Many Kiwi organisations are ill-prepared for the intense competition found overseas. Part four of a six-part series
For any New Zealand organisation conducting business offshore there are unknowns and this uncertainty can sometimes deter an organisation from attempting to internationalise.
Internationalisation is a major decision and even for offshore-seasoned organisations each new foreign market foray offers a different challenge. Such challenges are not specific to New Zealand organisations. Our distance from the rest of the world shouldn't be used as an excuse to avoid going down that track.
In the first three articles in this series I highlighted some key elements of internationalisation that are not unique to New Zealand organisations. First I discussed the importance, when considering a market entry, of learning from similar organisations, local players and foreign players in the potential target market. The second article provided a framework for analysing potential markets and the third advised organisations on embracing cross-cultural differences rather than treating them as a recipe for failure, remembering that organisations from other countries are facing similar cultural challenges.
Many other aspects of cross-border initiatives are also not unique to New Zealand organisations. Managers throughout the world are risk-averse to varying degrees. So the mindset that is stopping some New Zealand managers from internationalising (or internationalising further) is not only found here. Many small and medium-sized enterprises throughout the world are expanding beyond their home countries. There are also more born-global companies that are located in a foreign country from day one.
So what is unique when it comes to challenges for New Zealand organisations thinking of expanding (or expanding further) abroad? Does distance matter? Yes it does, but we have done reasonably well as an exporting nation and New Zealanders are well-travelled.
Would an Asian organisation refuse to deal with us because of our far-flung location? Possibly yes, but most likely no. We might face more challenges as a growing number of New Zealand organisations set up their own operations overseas but this challenge isn't unique to New Zealand either.
What seems to be unique, in my view, is the New Zealand business environment.
Competition tends to be less intense in this country than in larger markets. Some sectors are dominated by major players and most do not reach the stage of needing a "shake-out", which is the consolidation that happens in a competitive market when there is more supply than demand. As a result there is little need to learn how to deal with aggressive competition and some, if not most, New Zealand organisations are unaccustomed to it and ill-prepared for dealing with it.
What they need is to gain a better understanding of the competitive landscape in the "outside world" and try to relate that to the business environment here. Only with this alignment can the question of internationalisation be asked more often and our knowledge in this area increase.
Professor Siah Hwee Ang is BNZ chair in business in Asia at Victoria University.