Many of those retailers are now recognising the change in buying habits is permanent and are getting on the bandwagon.

This acceptance of online sales has positive implications for sectors of the Australian market with a product that suits an international consumer market.  The costs of transport to main destinations abroad by parcel can be reasonably standardised; and after also ensuring payment is made up-front, and the entry documents (where required) meet the overseas customs requirements, it can be an exciting and lucrative addition to the domestic consumer market.

Of course 1) getting found by an overseas buyer and 2) capturing their interest so that they want to buy, are two key steps that precede the sale.  This involves refining the website so that it receives a high ranking on the main search engines, and for Google, perhaps paying for positioning.  Then, having been found, you have a very short time span to capture the attention, interest and desire of a potential buyer once they land on your site.

Structuring a website for domestic and overseas visitors requires some finessing.  Some companies set up separate sites in major markets so that they are perceived as a ‘local’ supplier.  Another check point is ensuring your IP is protected in your key target markets, and equally that you are not infringing someone else’s IP already registered in that market.

You need to succinctly outline your USP….why would someone in say Tokyo buy from you? Having text in Japanese may be a good start. Then outlining the originality/quality/uniqueness of your product in values a Japanese consumer would appreciate. Finally clear pricing and a simple delivery process will be the things that clinch the deal.  Many suppliers include delivery in their pricing, or if not, set out standard costs per region so the buyer knows exactly what they are up for.  Are there guarantees for delivery, returns, exchange (for clothing sizes) etc that take the risk away for the buyer?

There are some very successful Australian suppliers currently doing very well selling to the global consumer market.  To do it properly though requires focus:  monitoring hits, responding to questions and refreshing information so it is always current.  Your website does become the shop front for your business, open to the world 24/7.

So for all businesses with a consumer focus, you need to actively consider the potential overseas customer. 2012 might be the time to start, or your competitors could be taking your market!

Watch the video here.

Of course, having a bit of a national conversation with ourselves isn’t a bad thing. It’s healthy to ask questions. And there can be some spinoffs. A bit of navel gazing by Australians lead to Dr Karl Kruszelnicki‘s mini-thesis and why belly button fluff is always blue (true blue that is, or is it green, Karl?).

But as healthy as questioning is, it is important to know to have a good amount of evidence on side to really get a handle on things. In these days of 24 hour news cycles, and instant opinion making, having a loud megaphone and the capacity to put the boot into someone or some group seems to carry more weight than a considered opinion based on research or a fair minded assessment of a complex issue affecting the nation. Whether it’s a shock jock at home or a celebrated expat touching down on an airport tarmac to launch a diatribe on the national character, some of the louder voices of public opinion drown out the voices of other Australian citizens.

But as we approach January 26th, we should clear the air by disposing a few great Aussie myths, which will fill the air waves this week. By doing that, we’ll have a better informed dialogue about the future of the nation. If New Zealanders are once were warriors, Australians are once were worriers. As a result of our mass worrying several myths are created as fact, and distort the debate. So if we can dispose the myth, then we will literally have no worries. Let’s take few myths that you always hear around this time of year.

Myth one is one we always hear that ‘immigrants take our jobs.’ This has come to the fore recently in the form of Liberal MP Theresa Gamboro’s ‘scientific’ observation that immigrants don’t know how to queue of use deodorant. Putting the great Rexona question aside, in the labour market the evidence shows that immigrants make a positive contribution to the labour market. Immigrants make good exporters. According to Sensis research, 50 percent of all exporters are born overseas. They bring skills, networks, language culture and a bit of entrepreneurial flair and enrich us as an economy and a society. Think Westfield, TNT, Myer, Bing Lee, Crazy Johns all started by migrants. Think of the Australian business hall of fame. Names like Lowy Abeles Parbo come to mind. Immigrants make good employers and good workers. Exporting businesses (many started by immigrants) pay 60 percent higher wages than other companies, and provide job security and higher occupational health and safety (O H & S) standards. As employees, immigrants are often highly skilled and work ready. According to the Australian Bureau of Statistics (ABS) shows that while immigrants account for less than 30 percent of the labour force, they have claimed more than half the jobs created since the start of 2010. Immigrants are both employable and self-employable.

