Australia is often seen as a strong test market for foreign based businesses looking to expand: our economy is just sufficiently big and diverse to test and iterate, while still being small enough to make the cost of testing across the market affordable. For tech-based businesses in particular, our strong digital penetration – 88 percent of Australians now own at least one smartphone – is a key attraction. But when the question of expansion arises for Australian based companies, where should our companies be looking to test, and what’s the correct way to go about planning global growth?
OFX recently partnered with Macquarie Media and finance guru Ross Greenwood, host of Money News, conducting an intensive two-hour workshop designed to assist an Australian business with developing a successful global expansion strategy.
The selected business was Compusoft Australia, a specialist in software tech solutions for small to medium sized businesses. As a Mircosoft Gold Partner Compusoft design, implement and monitor a diverse range of ERP solutions to suit the growing needs of the wholesale food distribution industry. The solutions are driving efficiencies from inventory monitoring, sales budgeting and labor management.
Joining Ross was Skander Malcolm, CEO of international money transfer company OFX (formerly OzForex); Justin Dry, cofounder and co-CEO of online wine marketplace Vinomofo; Lisa McAuley, CEO of the Global Trade Professionals Alliance; and Cynthia Dearin, managing director at Dearin & Associates. Together, they worked to help troubleshoot Compusoft’s planned launch into the US market, scheduled for later this year.
Here are the panel’s key tips for Australian companies navigating the task of globalising:
- Study the global context
As a Microsoft Partner expanding into the US seemed a natural and attractive proposition, but that doesn’t automatically mean it’s the right market for Compusoft, the panel counselled. Taking the time to analyse the global context is crucial.
Lisa advised Milton to step back and assess the company’s competitor matrix in the US, comparing this to a number of other markets, to affirm which is the best fit.
“Many companies end up being ‘accidental exporters’ as they respond to the first phone call they get, or work with a personal contact abroad. That’s how they start, but it’s not a carefully planned move that has been assessed and had a solid expansion strategy put in place.”
“It’s also important to look at the competitive landscape – you might find that you have little competition in Australia, but that this increases dramatically in another market.”
Some of the other factors worth investigating include the political landscape, regulation, tax and laws that might apply to your product or service in an overseas market.
A good place to start is by looking at Australia’s free trade agreements. The Trans Pacific Partnership, Lisa said, is a “groundbreaking” agreement including countries who are “absolutely crying out to do business with Australia”. Argentina, for example, is a major food producer that could provide strong opportunities for a company like Compusoft.
“Everyone logically goes to the US with a tech company, but often because it’s the biggest market in terms of size – and they’re drawn by Silicon Valley’s reputation. I tell companies to look at markets that are smaller, or less obvious, because you have a significant advantage if you can trade in an uncrowded marketplace,” Lisa said.
This sentiment was echoed by Ross, who reminded Milton that higher population doesn’t only mean more opportunity, it can also translate into greater levels of competition.
Skander explained that OFX’s initial expansion from Australia was into the UK market in 2005. “Although still English speaking, you’re dealing with a financial services system that’s very different to Australia. In some ways, more highly evolved, and with that comes greater industry regulation and higher public expectations of product performance and service levels.”
- Always develop a new strategy for each new market
Just because two markets share a language doesn’t mean you do business the same way, warned Cynthia: you have to study the culture of a market before you can work in it. This is a lesson she learned the hard way in her 20’s, when she started a business importing artisanal Moroccan goods.
The venture blew up in her face, Cynthia said, because Australians had no interest in the products. She “wasted a bunch of time and money” before finally making the decision to shut the operation down. Years later, she witnesses major corporates making the same mistakes that she did.
Cynthia sees three mistakes that commonly recur when it comes to strategy; “they don’t do enough research on the market and clients, they take a cookie cutter approach, and they start expanding before they are ready. What they should do is investigate, plan, test – and then build incrementally.”
Compusoft’s expansion strategy has flowed from first acquiring critical mass across Australia’s capital cities since their launch in 1989. With the US market’s well known adoption of business software, English speaking culture and with partner Microsoft being Headquartered there, “it seems like a natural progression for us”. “The release of Microsoft’s new cloud platform also opens up the potential for smaller and boutique businesses to adopt the technology with low entry cost and quick implementation timeframes” explained Milton.
When Vinomofo chose New Zealand as its first international market Justin experienced some of the challenges that accompany an imperfect strategy. He explained, “we assumed it was close, the people are like us, and it should be semi-easy. It’s still a great business for us in New Zealand, but it was hard in the early days,” he said. “We got the product mix wrong, so we had to evolve.”
Vinomofo learned from this process as it decided on its next market. Knowing they wanted to go into Asia, Dry said the company spent time debating Singapore vs Hong Kong; though Hong Kong is a “shining light”, Dry said, Singapore was eventually chosen because it has more English-speaking expats with an established appreciation of wine.
- Look Beyond Language to Cultural Variations
Even if expanding to a country that is English speaking, it’s not a case of just copying and pasting your existing website or corporate materials.
“People communicate in the same language very differently” Cynthia explained, “even though the words are the same, words can mean different things – there are subtleties of tone and inference to consider between countries.”
The key is localisation – the study and application of culture to a translation. This can be as simple as using local idioms, or referencing certain places or events specific to that culture that will resonate with your new audience.
According to Skander, OFX realised the importance of cultural variations when expanding into North America, “we had to examine the words we were using, the customer journey and the way that we were registering our new customers – and this all had to be changed to optimise success with North American customers. We know that clients across borders have different priorities, and unique expectations around service, and it’s important to plan how to best meet these before launching.”
Milton explained how Compusoft has spent time researching the distribution network in the US to ultimately land on one key partner who shares the same values and ambitions as Compusoft. The partner identified will assist with the local launch to reach new customers. A sensible strategy advised the experts, but they also urged Milton to be cautious as “it can be dangerous to put all your eggs in one basket.”
- Leverage government and community support
The nature of expat existence means that Australians will naturally band together in new environments, and when it comes to doing business in a new country, they can be amongst your biggest supporters.
This was certainly the case for Vinomofo. “Expats have always been our early adopters in each market; Aussies like to help other Aussies,” Justin said, “and they like to drink Australian wine.”
As the wine marketplace gears up to launch in the US, Justin said the help from the community of Australians, particularly in California, has been invaluable. They have helped with referrals for local banks, legal firms, and accountants and, when Vinomofo starts selling, he hopes they will keep helping out by buying a few bottles.
“There are 65,000 Aussies living in California; 65,000 Aussies buying wine from us there is a very big business, so it’s been powerful for us to get involved in those communities,” he said.
Milton agreed with this sentiment, adding that their research suggested as many as 100,000 Australians or Americans with Australian ancestry were living in the US, and of these, the biggest majority were based in California – almost double that of the next largest state, being New York.
Lisa agreed that other Australians can often be a great starting point, but reminded Milton that the community of Australians extends beyond just other individuals.
Across state and federal levels, Australian governments are keen to push international trade, and have departments based both in Australia and globally dedicated to helping Australian companies expand overseas.
From the Department of Foreign Affairs and Trade [DFAT], Austrade, the Export Council, State Government trade ambassadors, Advance (a network of global Australians) and others, there is a wealth of government support available that companies should leverage.
“Knock on every single door and accept as much of their support as possible,” Lisa advised. “It doesn’t hurt to have someone from government on your side when going into a new market, and the beauty of government is that they’re able to open doors for you.