: ‘If you want to be successful, make sure you go into a business relationship with someone who really understands what you’re trying to achieve. It is difficult to set up a business in Japan without having a strong input from Japanese nationals – either having a business partner who is Japanese or a person who really understands the Japanese culture.’

If you are looking at exporting to Japan IP Australia has country specific information on IP issues exporters may face in Japan, and other markets. For information about exporting to a range of countries visit our doing business overseas page.

Jessica Huntley

Marketing and Customer Engagement

IP Australia

Risky business: Australian companies shy away from credit terms despite competition

Australian companies are facing a dilemma, with many increasingly reluctant to extend credit terms to their customers to retain or win business even as heightened competition ranks among their biggest concerns, according to the Survey of Corporate Credit Risk Management in Australia conducted by Coface Australia, the local arm of one of the world’s leading international credit insurance and credit management organisations.

The recent survey of 553 Australian companies, which seeks to understand the payment behaviour of businesses, showed that only 38 % relied on providing credit terms for at least 75% of their sales in 2011, instead favouring more secure forms of payment such as collect-on-delivery. That’s a significant decline from the 55% and 57% recorded in similar surveys in 2010 and 2009 respectively, a trend that could make Australian companies less competitive on the global stage. 

Despite the decline in businesses providing credit terms, increased market competition was one of the biggest concerns for companies, with some 45% of business operators blaming competition for the need to extend credit terms to customers in order to win or keep business.  

Chris Doubé, General Manager of Coface Australia said: “The results of the survey indicate companies find themselves in something of a catch-22, with many of them clearly concerned about the increased risk of extending credit terms to customers just to keep pace with the competition, but they are increasingly concerned about the financial risks involved in extending credit.

“The ease of international online purchasing poses new risks for Australian companies as they now compete increasingly with global suppliers. The number of companies offering credit in China, for example, grew from 65% in 2008 to 90% in 2011, suggesting Australian customers looking for flexible payment terms could start looking to purchase overseas if they can’t find suitable payment terms domestically,” Mr Doubé said. 

“Australian businesses need to provide more compelling payment terms or risk losing customers to overseas suppliers. While there is an increased risk to revenue, we suggest local companies make more use of credit management tools such as credit insurance, which allows them to extend credit terms in order to keep or win business while reducing the risk of doing so,” he said.  

Coface estimates that only 5 to 10% of Australian companies use credit insurance to mitigate risk – a slight increase on previous years - compared to around 40% in Europe. 

“As a general rule Australian companies still fall short of their counterparts in the U.S, Europe and Asia in their use of credit risk management tools, particularly credit insurance,” Mr Doubé said. “This is a worrying trend that could see them lose business to competitors.” 

A decline in the number of Australian businesses offering credit terms to customers could be attributed to an increase in overdue payments. The survey by Coface revealed that more than half (51%) of businesses that offer credit terms also had 54% of their payments overdue by up to 60 days.  

"It's obvious that Australian businesses are more risk averse than their international counterparts, partly due to the lack of credit management strategies in place. However, it's an important competitive advantage in today's market to have the right tools in place to be able to offer flexible payment terms without increasing financial risk," Mr Doubé said. 

In other findings, Australian companies were more optimistic about the Australian and Asian economies than they were about the global economy. Some 42% of respondents said the domestic economy had less than 25% chance of entering a recession next year, about the same as for the Asian economy, while only half that number were as optimistic for the global outlook. Interestingly, increased wages pressure was ranked the highest concern among companies (41%), followed by inflation and higher commodities prices (34%) and tighter monitory policy and access to credit (34%).  

“Again, the concern about higher wages may be feeding into the theme of increased competition as a notable trend in this year’s survey,” Mr Doubé said. “It could possibly be explained by tight margins and cash flow in a competitive market making it difficult for managers to justify salary increases, which could in turn impact staff morale and productivity.”  

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