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.”  

Press Contacts:
Tania Muñiz: ( +61 (0)2 8235 8615 /

The construction sector: persistent credit risk in most countries

The situation of companies in the construction sector closely reflects the world, regional and national economic trends. At a time when the world economy is characterized by divergences between countries, with a recession in the euro zone, there are significant disparities between countries and subsectors. The construction sector was badly hit by the 2009 crisis, and a large number of payment incidents were still occurring in 2011.

Sensitivity to economic conditions specific to each market and subsector
The intensity of activity in the construction sector vary according to the impact of the crisis on the economy of the concerned country and according to sensitivity to economic conditions that varies from one subsector to another. Activity is strong in emerging markets that are making up for lagging development, and this is particularly favourable to certain subsectors, such as public works and private and institutional non-residential construction. Conversely, activity in developed markets is either moderate or stagnant, with particularly large disparities in the residential construction sector linked to differences in demographics, economic environments, credit terms, fiscal legislation, stocks of vacant housing, and prices.

This fragile and variable economic climate, combined with changes in orders form the public sector and regulations as well as fluctuations in both costs of materials and demand, explain the increase in payment incidents during the early months of the crisis in 2008 and again from October 2011 onwards.

Construction in Europe will depend on the austerity plans in 2012
After a three-year decline and a 17% drop in activity over the period, the European construction sector at last almost stabilized in 2011, particularly in the residential subsector, despite disparities between European countries that can be divided into three groups:

- The first group is the one where construction has suffered the most, and where the cleaning up will take some time. Ireland, Iceland, Spain, Denmark, the Netherlands, Greece and Central Europe have been affected by significant excesses in pricing and supply, and keep seeing a large number of payment incidents.

- The second group, United Kingdom, France, Belgium and Italy, has suffered less from the crisis and business even bounced back in 2010. Despite this, a new decline has set in due to the persistence of excessively high prices. Payment incidents are still widespread, particularly in the UK where the number of corporate bankruptcies is the most significant.

In France, companies face tough competition and fight to win contracts even if this means sometimes tightening their margins while taking into account price increases for raw materials. There were fewer bankruptcies in the first quarter of 2011 than in the first quarter of 2010, although the number remains much higher than before the crisis.

- The third group is made up of European countries where the crisis has not affected the construction sector: Germany, Austria, Norway, Sweden, Finland and Poland. Bankruptcies are nevertheless higher than in other sectors, mainly affecting companies whose activity is regional and which work in a single sector. 

For 2012, Coface forecasts a very modest advance in construction in Europe, if the upturn of the housing segment continues. The construction sector will, however, be affected by austerity plans. Public works and institutional building are expected to stagnate under the influence of budget restrictions. Construction of business and industrial premises is likely to be affected by economic uncertainties.

North America: large disparity between the US and Canada
In the United States, falling prices combined with rising costs have weakened the entire sector. Investment in construction fell by 2% in the first 11 months of 2011. Although the decline affects most subsectors, the new building segment has been especially weakened. Non-residential construction also continues to suffer due to budget difficulties of the States and Cities. In Canada, the recovery that began in early 2010 explains the low level of payment incidents recorded by Coface. A sharp slowdown is nevertheless expected in the housing segment in 2012 following the introduction of more stringent credit access conditions.

Asia-Pacific: upturn in activity
Construction in the Asia-Pacific zone is relatively buoyant. Activity is expected to recover fairly well in 2012 in Japan and New Zealand, both affected by environmental disasters, in response to the need for reconstruction. In Australia, in the short term, economic uncertainties are likely to hinder the dynamism of the sector, but activity is expected to pick up in the medium term thanks to favourable demographics.

The case of China
Sales have fallen in China since 2010 following the steps taken by the authorities to cool down the property market, in particular by restricting bank loans to the sector. The drop in sales, price adjustments and increased stock levels are expected to slightly slow the activity in the private residential segment, but this will be partly offset by the launch of a new public social housing construction programme.

