New Zealand is recognised internationally as a country that is innovative, creative and demonstrates ingenuity in the development of high quality products. Successful exporting is hard work and to get started requires a singular clarity of purpose and drive. Riding the highs and lows is a vibrant journey bringing satisfaction and rewards at many levels. Before taking the plunge to grow your business through exporting you will need:
Clarity of Purpose
Have a clear vision for your product and how it will compete in an overseas market. Understand the issues of access and have a plan in place that allows you to measure and manage to ensure success.
Capability
Capability is about your people (including agents), governance structures, technical ability and processes that perform in a market and keep performing.
Connections
It will not be ‘what you know’ in most markets it will be ‘who you know’. Develop good networks which will give you access to good market knowledge and distribution systems. Build a team around you of positive mentors.
Cash
You will need this to visit, research, test markets, meet people, create a local network and go back and do it all again, if you are going to succeed.
Commitment
Exporting to new markets takes time and patience. You will flirt with failure on a rewarding journey to success.
INVESTIGATING A NEW MARKET?
Develop an export plan that will
- spread your risk
- enable a controlled expansion of your production capacity
- operate within a financial framework your business can fund sustainably
- be strategic in seeking and responding to opportunities
- Include and consider the following:
Travel
Visit the market you are considering, attend a relevant trade fair or conference, before you make a commitment. Factor in regular travel to your established export markets. Maintaining a frequent presence in each market is essential to success.
Market Evaluation
Identify:
- product currently available, quality, price, origin
- applicable local labour rates, subsidies
- population, potential volumes required
- currency stability, usual currency for trade
- political stability, government intervention levels
- whether there are any applicable import quotas
Compliance
- Does the importer require an import licence or permit?
- Is the sale of the product regulated – require permits to sell?
- What regulations/standards apply?
- What certification and documents will be required to enable import and sale of the product?
- How does a foreign product obtain necessary certification?
Branding/Advertising
- Research the words and images of your branding/advertising.
- Check no undesired implications in local language, both official and colloquial
- Will advertising need to be changed to be sensitive to local custom/religion?
- Check for existing brands with the same or similar names
IP Protection
Before promoting your innovative product in a foreign market protect your IP where possible and understand:
- the options available to effectively protect your brand and IP in the market
- risks associated with exporting to markets with ineffective IP enforcement
- common time lag in a market before a product may be replicated and a cheap copy available
Market Positioning
Understand where your product fits in the market. Determine how and where your product would be sold and marketed, as well as the potential price range, by evaluating the pricing and marketing of existing products in the market.
Distribution
Decide on the preferred distribution channel to the end user, whether this will be direct or via an existing distributor with a compatible product range.
- Determine freight options identifying available routes, associated costs and delivery times
- Investigate warehousing options
Market Representation
Your local representative will be the face of your brand and your eyes and ears in the market. Choose representation with values aligned to your business and sound local knowledge.
- Evaluate options before basing your own staff in the market or appointing a local agent
- Determine in advance how a representative’s performance will be measured and remunerated.
- Understand implications of choosing to service the market from New Zealand and need for more frequent visits
Contracts
Clearly defining the terms and conditions at the outset of a sale, representation arrangement or even permitting access to IP, will minimise risk of costly misunderstandings which can escalate quickly with distance and language differences.
The International Chambers of Commerce’s (ICC) comprehensive range of model contracts cover most areas of international trade. Using these templates to draft contracts for your specific circumstances enables a contract to underpin all arrangements early with nominal expense and legal assistance. Full details of available contracts.
Price Setting
It is important to determine your price position before initiating conversations with potential clients or agents – even an informal price indication, which turns out to be too low, can be very difficult to increase.
- Establish all associated costs including impact of terms of trade, payment terms, promotional cost, representation cost, insurance, after-sales service, packaging cost/disposal obligations, duties & taxes
- Determine competitiveness of a pricing based on costs against pricing of competitor products
- Clearly explain the terms of trade, payment terms and what is included in a price offer
Terms of Trade – Incoterms 2010
Codified by ICC, Incoterms are internationally recognised rules which clearly define when the costs and risks involved in the delivery of goods transfer from seller to buyer.
- Determine and understand the implications of the agreed Terms of Trade
- Guides to ICC Incoterms 2010 are available from the Auckland Chamber of Commerce
- Establish the impact of different Terms of Trade options on pricing
Payment Terms
Getting paid is essential and managing the time frame between production and payment will be critical to sustainable trade.
- Meet with the international advisor at your bank to evaluate the risks, costs and advantages associated with available payment terms and mechanisms.
- Consider different pricing offers based on different payment terms
Risk Assessment
There are a wide range of risks associated with export and these need to be identified, understood and mitigated where possible.
- Risk factors to examine include: political & economic climate; creditworthiness & trustworthiness of importer; currency exchange fluctuations; transportation; delays
- Identify best Terms of Trade and Payment Terms for the applicable risk factors
- Speak with an Insurer or Broker experienced in providing insurance for international trade. Policy types to investigate include: Marine Cargo Insurance; Product Liability Insurance; Trade Credit Insurance & Business Travel Insurance.
Dispute Resolution
Identify mechanisms available to resolve any disputes and ensure that the process and mechanisms for dispute resolution are clearly stated from the outset in contracts and offer statements.
- Conduct communications in writing and keep the “paper trail”.
- Follow up verbal conversations, irrespective of how informal, with a written summary of the points discussed and decided
- Obtain a written acknowledgment from the other party
Tax Implications
There will be additional tax implications to trading domestically. Speak with your tax advisor and consult Inland Revenue to ensure you are aware of applicable tax implications and have taken these into consideration in your export plan.
DOCUMENTATION
Correct paperwork is the difference between getting paid or not, having goods reach consumers or shipped back at your cost. This is a job for the detailed person. Accuracy is essential. There is zero tolerance even for spelling mistakes.
- Check, double check and have a second person triple check
- Ensure statements contained in documents are true and correct
- “Get it right the first time”. There are limited options to amend or replace documents once they have been presented. Incorrect documents increase the risk of the importer and exporter being ‘flagged’ for additional scrutiny of future, current and past consignments, goods being denied entry, fines being imposed or prosecutions initiated.
- Check goods meet criteria for 'New Zealand Origin' under relevant Rules of Origin prior to any commitment to provide a Certificate of Origin especially when a Free Trade Agreement Certificate of Origin is specified in Letter of Credit terms.
Disclaimer: The above information is supplied as a guide only. It does not purport to be comprehensive. No person should act in reliance on any statement above without first obtaining specific professional advice. Auckland Regional Chamber of Commerce and Industry makes all reasonable efforts to ensure that the information published in this resource is accurate and up-to-date. However the matters covered are subject to regular review and no warranty or representation can be provided regarding the accuracy of such information. The Auckland Regional Chamber of Commerce and Industry does not accept liability for any losses or damage arising directly or indirectly from reliance on the information.
Copyright © Auckland Regional Chamber of Commerce and Industry 2015.