Myth two is that ‘we’re experiencing a brain drain’. Apparently all our best and brightest are leaving and this is harming our economy. Well. It is true that there are 1 million Aussies overseas, according to the seminal work on this subject by the Lowy Institute, but it is more ‘brain gain’ than ‘brain drain’. Many Australians work and study abroad – especially in their younger years – get experience and like a boomerang, they come back, especially when wanting to raise a family. But it’s not a bad thing for Australians to have overseas experience, and if some stay on and become Vice Chancellor of Oxford University, editor of The Times, or hold down key positions in Shanghai, Seattle or Sao Paulo, that just opens up strong networks for the rest of us. Also with the global financial jitters affecting northern hemisphere financial markets, more expat Aussies will be coming home than we thought.

Myth three is ‘Australian workers are bludgers’. When Jeff Kennett was Premier of Victoria and attacking public holidays, annual leave and penalty rates, labour market research showed that Australia was mid-table in terms of public holidays and most countries paid annual leave loading, annual leave and leave bonuses. On international comparisons, Australians are relatively hard working; they focus more on practical productive outcomes (than clocking up hours at the office or other workplace) and have a moderate amount of public holidays. We’ll be taking Australia Day off, but Chinese New Year holidays and celebrations last two weeks and other countries have similar festivals. According to international brand surveys, Australians are perceived to ‘work hard and play hard’ and their easy going nature should not be confused with sloth or laziness.

Myth four is ‘We’re just China’s quarry and Japan’s beach.’ This pops up from time to time along with the comments that we are not clever, innovative or ‘high tech’ enough. Australia’s chief scientist (along with the head of Hewlett Packard) said 10 years ago that Australia needed to forget commodities (he said this just before our record terms of trade boom) and build a strong technology sector like Taiwan of the Australian dollar ‘would be 30 cents US by 2010’. The comment ignores the fact that innovation comes from many industries including Australia’s traditional areas of comparative advantage in mining and agriculture. Everywhere I go in the world, I meet small Perth companies that sell technology to the Siberian or Brazilian mining sectors, McLaren Vale winemakers selling marketing software and services to Argentina and France, and everyone knows about the innovation in Australian surf wear, surfboard and sports innovation. Check out how many Billabong boardies you next see in Bordeaux, Bali or on the surf coast of Brazil, Peru, Chile or South Africa. Innovation comes from many places, not just the computer industry.

And finally, there is a myth that ‘We are too far away to matter.’ Well that may have been so in 1788 when we were a convict colony waiting for ships to come from England. The brilliant and eminent Australian historian wrote eloquently about this in his famous treatise The Tyranny of Distance. Now in the 21st century, Australia finds itself at the right place at the right time in the Asian time zone, and supplying what China, India, ASEAN and the rest of the emerging world need. With euro-gloom and American blues economically, the rise of Asia may well see Australians talking less about ‘the Tyranny of Distance’ and more about ‘the Power of Proximity’ in years to come.

Happy Australia Day!

Tim Harcourt is the JW Nevile Fellow in Economics, Australian School of Business, UNSW and author of The Airport Economist: www.timharcourt.com

“They made A$6 from me during the 90 minutes that I took up a chair and table in their café,” says Patterson, a marketing professor at the Australian School of Business. “They have quite large stores and their model is that they charge a slight premium, but you can sit there for an hour on one coffee. With the rent on those premises, that business model is not sustainable. It doesn’t surprise me that they lost so much money in Australia.”

The story of Starbucks in Australia is a salutary lesson in business. It’s the tale of an organisation seeking world domination in its field that stepped into a new market without first testing the waters. What went wrong for the company down under has been analysed in a paper by Patterson and fellow marketing professor Mark Uncles with Jane Scott, also from the Australian School of Business.

