KEY POINTS:
There's a quote about challenge that says the strongest oak tree in the forest isn't the one that is protected from the storm, but the one that stands in the open where it's compelled to struggle for its survival. That could be an analogy for New Zealand international
businesses in today's economic climate.
While sheltering from the storm may be the natural reaction for some firms, persevering in international markets and with partners is vital in these tough times - for both the business and the nation. More New Zealand firms must operate internationally. It is critical to New Zealand's long-term growth prospects and this remains true regardless of the short to medium-term domestic and international environment.
Brett Hewlett, chief executive of Comvita New Zealand - a global marketer of natural health products - says marketing, product development and research are areas that companies often cut back on but he cautions that this is very dangerous.
After a firm has reviewed its plans and ensured it is as lean and mean as possible, Hewlett suggests they divert as much additional resource as they can afford into areas that are going to be revenue-generating or help promote their brand in the short to medium term and that they explore the opportunities that will arise from the downturn. One example for Comvita is retail space in Hong Kong in locations it previously could only dream about now becoming affordable.
Integrated wood products company Verda New Zealand is one company that has had to scale back its growth targets and cut discretionary spending and production as it rides out the market downturn, but says it hasn't changed its plans of developing a high-value brand and export markets and it is still investing in internal R&D and design capability.
Relationships are key to developing a successful and sustainable international business and when the going gets tough the strength of those relationships will often carry the day.
Gustavo Richardson, chairman of NZTE's South American Beachhead, said recently if you are doing business with a person and when a crisis is coming (or is upon you) you need to be very sure of them - and they need to be very sure of you. Keep talking, let suppliers, partners and clients know what you are doing, show your support and concern for their issues.
Today many of those relationships go beyond that of the traditional exporter and overseas distributor. New Zealand businesses are increasingly working internationally in different ways such as joint ventures with firms in other countries, investing in regional sales networks, locating production, assembly and marketing capability closer to priority markets; outsourcing parts of their operation.
IBEX Group, winner of the 2007 Export Awards, restructured its business model in 2003, with the New Zealand operation becoming the knowledge hub where all the innovation and value creation takes place.
All the rest is outsourced, including manufacture of its large chilling and sorting systems which are assembled on site in the market under the guidance of a New Zealand project management team, from materials sourced from the cheapest source.
Managing director Jonathan Engle says the change in business model has helped IBEX achieve phenomenal revenue growth of over 2000 per cent in four years to 2007.
We also see some of our very successful companies bought by big overseas firms. This is the reality of business the world over and while there is a tendency for some to see such sales as akin to selling the family silver, in many instances it is an opportunity.
When technology entrepreneur Rod Drury sold AfterMail to US company Quest Software for about US$45 million ($86.6 million) several years ago, Drury said it gave him and his team a "capital war chest", much of which they planned to reinvest into new software development ventures.
It would be a mistake for New Zealand business to put their internationalisation plans on hold during this economic crisis.
Those that continue to invest in R&D, promote their brand, foster those critical relationships and retain their readiness to expand quickly once this difficult period is over, are the ones that will prosper.
* Tim Gibson is chief executive of New Zealand Trade and Enterprise.
