Risks, opportunities and the conclusion
What Excellence requires
- The standard defines it: evaluating exporting potential refers to comprehensively exploring the risks and opportunities of exporting for the New Zealand business in relation to a market.
- Three things are packed into that sentence:
- comprehensively — both halves, readiness and potential, and all the main risks
- risks and opportunities — both, weighed against each other
- for this business in relation to this market — a general account of exporting risks earns nothing; it must be about this business and this market
The opportunities
- A larger market. New Zealand's domestic market is small; a single overseas city can be bigger than the whole country.
- Growth beyond a domestic ceiling. For a business that already has most of the New Zealand market it can get, exporting is the only growth available.
- A better price. Some products earn more offshore than at home, particularly where New Zealand provenance carries value.
- Spreading risk. Selling into more than one country reduces dependence on a single economy — although the first export market increases exposure before the second reduces it.
- Counter-seasonality. Southern hemisphere production reaching northern hemisphere markets out of their season, which is the basis of several New Zealand export sectors.
- Scale. Higher volume lowers unit cost, which improves margins at home as well.
- Learning. Meeting an overseas market's standards usually improves the product and the systems, and that improvement applies to the domestic business too.
- Credibility. Exporting successfully is a signal to domestic customers, staff and lenders.
The risks
- Cash. Costs come first and payment comes late. This is the risk that closes businesses.
- Non-payment. A buyer in another jurisdiction who does not pay is expensive and often impossible to pursue.
- Exchange rates. A margin calculated today can be gone by the time payment arrives.
- Compliance failure. A shipment held at the border, or product that cannot be sold as labelled.
- Losing the domestic base. Capacity and attention diverted to a new market at the expense of the customers who currently pay the bills.
- Dependence on one buyer. A single large distributor can dictate terms and can leave.
- Intellectual property. The brand registered by someone else, or the product copied.
- Cultural misjudgement, which is invisible until it has already cost the relationship.
- Distance. Long lead times, slow responses, and problems discovered late.
- Distraction. In a small business the owner's attention is the scarcest resource, and exporting consumes it.
- The market changing — recession, a competitor, a rule change — after the commitment is made.
Reaching a conclusion that is a judgement
- The conclusion must answer the question asked: does this business have exporting potential in this market? Answer it directly.
- The three conclusions that are genuinely available:
- Yes, and it is ready. Rare, and it needs strong evidence on both halves.
- Yes, but it is not ready yet. The most common honest finding — and the most useful, because it specifies what must change, in what order, and at what cost.
- No, not in this market. Legitimate, if the evidence supports it. Say why, and whether a different market or a different product would change the answer.
- Structure the conclusion the same way as an external justification:
- state the conclusion plainly
- give the strongest evidence for it, from the investigation
- give the strongest evidence against it, and say why it does not change the judgement — or say what would have to be true for it to
- name the conditions: what has to happen before the business should commit
- add something the earlier sections did not use — a long-term effect, a second market, a sustainability point, a risk that only appears at scale
Integrating business knowledge and concepts
- Excellence requires integrating business knowledge and a business concept where relevant to fully support the explanations. Where they fit naturally in this standard:
- the four key concepts — enterprise (taking the risk), globalisation (why the opportunity exists), citizenship (obligations in the host market), sustainability (whether the export is economically, socially, culturally and environmentally sustainable)
- kaitiakitanga, where the export depends on a natural resource: can supply be increased without damaging what it comes from?
- rangatiratanga, where exporting means giving a distributor or partner control over how the business is represented offshore
- pūtake, where the business exists for reasons beyond profit and exporting has to serve those too
- whanaungatanga, where the relationship with the in-market partner is the asset
- Integrated means used inside the argument, not appended as a paragraph at the end.