Everyone wants you to “go global” if you are not already “born global”.
It’s fashionable because in a global economy it means money flowing in Australia and increasing wealth through the multiplier effect. But despite it being great for Australia for firms to be “going global” it can kill your business if you don’t have a clear strategy and do some research.
Consequently, I decided we were going to have a look at building global sales channels at the Churchill Club soon, but wanted to outline where we were coming from first.
Now I have had a bit to do with selling overseas, having personally set up new operations in Indonesia, Vietnam and Romania as well as appointing distributors in Europe and supporting business in Asia. The way I see it is that you have five options, each with its own set of challenges and benefits.
Selling directly to overseas customers is the quickest and easiest way to get started. It’s also the quickest and easiest way to get ripped off. You need to have a good understanding of supporting warranties, currency fluctuations, shipping arrangements and payment arrangements.
Organisations like haul have had a steep learning curve selling internationally from their website, but are now starting to realise some of the benefits. A great source of advice and support for this area are actually the banks as well as government programs like Tradestart and Enterprise Connect.
Selling via distributors is a slightly slower way to start, and it will reduce your margins, but you will get much more revenue growth in the market.
Local organisations like Ecotech support around 60 distributors around the globe to generate a decent chunk of their revenue. As well as the normal export issues, you also need to start thinking about how you intend to recruit, support and terminate distributors in regions, as well as a host of other transactional issues and what precedents you are setting that will get discussed at downstream distributor conferences.
When looking for distributors it’s useful to speak to organisations like Austrade and the export division of your State Governments – click here for Victoria’s.
Setting up a joint venture in a foreign market is a way to get the best engagement and revenue growth in the market, with reduced risk, investment and profits. Qantas has just decided on this strategy in Asia. The issues are of course, making sure you get into bed with the right partner, making sure accounting and financial policies are squared away before you start and understanding the brand risks you may take as you no longer control your own destiny.
Some good advice here can generally come from your lawyer and the trade and investment teams from the region you are looking to invest in.
Setting up your own operations in foreign markets is also called Foreign Direct Investment. Its issues tend to be around selecting the right market and the right footprint before you invest, of course you wear all the risk, but you also get all the profits.
Organisations like Aconex have been quite successful with this strategy. Once again some good advice here can generally come from your lawyer and the trade and investment teams from the government of the country you are looking to invest in.
The final strategy is to buy an established operator, and introduce your brand under theirs. The issues here are obviously about the risk in selecting the right target and paying the right price. It’s also quite a challenge to find the potential targets as brokers and investment bankers are generally aligned with the sellers, not the buyers.
That being said, both Melbourne IT and REA Group have chosen this course globally. The strategy of buying an established operator of course means that you will be immediately able to capitalise on their existing markets, however you will pay a premium for this.
Again, speak to your lawyer and trade and foreign investment review boards of the country you are looking at. It’s also worthwhile speaking to other members of transcountry commercial associations (eg. the Australian British Chamber of Commerce) as the experiences of other organisations who have previously bought in the market can be gold.
Going global isn’t anywhere near as hard as it would appear, you just need to do some quality thinking and a bit of research first. After that it’s a hell of a lot of fun.
Brendan Lewis is a serial technology entrepreneur having founded: Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club and Flinders Pacific. He has set up businesses for others in Romania, Indonesia, Hong Kong and Vietnam and is the sole Australian representative of the City of London for Foreign Direct Investment. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.
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