When Starbucks entered the Australian market in 2000, it was one of the biggest coffee chains globally, opening one new store every day somewhere in the world, notes Patterson. Its success in the US, which had not previously enjoyed a strong coffee-drinking culture, had given the brand great confidence to enter other markets including Japan (1996) and China (1998). The company now has more than 15,000 stores in 44 territories.

But in mid 2008, Starbucks’ management announced that it would close 61 of its 84 Australian stores. The closures took place swiftly – within one month. Losses were enormous, including 685 jobs and A$143 million. Just 23 Australian stores were left operating in prime locations. What went so wrong?

Avoidable Errors

Patterson can identify several major problem areas that, in combination, caused the decline of Starbucks in Australia. They begin with the brand overestimating its points of difference, as well as the customer-perceived value of its services. After giving Starbucks a try, many Australians – who, in the majority, lived in cities with already thriving café cultures and experienced, world-class baristas – failed to understand why Starbucks charged more for its coffee.

The second serious problem was that service at Starbucks suffered as the number of stores grew at a fast pace and began employing younger, less-experienced staff.

Issue three was the mistake of failing to adjust its product to suit Australians’ coffee tastes, which lean more towards Europe. Instead the company introduced its American offering. And that helped to create the fourth glitch – a perception that the brand, due to its rapid expansion over just a few years, was forcing itself onto an unwilling public.

In contrast to Asian territories where coffee houses previously didn’t exist, in Australia Starbucks entered an extremely competitive and mature café market. Not only that, but as Starbucks did not advertise in the mass media – relying instead on its reputation – it failed to communicate its brand. “It is probably against their corporate ethos, but I would have done some above-the-line advertising to promote the brand,” Patterson suggests. “I am sure the majority of the Australian public did not know much about them.” Above-the-line advertising refers to advertisements aimed at mass audiences on platforms such as television, cinema, radio, newspapers and magazines and the internet.

Finally, Starbucks’ business model was simply unsustainable. Leasing a large, expensive shop space and inviting customers to sit around for as long as they like while spending very little was never a good idea in a highly competitive and mature market, asserts Patterson. In addition, he points out, the company owned its stores, rather than using a franchise model, which added not only to its financial pressures but also meant it lacked local knowledge.

Lessons in Decline

Business specialist Hunter Leonard, founder of Melbourne-based BlueFrog Marketing and author of the book, Marketing Has No Off Switch, says the Starbucks case offers three major business lessons. “First, research is the key to statistics,” he says. “If you don’t research then you can’t grow a business. That’s a golden rule. If you’re not surveying customers regularly then you may do well in spite of yourself, but you won’t unlock potential growth.

“The second lesson involves the importance of identifying a target market. Starbucks was going for everyone. They claimed to offer a premium coffee and therefore charged premium prices, but that did not wash with Australian coffee drinkers. They should have been targeting young people who care less about the quality of the coffee and more about the quality of the experience. They should have marketed their big, sugary coffees at people aged 14 to 25.

“Thirdly, a very valuable tip for businesses launching a new product or in a new market is to lose the ego. Just because you say you’re after global domination doesn’t mean customers will allow it … Australians react very badly to people banging their chests.”

While Patterson upholds the success of the Starbucks model elsewhere in the world and credits the company with growing the coffee category internationally, he says the brand’s major mistake was not creating any barriers to entry. “There was nothing to stop a competitor coming in and setting up against Starbucks,” he says. “I don’t necessarily mean a global chain. Look at the number of independent coffee shops around. You can just buy a high-quality coffee machine, get a trained barista on board, lease a shop and design a good atmosphere – that’s all anyone needs to do to compete. Starbucks did not create a sustainable credible advantage for themselves.”

