Strong dollar? Time to Think Strategy

Strong dollar? Time to Think Strategy article image

It’s pretty obvious exchange rates have not been kind to Aussie exporters for the last few years and particularly over the last few months -and there are plenty of pundits predicting the dollar to get stronger still... As a result existing exporters have seen reduced sales, tighter margins, loss of market share and in some instances complete loss of markets. It’s a tough time being an established exporter and often the first reaction is denial-"we’ll just ride out this period and hope that it gets better". Is it possible to think strategically in the light of this pressure? The key is to explore a range of options and determine what’s right for your business, some options are as follows: Strategic relationships: Now’s the time to review your local sales ‘partners’: distributors, agents or others. Are you working together to deal with the exchange issue-are your local partners the most effective, are they savvy marketers building your brand?  Now may be the time to do the reality check and take an objective look at the effectiveness of your in-market support. 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? Do you need to think about manufacturing-assembling or down filling in the local markets to take advantage of reduced freight and probably less expensive inputs? 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? 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. 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.  The importers of your product-distributor-agent-end user-are already building a ‘hedge’ or a margin on top of the current exchange rate to ‘protect’ them from short-term exchange movements. It is better for you to control that hedge factor and give them certainty in invoicing in their currency-this gives you greater control over the end-user pricing. For companies just starting on the export journey all strategic market entry options are open. That starts with researching your market and determining what is your value proposition-the true differentiation of your product or service. Then you look at the best strategic model that suits your business-objectives and resources. There are many ways to respond to the challenge of a very strong dollar. If export is key to the growth of your business, then perhaps it’s time to review your export strategy?


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