The building boom has seen world-class players emerge in China, not only in the construction companies but also as producers of raw materials and machinery manufacturers. These newcomers are more and more active in emerging zones, particularly in Africa and the Middle East.Click here to download a full copy of the report >

Press contact: Maria Krellenstein / ( 33 (0)1 49 02 16 29 / maria_krellenstein@coface.com

On-line export sales

There has been a lot of press regarding the impact of Australians purchasing on-line, particularly from overseas suppliers, and the erosion of the market for our local retailers.

 Many of those retailers are now recognising that the change in buying habits is permanent and are getting on the bandwagon.

This acceptance of on-line sales has positive implications for sectors of the Australian market, especially for a product that suits an international consumer market.  The costs of transport to main destinations abroad by parcel can be reasonably standardised; and after also ensuring payment is made up-front, and the entry documents (where required) meet the overseas customs requirements; it can be an exciting and lucrative addition to the domestic consumer market.

Of course 1) getting found by an overseas buyer and 2) capturing their interest so that they want to buy, are two key steps that precede the sale.  This involves refining the website so that it receives a high ranking on the main search engines, and for Google, perhaps paying for positioning.  Then having been found, you have a very short time span to capture the attention, interest and desire of a potential buyer once they land on your site.

Structuring a website for domestic and overseas visitors requires some finessing.  Some companies set up separate sites in major markets so that they are perceived as a “local” supplier.  Another check point is ensuring your IP is protected in your key target markets, and equally that you are not infringing someone else’s IP already registered in that market.

You need to succinctly outline your USP….why would someone in say Tokyo buy from you? Having text in Japanese may be a good start. Then outlining the originality/quality/uniqueness of your product in values a Japanese consumer would appreciate. Finally clear pricing and a simple delivery process will be the things that clinch the deal.  Many suppliers include delivery in their pricing, or if not, set out standard costs per region so the buyer knows exactly what they are up for.  Can you include guarantees for delivery, returns, exchange (for clothing sizes) etc that take the risk away for the buyer?

There are some very successful Australian suppliers currently doing very well selling to the global consumer market.  To do it properly though requires focus:  monitoring hits, responding to questions, refreshing information so it is always current.  Your website does become the shop front for your business, open to the world 24/7.

So for all businesses with a consumer focus, you need to actively consider the potential overseas customer. 2012 might be the time to start, or your competitors could be taking your market!

Peter Mace, General Manager- Australian Institute of Export

Most Australian companies ill-prepared for Personal Property Security Reform (PPSR)

A high proportion of Australian businesses, 82 percent, are not looking to register their assets under the new Personal Property Securities Reform (PPSR) coming into effect on 30 January.
 In a recent report conducted by Coface Australia, Survey of Corporate Credit Risk Management in Australia, many Australian SMEs were still unaware of the implications to their business, despite significant changes to the way many companies will conduct their trading relationships.

The survey revealed 76 percent of respondents do not have a strategy in place to adapt their business to the changes. One of the key reasons for business operators being under prepared is due to a lack of education and awareness of the reforms. Some 74 percent said they were still unaware of the reforms, compared to 91 percent last year.

Chris Doubé, General Manager of Coface Australia said: “It’s alarming so many businesses are not yet prepared for this critical new piece of legislation, as the reforms will impact virtually all business operators in Australia.

“The PPSR will affect business documentation and procedures, providing a new level of security and certainty in business relationships. Australian companies should seek advice on registering their debtors to protect them against default,” he said.

The PPSR will bring together the different Commonwealth, State and Territory laws and registers governing personal property under one national system. The reforms will introduce the Personal Property Securities Act 2009 and the online PPS Register.