The original advantage Starbucks did have was their level of personal service. Staff made eye contact with customers as soon as they entered the store, they remembered names of regular customers and were happy to make a drink according to specific requests. But even that advantage was easily replicable, and it was completely lost when head office began using key performance indicators to measure the sales of frontline staff. “Not only did staff have customer service targets around engaging people and ensuring customer satisfaction, but the bosses said they had to sell a certain number of coffees and cakes each day. Staff were saying they could make the sales, but they couldn’t engage the customers at the same time,” Patterson says.

According to Patterson’s report, the major takeaways from the Starbucks Australia experience are:

• Crossing international borders is risky, so in-depth research is absolutely vital.

• Think global, but act local. Even well known and well-liked brands must adapt their products for local tastes.

• Establish a differential advantage then strive to sustain it, ensuring your product is unique enough to stand out amongst its competitors, and that it  always will.

• Keep sight of what first generated the business’s success. At Starbucks, sales targets destroyed the idea of high-quality service that the brand had been built upon and which was the only competitive advantage it had.

• Consider the viability of the business model. If your model relies on charging a premium price, for instance, ensure the product on offer will be recognised as premium.

This article first appeared on Knowledge@Australian School of Business website.

While on a trip to Africa recently, I visited my 84-year-old grandmother in the countryside. On arrival, I met her answering a call on her mobile phone while gardening.  I was pleasantly surprised to see that mobile phone network has finally reached her in a rural village in West Africa.

It is on record that western investors came late to Africa telecommunication transformation because analysts and bookmakers failed to predict the mobile phone revolution when it started.  For a continent with a population of over one billion and slightly over two million mobile phone subscribers a decade ago, having more than half a billion subscribers today is a remarkable economic achievement.

New approach:

The success story of telecommunication in Africa is mostly driven by large-scale private investments.  According to Public-Private Infrastructure Advisory Facility (PPIAF), Sub Saharan Africa ICT sector has attracted over $60 billion in investment, which translates to 97 projects in 37 countries. To make return on investment quicker, telecom networks in Africa introduced pre-paid services, which resulted in astronomical growth of subscribers across the continent.

The governments of African countries also contributed enormously to the success of the telecommunication investors in their countries. The governments not only deregulated the sector, some provided market entry incentives to lure private investors that have successfully transformed the communication ability of an entire continent.

Regulating the market:

Telecom regulatory bodies across Africa are gradually evolving a stable regulatory system that guarantees sustainable growth and increased foreign direct investment. According to Secretary General of International Telecommunication Union (ITU), Mr Hamadoun Toure, over 45 African countries have good regulatory authorities with stable and predictable policies.

The McKinsey Institute in their 2010 report suggested that telecom regulators and African governments could further drive the growth of the sector by making lower-spectrum bands available, encourage infrastructure sharing, provide rollout incentives and potentially reduce rural telephony license fees.

How to get involved:

Investors that arrived earlier and recent acquisitions dominate telecom markets in Africa.

Nevertheless, there are still growing opportunities for both big and small businesses in rural telephony, recharge card solutions among others.  Companies that are aspiring to explore opportunities in the African telecom market should consider collaborating with a local player in their target market.  There are several opportunities to meet African telecom experts in industry events in Africa or outside the continent.

The opportunities below are spread across countries in the continent.

• SIM Card Accreditation (software and hardware providers)
• Repair and maintenance of telecommunications facilities
• Collocation and co-sharing of infrastructure
• Power management systems
• Alternative energy for cellular sites/services (solar, wind, etc.)
• Vehicle tracking systems
• Satellite navigation systems
• Infrastructure companies – (building/Towers and Masts co-location)
• Call logging solutions
• Recharge card solutions and other value-added services
• ICT/telecoms solutions for telematics and healthcare
• Consultancy and business development services
• Sales and installation of terminal equipment
• Provision and operation of public pay phones among others.

