Ready to expand? Take a look at these three international markets.
China, the US and India are viewed as the most important international markets for future growth for Australian businesses, according to Australia’s International Business Survey 2014, commissioned by the Export Council of Australia, with the support of Austrade and the Export Finance and Insurance Corporation.
Before considering international expansion, Brian Machray, Director of small business consulting firm Corporate Crafting, suggests conducting a risk assessment of your preferred market to see if it suits your business needs. “You need to ensure the location you are moving to is the best for your business and that there’s a serviceable demand for the product or service in that location,â€ he says.
International market 1: China
With a population of 1.35 billion, China is Australia’s largest trading partner and export destination. Almost 5,000 Australian companies sell goods and services in China.
Over the past two decades, China has been shifting from an export-driven economy to one that is more consumer based. Its consumer spending is growing at an average annual rate of 18 per cent. Key areas of expansion include the mobile internet industry and the luxury goods market. Taste for wine is also growing in China according to global market researcher Euromonitor, it will overtake the US to become the world’s largest consumer of wine by 2015.
Machray says China still presents challenges to international businesses. “You’re looking at different legal and financial frameworks,â€ he says. “You can go to China and trade but repatriation of the funds from Chinese currency back into Australian currency can be extremely difficult. Also, there are conditions in place that can make intellectual property remain in China, even after a deal has run its course.
“China’s economy is becoming more open but only in recent times. It’s still having a pretty hard time letting go of its practices from the old days.â€
International market 2: The US
The US economy has experienced a downturn since the global financial crisis, with stagnating household incomes, high unemployment and low consumer sentiment. Yet the US still has the largest economy in the world, with a GDP estimated to be US$17.15 trillion. Its legal frameworks are also aligned with those in Australia, making it easier to do business in the US than in countries such as China.
Machray speaks of an economic protectionism that can limit opportunities for some foreign companies in the US. “The US has quite a strong protectionist outlook for some industries, such as car manufacturing and energy. This is for the simple reason that the US wants people to buy American products, just as people in Australia want to buy Australian products.
“The infrastructure and the way they do business is very developed, so there aren’t any cultural, legal or financial framework roadblocks,â€ adds Machray. “But it’s more about how you penetrate and compete in that market, given the way local firms and the government lobby in favour of local businesses.â€
International market 3: India
India is projected to become one of the world’s biggest economies; PricewaterhouseCoopers predicts it will almost draw even with the US by 2050. It is the world’s second most populous country with 1.24 billion people. The annual disposable income increased by more than 29 per cent between 2007 and 2012, while consumer spending increased by more than 25 per cent.
Businesses are more likely to succeed if they adapt their products to the Indian market. Business owners should also expect to encounter bureaucratic hurdles in India.
“The labour market is also tightening in India and the cost of doing business is increasing,â€ says Machray. “India used to be a low-cost producer for cheap labour but that has shifted now to become technical and service based.â€