The importance of Asia for Australian businesses has been a hot topic over the past few weeks.
A delegation of Australian business people and government officials travelled to China for the Boao forum, Prime Minister Julia Gillard signed a deal for direct currency trading with China and business leaders in both countries have pledged greater support to help each other navigate regulatory obstacles.
A survey conducted in 2012 by research firm RFi of 500 Australian SMEs found 34% of them traded with China and that Australia’s free trade agreements with Singapore and the South East Asian Nations make Asia an attractive location for SMEs to do business.
Exporting to Asia doesn’t need to be a tricky business, but it’s important to be prepared and understand the process. A clear plan, market research and informed partnerships can allow a smooth expansion to the Asian markets, but without research your product or service could end up floundering in a foreign market with no chance of turning a profit.
So, before reaching for the skies and flying into Asia in a whirlwind of economic excitement, take a minute to read through these guidelines and make sure your business is ready.
SmartCompany has compiled a list of guidelines to make the process easier and had a chat to industry experts Peter Mace from the Australian Institute of Export and academic Anura Amarasena, who has studied and had experience in exporting businesses since the early 1990s.
Identify your market
With the frequent discussions surrounding the “Asian Century”, it’s important to remember “Asia” is not one entity. Each country has its own unique cultural, legal and economic conditions and it’s important to determine which country will be most receptive to your product or service.
Amarasena and Mace agree this is the first, most fundamental, step.
“First thing is deciding which market you would like to enter. To identify the market which best suits you, this requires desk research on where your product or service can find a ready market, in turn this gives you a scope,” Mace says.
“As a local company, you have to identify a market and then look for potential importers in the country which you identify as being reliable. This is the primary thing they have to undertake,” Amarasena says.
Many opportunities exist in Asia, but Mace identifies specific industries where Australian SMBs are likely to do well.
Mace says Australian businesses in the wine production sector and manufacturers of baby products are likely to do well in China.
“There are good opportunities to build up the market share of the wine industry in China. While many winemakers have been struggling in the European and UK markets, the Chinese are keen on good labels.
“With the one-child policy in China, they can afford to spend a lot more money on their children,” Mace says.
Mace says broadly there are good opportunities for farmers, pharmaceutical companies and businesses in the services industry.
“Across most of Asia there are good opportunities in food processing and fresh food markets. There are concerns about the quantity and freshness of groceries in Asia and if you have money, you want to purchase fresh food for your family and they often buy products from overseas.
“There are also opportunities for pharmaceuticals and health supplements manufacturers because these areas have good strong regulations around product quality. In the services sector, a lot of the Asian countries don’t have well-established legal, accounting and insuring services, so there are also possibilities there.”
Test the product
Once you’ve done some research and determined where your product or service best fits in the Asian market, it’s time to test it on a smaller scale.
“One example of how to test your product before exporting is by going and participating in international trade fairs and exhibitions in overseas markets. Sometimes it’s also possible to establish a relationship with importers from the region for testing the product overseas,” Amarasena says.
By going to international trade shows and exhibitions you’re not only able to witness first hand people’s reactions to the product, but also gauge the local competition and determine if your product or service could be price competitive.
After conducting the initial research, Mace says trade fairs are a good testing ground to see how your product compares to others on the market.
“You need to see who else is out there, initially this is desk research and visiting and attending trade shows and seeing what people are selling and what they’re selling it for. But it can also be done by going to the country. For example, if it’s a grocery item, you can go to the local supermarkets and see how much other similar products are selling for,” he says.
Amarasena says a product does not need to be successful in a domestic market, for it to be received well overseas.
“Market conditions overseas can be very different, so testing locally doesn’t help you to gain the required knowledge. I think it’s much better to test the product in the market itself,” Amarasena says.
According to the Australian Trade Commission’s Austrade website, if a product is successful locally it’s got a greater chance at generating a profit internationally.
“In most cases, solid domestic sales form the basis of a good exporting business. A successful domestic business gives overseas buyers confidence in you as a supplier and will ensure that your business processes are in place and well tested. Importantly, strength in the domestic market will also provide you with cashflow and the working capital you need to invest in developing your export markets,” Austrade says.
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