While you are here:

The inaugural Africa Australia Infrastructure Conference will take place on September 3^rd and 4^th 2012 at the Sydney Exhibition and Convention Centre. The Conference will feature ICT & Telecom, Oil & Gas, Transport and Energy. Private sector decision-makers, Government Ministers, Business community and experts from both Australia and Africa are expected at the Conference.

You can register your interest now or get more information here.

Research on the barriers that contribute to the gender gap in entrepreneurship often cite a higher level of risk aversion in women which it is postulated prevents many from expanding their businesses. I found myself questioning how effective really are support programs such as the Women in Global Business program, if our genes work against us? Then I heard the scientist say the magic words – “Entrepreneurs seem to all have a genetic propensity to take risks”. So if you are already in business, you have already faced your fears and taken a deliberate course of action to overcome them. Exporting then, taking the risk to grow your business by building the level of risk internationally, and potentially reaping the rewards, is just an extension of your original risk taking behaviour to establish a business.

My mind wandered back to those sleepless nights when I first took out a lease on an office for my fledgling company. Would I be able to make the monthly rent? Would I be able to bring in enough revenue to pay all the staff? Would I be able to feed my family? Would the business take off in that market? The physical symptoms of fear, the fast beating heart, the sick feeling in the stomach was a reminder that I was embarking on something that was completely different to my previous behaviours. I was definitely out of my comfort zone. But later there was the almost indescribable satisfaction that my original hunches and rational business sense paid off.

As my business expanded internationally, so did the complexity and degree of problems. Risk was always there but it was commonplace to face it.  Expanding meant dealing with cultural, language, legal and financial hurdles to name a few. It meant hiring advisers and staff that you weren’t sure you could trust. It meant adapting to different procedures and protocols in each country. And there were disappointments and failures along the way. But the decision making, although more complex as time went on, was no harder than that first decision to take on a one year lease in a foreign country. So how you react to risk may be primarily dependant on your genetic makeup, but if you are already an entrepreneur and have a successful business, you have already proved capable and resilient in the face of risk.  Taking that next step to exporting your products and services to the global market is just a natural progression in expansion.

My message for 2012 is let’s turn around the statistics that female owned businesses tend not to grow or prosper as much.  Put yourself in new situations and explore new markets.

Last year, the number of visitors from Brazil, Russia, India and China increased by 6.4%, 7.1%, 13.0% and 28.2%, respectively. Is the Australian Tourism Industry prepared for this?

Here are some thoughts on how to attract the new BRIC Tourist:

Follow the money!

In the next decade, the tourism market for Chinese visitors alone is forecasted to be worth A$6 billion to Australia, with almost one million Chinese visitors forecast to visit Australia in 2020. The Chinese tourist contributes twice as much value as the Japanese, with total inbound economic value (TIEV) having increased on average by 17.1% per year for the past ten years (a contribution to the Australian economy of A$7,287 per person).

Indian tourists also spend on average more each day than other nationalities. The total inbound economic value of an Indian tourist has increased by 14.9% per year for the past ten years. Indian tourists spend, on average, $73 per night and $4,607 per visit. For the next decade, the TIEV for Indian tourists is forecast to grow 6.7% year on year, moving the Indian tourist from Australia’s ninth to our fifth most valuable inbound market.

In 2010, Russians spent $26.5 billion abroad. As the BRIC country with the highest GDP per capita and the lowest levels of debt, the Russians have high purchasing ability and a relatively large luxury consumer market which is predicted to reach the size of Germany’s by the end of this decade.

Education policies requiring Brazilian students to study English are fostering outbound education tourism. Australia is a popular destination for young Brazilians due to our outdoor way of life, beaches and cultural similarities. In addition, Brazilians devote a large portion of their income to discretionary spending and choose to live for the present!

Casting a Wider Net

Unlike in the past, when the tourism industry has relied on above-the-line advertising and travel agents to attract business, the number one source of information for one-third of Chinese, Indian and Russian tourists is the Internet. Even more compelling is the knowledge that, unlike western travellers who usually plan and book their travel many months in advance, Chinese tourists booked their flights within one month of their date of travel.