Press Contacts:
Tania Muñiz: ( +61 (0)2 8235 8615 / tania_muniz@coface.com.au
Daniela Nasso ( +61 (0)2 8920 0700 or +61 (0)421 792 765 / dnasso@sefiani.com.au
Mark Roberts: ( +61 (0)2 8920 0700 or +61 (0)405 447 824 / mroberts@sefiani.com.au

About the survey:
This is the third annual survey by Coface Australia on corporate credit risk management in Australia, and supports Coface’s commitment to developing the credit risk management market in Australia. The Survey of Corporate Credit Risk Management in Australia was conducted between 20-24 October 2011, with responses from 533 companies of all sizes, ages and industries. The survey aimed to provide a broad understanding of the status of payment experiences, payment trends and credit risk management practices among companies. The majority of respondents were private (39%) and sole traders (27%) from a wide range of industries including manufacturing, wholesale and retail, and finance services. In 2011, a greater number of larger companies (those with 100+ employees) took part in the survey, accounting for 34% of respondents compared to 4% last year. Public companies made up 16% of respondents compared to 2% in 2010.

Unleash the Dragon

Today marks the start of the Chinese Year of the Dragon. Traditionally, the Dragon is one of the luckiest signs in the Chinese Zodiac, so perhaps 2012 is the right time to consider exporting to China. 

China is Australia’s largest two-way trading partner and export market. In 2010/11 the value of goods exported to China amounted to a whopping AUD $64.8 billion (DFAT, 2011), which is an increase of 39.4 per cent over the previous year. With such a significant volume of trade, it is important for Australian exporters to know how to protect their intellectual property (IP) in this vast market.

China’s counterfeit and piracy market is reportedly the biggest in the world with many manufacturers so skilled at copying items it can be difficult to distinguish fakes from genuine items. In fact, the so-called ‘fake markets’ have become major tourist attractions in large cities like Shanghai and Beijing.

How can you protect your IP in China?

If you are thinking about exporting to China, or using China as a manufacturing base for your products then you should be protecting your IP rights in China. IP Australia is responsible for administering registered IP rights in Australia only. In China, there are a number of agencies that are responsible for registering IP rights. The Chinese Trade Mark Office registers trade marks and the State Intellectual Property Office registers patents and designs.

You have two options if you wish to file a trade mark or patent application in China. You can file your application in China directly, either through a Chinese attorney or an Australian attorney who has a Chinese counterpart. Alternatively, you can file using an international agreement such as the Madrid Protocol for trade marks or the Patent Cooperation Treaty for patents. An Australian patent or trade mark attorney will be able to advise you on your best option.

Protect your trade marks (and their Chinese translations) immediately.

In Australia, we follow the ‘first-to-use’ rule, which generally gives the first person to use a trade mark the rights to that trade mark. In China, the first person to file a trade mark application will generally have priority over an earlier user of the mark (the ‘first-to-file’ rule). This means that even if you are already operating in China, you may have difficulty preventing someone else from registering your trade mark if you do not apply first.

Pharmaceutical giant Pfizer recently learned this lesson the hard way. When it released Viagra in China, Pfizer chose to market one Chinese translation but did not register a similar Chinese translation that was being widely used in the media. When an unrelated company, Guangzhou Wellman Corp, registered the popular translation, Pfizer became embroiled in an 11-year court battle to claim back the translated trade mark but ultimately lost. (Foley & Lardner 2010)

Be watchful of potential IP violators and respond swiftly.

Once you have secured your IP rights, consider developing an infringement strategy to protect yourself against the unauthorised use of your IP. It is not only important to protect yourself but also to make sure that you do not infringe on the IP rights of others.

Know what your rights are and be prepared to act if they are violated. If you find your IP has been infringed in China you have several options. The Administration Industry of Commerce has the power to investigate trade mark infringement and a decision will usually be reached quickly and relatively cheaply. This usually results in a fine for the infringer or the seizure of the counterfeit products. There are, however, disadvantages with the administrative system especially when dealing with repeat offenders.

Alternatively, you can use the judicial system and take your infringer to court. For a foreign company the court process can be lengthy, due to procedural requirements such as translation of documents. Damages awarded by Chinese courts in IP matters have been quite low in the past, although the situation is changing.

Chint Group, a Chinese manufacturer of low-voltage electronics, took action against the French company Schneider Electric for infringing its utility model patent in China. The court initially awarded Chint a record RMB 334 million in damages but the case ultimately settled for RMB 157 million (approximately AUD 24 million) (Foley & Lardner 2010). The case is an example of the greater value being placed on IP by both Chinese companies and the courts and how having a strong IP infringement strategy could minimise the risk of your IP being used without your permission.

