To grow a business, make overseas markets the first destination

Marc Michel says BCS decided to focus on a few selected markets. Photo / Natalie Slade

"If you want to grow a large business in New Zealand, your first sale should be export."

That's according to Marc Michel, general manager at BCS, the Auckland-headquartered company that supplies baggage handling and logistics systems around the world.

"As a domestic market you can only ever have a small business," says Michel. "If you want to grow and scale the business then, to me, your first sale should be export."

More than 95 per cent of BCS' $100 million a year turnover comes from sales overseas, most recently a deal to upgrade baggage handling systems for Virgin Australia in its Perth and Brisbane terminals.

Michel admits that until a few years ago, winning business in the global market tended to be opportunistic and scattergun.

He says BCS recognised it was an inefficient way to win and retain business, so narrowed its strategy to focus on operating at a high level in a few selected markets.

Southeast Asia was judged a priority and the timing to provide systems in a region intent on improving infrastructure was bang-on.

Michel says the global financial crisis and downturn in Europe drove large European competitors to turn their attention to Asia, with its growing fleet of low-cost airlines serving a rising middle class.

"It's now very clear that the growth engine in our business is obviously Asia, as it is for many different sectors and yet if we hadn't focused when we did then we would really be behind the eight ball because there is such a scramble to get a piece of the business in Asia."

In the past 12 months a regional headquarters and manufacturing plant has opened in Kuala Lumpur, with a sales office opening in Singapore last month - a key part of the Southeast Asia strategy and significant in winning business in the region.

He says being close to the customer and offering a solution exceeding the design brief made a difference when going up against multinational Siemens to win a project in the new Kuala Lumpur International Airport 2 terminal construction. "If that market is going to be critical to your business plan then expect to develop an in-market presence."

Michel says there is no substitute for feet on the ground, whether that be a physical office, spending time travelling to the region or collaborating with other New Zealand companies which share a similar strategy to get visibility in a market.

With further operations in Australia, North America and a subsidiary dealing with major projects in Mexico, even a defined focus on key markets creates complexity for BCS.

"FX (foreign exchange) management for the company is a massive task and international business is just increasingly complex and you need to have the right advice and good advisers."

Michel says the company maintains a master list tracking all its key relationships that assist in the business, including banks, the Export Credit Office and NZTE.

However, Michel warns that not completing due diligence in markets less transparent and regulated than New Zealand can be costly.

"We've had some adverse experiences in that respect. [We] thought we'd done due diligence really well but what we learned in Asia is, rarely is anything as it appears to be and you really need to look very hard and very carefully at who you're engaging with locally before you make a commitment."

His advice is to start closer to home with Australia, which at least shares a similar regulatory and business transparency environment, albeit in a tough, intensely competitive market.