The importance of reaching potential BRIC customers via online promotional material and marketing campaigns will be a necessary competitive edge for all travel companies in the future.

However, traditional methods of marketing and search engine optimisation are of little significance for BRIC tourists, in particular the Chinese. As an example, the Chinese population’s most popular search engine is Baidu, the Chinese equivalent of Google.  It is therefore very important for the tourist industry to establish a presence in local popular Chinese search engines to attract the lucrative mainland Chinese market.

Revamping the Product

With such alluring growth figures, it is going to become even more important for all tourism companies to develop products that have direct appeal to the BRIC tourist. The BRIC tourist differs quite significantly from their stressed out Western counterparts in that they want to cover as much of Australia in as short a time as possible! A typical day may include a photo stop at Bondi Beach in the morning, followed by a bus trip to the Blue Mountains in the afternoon and then an evening at the casino. This contrasts with Western tourists who typically enjoy sunbathing and relaxing on the beach. With over one fifth of outbound Chinese tourists being labelled as ‘Self Challengers’, Australia is a popular destination for those attracted to adventurous pursuits, being pushed outside their comfort zone and those who are attracted to some of Australia’s more remote areas.

Recruitment

There are approximately 150,000 Chinese students studying at universities in Australia, almost 70,000 Indian students, 18,000 Brazilian students and 1,500 Russians, but very few of them successfully find work in Australian companies after they graduate. These students not only have valuable cross cultural and language skills, but also Australian knowledge, experience and qualifications and possibly even high level connections in their home country. With the limited time available until their visa expires, many students are forced to return home if they cannot find suitable employment in the short period available, and this results in a loss of talent and valuable skill sets which could otherwise be retained in Australia – particularly in the tourism sector.

A good place for Australian tourist companies to start in developing a strategy to attract new BRIC tourists is to review their recruitment policies to attract international students who, after a short period of training and on the job experience, will significantly enhance their ability to tackle the BRIC market.

Business Tourism

The market for business tourism is largely untapped, but with 87% of business travellers staying longer than the ordinary tourist, both before and/or after their business engagements, the business tourism market presents numerous opportunities for the tourist sector. In 2010, business travel from Brazil increased by 59% due to the rapid growth of Australia’s energy and resources sector and the desire amongst Brazilian companies to learn from Australia’s success.

Why not tailor a tourism package that incorporates business meetings, site visits or even networking events for the more entrepreneurial and business-minded BRIC tourist? With numerous delegations coming to Australia from Mainland China every week, is this a niche opportunity for local tourist companies to start tapping into?

Seasonal Differences

While a seemingly obvious point, it is important not to underestimate the power of seasonal differences, particularly to attract Chinese and Russian tourists. The peak months for Chinese tourist arrivals to Australia are in January and February which, amongst other things, is caused by their desire to avoid the harsh winter climate and travel over the Chinese New Year Season. For Russian tourists, December and January are the peak months for tourist arrivals as they seek to escape the harsh Russian winter.

Tourism companies should focus their marketing and promotional activities to attract Chinese and Russian visitors during our warm summer months.

Cultural Differences

Whilst there are distinct cultural differences between Australia and the BRIC countries, Australia is uniquely placed and well positioned to take advantage of our exclusive position as the only western country within the BRIC region.

With over 1 million Chinese Australians (either born in China or of Chinese ancestry), large numbers of business migrants arriving each year from all of the BRICs, our growing number of international students and our strong cultural and historical ties throughout the region, Australia is a truly multi-national, multi-lingual and multi-cultural society which has so much to offer the BRIC Tourist.

“Speak with one Voice”

In the words of Geoff Dixon, Chairman of Tourism Australia, Australia’s tourism industry needs to “speak with one voice” when marketing overseas. Unlike other sectors, The tourist industry is highly fragmented in Australia which means that collaboration, rather than competition, to attract the BRIC tourist will result in everyone having the chance to share in a much bigger pie.

