Leith Oliver: 'Entrepreneurial judo' good way to take fight to world

The key issue for exporters is to fully understand the sometimes complex financial products they are buying to offset the risk, says Leith Oliver. Photo / File

Opinion

Pick your market and find the best way to enter it with an eye on the exporting pitfalls, says Leith Oliver.

How do businesses pick which markets to enter?

For an initial scan of potential markets, use data on countries found in the annual World Economic Forum report (www.weforum.org). Although providing a broad-brush picture, the data is extensive and can lead to a first cut of contenders. For more intimate evaluations it is useful to pick a set of criteria, such as population, culture, government regulation, political and economic stability, language and currency. Then rank the attractiveness of each market against your business strengths. Secondly, think initially in terms of one city, not a full country. For example, Melbourne has the same population as New Zealand, is only three hours away by air and is culturally similar to New Zealand.

What are the best ways to enter new markets?

Management guru Peter Drucker has suggested "entrepreneurial judo" to help small companies, along these lines:
•Being fastest with the mostest - being the unchallenged leader in your field using continuous and rapid innovation.
•Use creative imitation - hit them where they ain't. Attack market gaps and operate under the radar.
•Find and occupy an ecological niche - based on a scarce specialty skill or knowledge.
•Change the economic characteristics of an existing product or business model - redesign to reduce non-value adding cost to gain competitive advantage.

What's important in an agent or distributor?

The agent will facilitate trade and be paid a commission, whereas a distributor buys your products and usually takes on all the risk of funding, marketing and distribution in return for a significant share of the profit margin. In either case you are dependent on their performance to get your product successfully into the market. The key components of the relationship should be regular communication, performance measurement, efficient operational systems and active collaboration.

What are some common export blunders?

Exporting risk can be managed or mitigated by awareness and planning. Here's a list of pitfalls exporters have stumbled into:
•Selling at the market rather than in it.
•Failure to tailor existing products or services to the new market's requirements.
•Lack of understanding of cultural differences.
•Trying to do it all by yourself.
•Going too fast - you need to temper persistence with patience.
•A failure to realise how much capacity is needed.
•A failure to realise working capital requirements.
•A failure to understand foreign government regulations.
•A failure to have all import/export documentation correctly prepared.

What foreign exchange risk is there?

The key issue for exporters is to fully understand the sometimes complex financial products they are buying to offset the risk.

Hedging is the most common practice to offset risk. This involves a forward exchange contract that allows an exporter to lock in an exchange rate without having to pay for the purchased currency until a future date.

Other strategies that are harder to negotiate involve building flexibility into contracts so adjustments can be made if the currencies move past tolerable points, or establishing contracts in New Zealand dollars.

Leith Oliver is a coach and programme facilitator at Icehouse and lecturer at the University of Auckland Business School.