Enforcement actions in China can be complex, as they can involve a number of different state and provincial administrative and regulatory agencies. It can be difficult to ascertain which court  or other body has jurisdiction over an IP matter, so specialist legal advice before taking any steps is crucial. The Chinese government has also established numerous IP rights service centres around the country in an effort to make it easier to address enforcement issues.

Whatever action you do take, make sure any infringer knows you are serious about protecting your IP.

IP Australia has country specific information outlining issues exporters may face in different countries including China. For more information visit http://www.ipaustralia.gov.au/understanding-intellectual-property/ip-for-business/doing-business-overseas/ip-protection-in-china/.

Austrade has a network of offices in China and are able to assist Australian exporters and investors.  Phone: 13 28 78, email: info@austrade.gov.au or visit http://www.austrade.gov.au/  

Jessica Huntley

Marketing and Customer Engagement

IP Australia

On behalf of us all at the Australian Institute of Export welcome to 2012

On behalf of us all at the Australian Institute of Export welcome to 2012. One can never really predict what lies ahead but if the dollar remains high and the international business environment shows little sign of recovery, it will continue to be tough for many Aussie exporters.  But in saying that, the US is looking brighter and if China holds up then many major export opportunities will continue to flourish pushing growth in the Australian economy, albeit a two speed economy, for some time yet.

The Institute’s agenda in 2012 is strong. First we have a new President. Dianne Tipping, well known to many of our colleagues particularly those who have experienced an AIEx training program, who took up the task this month. We would like you to join with us in welcoming Dianne to this important role and wishing her well.

Top of the AIEx activities list is the Australian Export Heroes Awards which will be held this year in Sydney. If you know of someone who has, over a long period of time, made a significant contribution to international trade please let us know. Nominations close at the end of February should be directed to Lisa McAuley at lisamcauley@aiex.com.au

This year we also celebrate the fiftieth anniversary of the Premier's NSW Export Awards. Given this important milestone the Institute and NSW Trade & Investment are planning a number of special events in metro and regional NSW culminating in the awards ceremony in October. It will be the biggest export event on the state’s calendar and we encourage you to get involved through entering the awards and having your company recognised for its export achievements. Contact lisamcauley@aiex.com.au for details.

For those new to export, those looking to export to develop their business, or current exporters assessing new market opportunities, the Institute has a range of activities planned for 2012 designed to help develop and build a sustainable export business. Details of these programs including the Future Leaders in Export Club, seminars and workshops on new markets and international trade disciplines will be available on our website at the end of this week. 

In the meantine, we would like to invite you to participate in a short survey that will help ensure our 2012 Future Leaders in Export (FLEx) program continues to present topics that you are interested in. Please click here to follow the link to complete the survey online, which should take just 5-10 minutes of your time. We look forward to seeing you at FLEx meetings commencing in February 2012.

In a difficult export environment possessing the sound international trade skills must be top of your list. Never has it been more important to effectively manage the export risk than it is today. With over fifty year’s experience, the Institute has the best skills development programs available in Australia. Whether face to face, on-line or at your company the Institute provides a flexible range of programs on all key aspects of doing business overseas. For details contact petermace@aiex.com.au or consult our website at http://www.aiex.com.au/education-training/short-courses-workshops

One of the most important things we do at the AIEx is to work with Government in building Australia’s international competitiveness. Whether promoting improvement to the Export Market Development Grants Scheme, lobbying government on tackling the high cost of trade facilitation or building a case for greater access to trade finance, the Institute is there on your behalf taking these issues to Government. To do this effectively, build our export skills and recognise excellence we need your input and participation. Through becoming a member of the Institute you can participate in a range of rewarding activities, benefit through discounts on skills development programs and assist us in getting your message to Government. Details can be found on http://www.aiex.com.au/membership/membership

We wish you every success in 2012 and thank you for your support.   

Ian Murray
Executive Director, Australian Institute of Export