As an example of this, in 2010, Italy, France and Spain signed an agreement to work jointly to attract BRIC tourists, a partnership which would have been unthinkable a decade ago.

Also, in Pattaya, Thailand, high end luxury resorts have been collaborating to attract the Russian Tourist, a innovative strategy which has met with almost immediate success. By introducing Russian street signs, Russian restaurants and developing training courses for hotel staff and waiters to learn Russian language and cultural differences, Pattaya is now attracting large numbers of big spending Russians.

The BRIC tourist presents an unprecedented growth opportunity for the Tourism Industry….what is your BRIC strategy?

This is a summary of a presentation I gave earlier this month to the Australian Tourism Export Council Meeting Place 2011 in Sydney.

Whatever we might think about Martha’s recent brush with the law, what came through for me was the essence of a true international entrepreneur wrapped in a package of generous natural talents and skills not often found in one human being. She’s a businesswoman who is driven, an optimist, a good communicator, she’s financially literate, great at marketing and PR, truly creative, has a good understanding of how to deal with different people and cultures, good negotiator, great at leading teams – and has the ability to break through the fear barrier: she’s one woman who shows us how to  succeed.

Businesswomen who would like to export are often are held back by the ‘what ifs’. What if I can’t handle caring for the kids and travelling overseas to meet clients or distributors? What if they don’t like my products? What if the people I trust and depend on overseas let me down? What if the legal framework becomes too complex? What if I just am not good enough?

We know through significant research that one common barrier for a woman’s career development is that they often underestimate their ability and potential. Whether applying for a job or deciding how to expand your business overseas, women will take the plunge if they think they already have ALL the skills necessary. All the boxes need to be ticked. Men are not hamstrung by this. They typically overestimate their ability and take the plunge.  This difference can partly be explained by the risk assessment processes in our brains, but that is not the whole answer. Fear of “putting yourself out there”, fear of trying something completely new, fear of promoting yourself or your products, fear of failure and allowing the ‘what ifs’ to dominate your thinking is a barrier to success that is of our own making.

Martha Stewart started work as a model at 13 and is still working at 70. Her what ifs were always focused on the positive. What if I leave modelling to become a stockbroker? What if I leave the financial world and start a catering business? What if I start writing books, establish magazines, go into TV and take my products to the world through the internet?

For your New Year’s resolution let that ‘what if’ be the foundation of your exporting business.

While Jim had already gained recognition and widespread respect for his previous work as an economist and currency analyst, he acknowledges that his career has now been shaped in large part by this simple term. While many eyebrows were raised at the time by some of his more dramatic predictions, notably the one that China would overtake the US to become the largest economy in the world within 30 years, the BRIC concept is now almost a household term, widely recognised within the media, academia, business circles and certainly by the investment community.  At the end of 2009, Jim’s BRIC research was widely acclaimed as the “Call of the Decade”.

With the benefit of 10 years since he first invented the BRIC acronym, it is worth pausing to reflect on how much the world has changed since 2001. As Jim wrote this week in an article in the UK Telegraph in which he reflects on the progress of the BRICs over the last decade:

“All four of the BRIC countries have exceeded the expectations I had of them back in 2001. Looking back, those earliest predictions, shocking to some at the time, now seem rather conservative.

The aggregate GDP of the BRIC countries has close to quadrupled since 2001, from around $3 trillion to between $11 – $12 trillion.

The world economy has doubled in size since 2001, and a third of that growth has come from the BRICs. Their combined GDP increase was more than twice that of the United States and it was equivalent to the creation of another new Japan plus one Germany, or five United Kingdoms, in the space of a single decade.

Some observers say the effect of the BRICs on the world economy has been exaggerated because their growth was primarily driven by exports to the developed markets, as well as the rise in commodity prices.

