KEY POINTS:
The road to the lucky country is one littered with the corpses of failed ventures. Telecom's investment in AAPT, The Warehouse Group's acquisition of Clint's Crazy Bargains and Silly Solly's stores, and Air New Zealand's Ansett are examples.
But despite the spotlight on these failures - Ansett even
threatened to take Air New Zealand down with it - the sunny shores of Australia still beckon to many Kiwi businesses.
The attraction is obvious. Australia is a market five times the size with more similarities than differences, keeping culture shock to an absolute minimum.
The risks, however, remain immense.
"There's enough examples to make people pause whenever New Zealand companies expand into Australia," said market commentator Arthur Lim. "It tends to ring alarm bells rather than jubilation - and yet we have seen New Zealand companies go over there and do very well."
He cites the likes of Michael Hill and Fisher & Paykel Appliances as two companies that have crossed the Ditch successfully.
But unless a company has a real competitive advantage, the going can be tough.
"They are competing with Australian companies that have stood much more competitive conditions. It's a big market, but a big market means big competition."
Lim said those that take the route of organic growth seem to do better than those that buy their way into the market.
"Those that do it by acquisition find the integration tough, and in the end, in the case of AAPT, Ansett and The Warehouse, it ended up with the New Zealand entity having to beat a retreat."
Retail analyst Tim Morris said a barrier was the shock of scale. Morris, of Coriolis Research, said it was simply not an "elegant" scale to go from a market of 4 million to one of 20 million. With buying often done nationally, the transition is a big one for his retailing and food industry clients.
"If you want to see Woolworths, you go to their buying office in Sydney and they're buying for all of Australia in Sydney. They're not saying, 'um, I really want to screw around and do a lot of paperwork and just stock this in five stores'. They're saying, 'I want to stock
this in all of my stores, how quickly can you supply me?'."
Beverage manufacturer Charlie's Group bypassed the supermarkets altogether in taking its Phoenix Organic range to Australia.
But rather than spend large on marketing, chief executive Stefan Lepionka said the company invested instead on getting branded beverage fridges selling just the Phoenix range into smaller retail outlets - bypassing the problem of standing out on crowded chiller shelves altogether.
The strategy seems to be working, with exports to Australia growing 47 per cent for the 12 months ending June 30. And the company is poised to introduce the Charlie's range next month.
But it has been a long hard road - Lepionka said the original owners of Phoenix spent four years trying to crack the market before Charlie's acquired the business in 2005.
The market's size, however, has its advantages. For Lepionka, a bigger market translates into more available retail outlets for the group's beverages.
"We are able to get a bigger market than we would've experienced in New Zealand - because of the market size."
That scale, however, can overwhelm. Just ask Martin Bell, director of furniture maker Rose & Heather. His advice is simple.
"Don't go national because you've got about five different markets over there. Sydney has over 4 million and if you're in a position like ourselves you could spend your whole career just developing the one Sydney market. If you go nationwide, as a part of a growth strategy it's a very good thing to do, but it has to be well managed. Don't do it all at once."
The company's range first went into Australia through retail chain David Jones in the early 1990s. At its peak, its furniture was in 15 outlets across Australia, but by 1997, with a range of more than 300 pieces, Rose & Heather had outgrown David Jones.
It opened its own store on Sydney's North Shore and within six months, had turned over the same bottomline as at all 15 David Jones stores. A store in Melbourne soon followed.
Bell saw few differences between Australian and New Zealand markets.
"The customer profile is very, very similar. The barriers to entry aren't high but the ongoing cost of doing business in Australia with regard to distribution in a big city is significant.
"Having said that, I believe that it's the easiest market for a New Zealand company to get into because of the distance. And the language. And the vaguely similar laws we have."
The company had support from NZ Trade & Enterprise in the early days, but Bell said they had to experience some aspects of doing business in Australia - such as the need for a public liability fund - for themselves.
Research commissioned by NZ Trade & Enterprise found Aussies viewed themselves as part of the big league - and that New Zealand needed Australia more than the other way around. But it also found that Australian companies were willing to partner with New Zealand businesses more than they realised.
A stronger identity was needed to enable New Zealand companies to differentiate themselves. They also needed to provide tangible evidence of their sophistication and technical know-how to create higher visibility.
It recommended New Zealand businesses spend time and effort learning about the intricacies of the Australian market.
In retail, this meant understanding the target market, competition, price points and positioning. Businesses also had to be less naive when it came to the negotiating table.
For all its challenges, Australia can give ambitious New Zealand companies a self-esteem boost.
Said Coriolis Research's Morris: "If you can't succeed in Australia, you're certainly not going to succeed anywhere else. There's no real difference between [Australia and New Zealand] culturally, it's just the size issue. Once you crack that you can then go on to try and crack the US, or the UK, or Canada."
But this, said Lim, does not mean Australia should be the only option for growth. He cited the examples of Fonterra, Zespri and the wine industry.
"They looked beyond Australia - sure they've got certain competitive advantages - but maybe there's a lesson to be learnt there. You can look beyond Australia and be successful."
