How can Exporters build strategic advantage from the strong Aussie dollar?

Exporters – Take advantage of the strong Australian dollar today!

Despite the turmoil of the end of the first week in August there are plenty of signs the Aussie will remain ‘high’ for a while to come.

The impact of the strength of the Aussie dollar for importers and exporters is clearly very different –but in both cases the challenge is to remain ‘strategic’ in response to it.

Exchange rates have not been kind to Aussie SME exporters for the last few years. Many exporters have seen reduced sales, much tighter margins, loss of market share and in some instances loss of markets. Regardless of whether you invoice in AUD or local currencies –the effect of the exchange rate movements will either impact your margin –or it will flow into the end-user price of your products and services.

Nevertheless for companies just starting on the export journey –I do believe all strategic market entry options are still open. If you have a well differentiated product or service idea there are definitely market opportunities –particularly if you look at booming economies of India and China and the other BRIC countries.

For those with established markets often the first reaction is denial “we’ll just ride out this period and hope that it gets better.” Eventually you have to deal with reality and the challenge is to remain strategic.

So can you be strategic in the face of shrinking margins and markets? There are a range of options –some are outlined below:

  • Alternate ’entry-strategies.’ Now may also be the time to review your market entry model –is it serving you well, is it the model of the future? Perhaps now is the time to think about manufacturing- assembling or down filling in the local markets to take advantage of reduced freight and perhaps less expensive inputs? Is licensing an opportunity for your business model?
  • Are there too many intermediaries in your supply chain –can you eliminate a level –perhaps by investing in your online resources and outsourcing fulfilment? Time to set-up your own sales/distribution office and control the distribution costs? The same ‘convergence’ issue identified above applies equally in export markets – are your distribution partners in embracing selling online? A key business model that is gathering momentum is where a supplier drives the marketing –motivates there target consumer to buy –but delivery of the product or service is completed –locally –often by traditional channel partners. For a local example of this see www.brasseriebread.com.au
  • Invoicing currency: If you invoice in AUD now’s the time to think about local currency invoicing –yes your margin will be impacted by the moving exchange rate –but your response to that is then under your control. The importers of your product –distributor-agent-end user –they are already building a ‘hedge’ or a margin on top of the current exchange rate to ‘protect’ them from short term exchange movements. Is it better you control that hedge factor and give them certainty in invoicing in their currency – this gives you greater control over the end-user pricing (even if it does come at the expense of your margin..)
  • Strategic relationships: Now’s the time to review your local sales ‘partners’ –distributors-agents–customers. Are you working together to deal with the exchange rate issue –are your local partners the most effective? Now maybe the time to take an objective look at the effectiveness of your in-market support and take a new direction if necessary.

Many exporters unfortunately have already ‘given-up’ taken a short term view and lost their export markets. Of course sustaining export markets in these times maybe challenging –but maybe you just have to think a little differently to hang-on. Fundamentally you have to ask –can I achieve my objectives in a market the size of Australia –and what is the cost to my business ‘holding-on’ versus having to start the export journey again at some future point – how will your customers see your commitment?

Advice for Exporters?

It’s often hard for SME business owners to be objective about their decision making – they don’t typically don’t have the management processes and objective analysis that boards in larger companies can rely-on. So how can you as business owner access advice –easy, the web, Austrade, state based government support, chambers of commerce, industry associations and of course specialist consultants like my organisation are the obvious places to start.

Are you an Importer? Check out last week’s article on how importers can take advantage of the strong Australian dollar.

How can Importers build strategic advantage from the strong Aussie dollar?

Importers – Take advantage of the strong Australian dollar today!

Despite the turmoil of the end of the first week in August there are plenty of signs the Aussie will remain ‘high’ for a while to come.

The impact of the strength of the Aussie dollar for importers and exporters is clearly very different –but in both cases the challenge is to remain ‘strategic’ in response to it.

The relative cost of imported products and services has been falling for some time (there’ll always be some exceptions of course i.e. petrol…..) The question is as a business owner how best to “strategically” use the windfall. The first thing not to do is not to fritter it away.

The volatility in the exchange markets over the last 5 years has been considerable (March 2006 the Aussie $ was buying 0.72 US$). The GFC, Euro zone debt crisis, recent tragedy in Japan, unrest in the Middle East portends a very unpredictable future in terms of exchange rates. I’m not an expert in currency but –volatility seems to be here to stay for a little while longer…

That said if your business model is built on importing this is an ideal time to step back and use the exchange rate ‘windfall’ to start your business with your new idea- build your business, increase market share, invest in new marketing initiatives and if necessary refresh your brand.

Of course your customers will expect ‘competitive’ pricing –and in price sensitive markets you’ll need to adjust your prices. However wherever possible I would challenge you to think of non-price related benefits to add value to your product. For example offering bundles – buy three get one free, bundling complimentary products from your range –or co-branding with other suppliers.

A key strategic option is managing your online channel. What we see now are many companies managing a convergence of ‘channels’ to market which might include the spectrum of bricks and mortar, online sales –picked at bricks and mortar locations, and direct selling on their own or via aggregated mobile commerce sites like eBay, deals direct etc. The reality as a supplier you need to make sure your product is ‘accessible’ by your consumer when and how they wish to access it.

Ebay for example state “In 2010, consumers bought nearly US$2billion worth of goods globally through eBay’s mobile applications. This is expected to double to US$4billion in 2011.”

The key is to think as broadly as possible; perhaps now is the time to run that national promotion you’ve thought about –upgrade the quality of your catalogue or –invest more into your web-site –or take your social media activity to a whole new level –or to think of deepening your product offering.

By investing your exchange ‘gain’ back into the business –you might just be improving your customer loyalty beyond that of your competitors who may not have such a long term view. This could be the significant differentiator when the “inevitable” fall in exchange rate happens.

What’s the right move for your business?

Advice for Importers?

It’s often hard for SME business owners to be objective about their decision making – they don’t typically don’t have the management processes and objective analysis that boards in larger companies can rely-on. So how can you as business owner access advice –easy, the web, Austrade, state based government support, chambers of commerce, industry associations and of course specialist consultants like my organisation are the obvious places to start.

Are you an Exporter? Stay tuned for next week’s article on how exporters can take advantage of the strong Australian dollar.