Exports certainly played a major role for China, but since the 2008 credit crisis and the consequent fall in demand in the US and elsewhere, that is no longer the case.

For India, domestic demand has been the driver throughout the last decade, and increasingly it is the domestic consumer as well as an increase in infrastructure spending that is fuelling growth in the BRIC economies.

The credit-fuelled growth in US demand certainly played its part in their ascent, but even since 2008, and despite the ongoing US struggles, the BRIC economies have continued to power ahead.

However you choose to interpret the data, the importance of the BRICs in global economic growth is beyond dispute. Personal consumption in the BRIC countries has skyrocketed. In China, between 2001 and 2010, domestic spending increased by $1.5 trillion, or roughly the size of the UK economy.

The increase in the other three was about the same, perhaps slightly more. BRICs now account for probably close to 20 percent of world trade compared with less than 10 percent in 2001.”

Whilst the BRIC idea was first dreamt up as an investment idea or theme, designed to challenge the thinking of investors and their professional advisors, even Jim has been surprised by how quickly the BRIC countries themselves have started collaborating via their annual BRIC (now “BRICS” to include South Africa), Leaders Summit which has met every year since 2009 to discuss opportunities for political, economic and even trade collaboration.

The recent BRICS Leaders Meeting in China in April 2011 laid the tracks for greater ‘intra-BRIC’ trade and investment co-operation in the years ahead.  This is vital to the global economy and should be occupying the minds of all forward thinking business leaders, investors and entrepreneurs.

‘Intra-BRIC trade’, or trade among the BRIC members, has grown at the rate of 30 percent per annum since 1999 and now accounts for 8 percent of global trade. During the last 10 years, intra-BRIC trade increased nine-fold, compared to global trade which only doubled over the same period.

In recent years, Intra-BRIC trade has been mainly characterised by Russia and Brazil supplying natural resources to satisfy the industrial and infrastructural needs of India and China. However, this is likely to change. Watch out for more investment and trade deals between the BRICs as they create their own trading bloc and invest in each other’s capabilities.

10 years later, it is time to acknowledge Jim O’Neill’s vision, foresight and thought leadership. But as he reminds me from time to time, the BRIC idea has a long way to run yet!

The key word is qualifying. Conduct due diligence on your Chinese manufacturing partners/suppliers before you sign the contract.

Here are some factors you must include in your due diligence on Chinese manufacturers / suppliers:

• Is the business a genuine business? Obtain a copy of their business licence and, if possible, check with the local Commerce and Industry Administration Bureau on the legitimacy of the Chinese business.
• Is the business a manufacturer? Smart Chinese middlemen understand you would like to cut down costs and go directly to the manufacturers. Hence they may work on a manufacturing site picture, put it on their websites and claim they are manufacturing what you need. Again obtain the copy of their business licence to check their business scope and/or investigate  with local government agencies/industry bodies directly or through a Chinese business consultant.
• Does the Chinese manufacturer have surplus manufacturing capacity and capabilities to meet your current and potentially growing demand? Check with the staff of the company on their manufacturing capabilities. If you are placing big orders and/or look at working with a long-term manufacturing partner, it is worth visiting the Chinese manufacturers to better assess their manufacturing capabilities.
• Does the Chinese manufacturer have quality control systems in place? Do they have an international quality accreditation? Obtain a copy and check with the appropriate authorisation organisation.
• Is the Chinese manufacturer a reputable business in the industry and protect clients’ intellectual property? Check with industry bodies, their clients and suppliers and conduct secondary research to find information on the company’s reputation.
• Is the Chinese manufacturer committed to work with you? If your business is not vital to them, you are at the very bottom of the list when they prioritise orders and hence may delay the production or delivery for your order during peak time.

For assistance with due diligence on Chinese companies or further information on doing business with China, contact Sara Cheng, Manager-Greater China Region, Australian Business Consulting Solutions, Email: sara.cheng@australianbusiness.com.au or call 1800 505 529