Overseas expansion for successful Australian businesses is an alluring source of growth. But it also comes with risks that can turn dreams of global dominion into an embarrassing and costly disaster.
Jacques Janse GAICD, CEO of Blast Movement Technologies and former COO of Groundprobe, has extensive experience bringing proprietary mining technology to new markets all over the world, including Chile, South Africa, Indonesia, China and India, for clients such as Anglo American, BHP and Glencore. He spoke to The Boardroom Report about his top tips for managing the risks of taking your operations offshore.
Do your market research
First and foremost you need to do your homework make sure there is a business case for entering the new market, according to Janse.
"You need to analyse the maximum addressable market that you're going into. It's a sales game. You might say I've got 100 potential customers there. Maybe in the first year I can get ten, then I can get twenty or forty, then maybe if I do really well in five years I can get all hundred. Or if there are only five customers there, you might do that ad hoc at that point and then sell out of Australia in the future," Janse told The Boardroom Report.
Find good help
It's important to find advisers that have experience working with Australian companies. Austrade can be helpful finding these contacts.
Finding the right person is key, otherwise you will be going back every two months to resolve issues and the problems will pile up. It's worth investing all the time that you can to find the best candidate.
"Austrade often knows law firms, accounting firms and tax agents that actually understand Australia well. They know how to help Australian businesses since they've done it before. This eliminates a lot of the tax risk, commercial risk, legal risk because they know the pitfalls and can guide you through it," Janse said.
When you get to the stage of opening an office, you need to find a manager that has a good reputation in their own market but also understand international business, Janse advises.
"Finding the right person is key, otherwise you will be going back every two months to resolve issues and the problems will pile up. It's worth investing all the time that you can to find the best candidate."
Understand local regulations
It is important to understand the regulations of the country you’re entering. It is no good setting up your business in the foreign market if there is no way of getting your profits back to Australia for instance.
"Every jurisdiction is different. They make the rules and you've got to find out how to play by them," warns Janse.
Labour laws will also differ from country to country.
"Don’t be surprised if labour laws are very different," Janse says. "Chile has this law where the employee is by default favoured in labour disputes. In some markets you agree with someone on a salary and when you look at the on-costs associated with labour regulations you can pay up to 40% more."
When you compromise your business model, you immediately open yourself to risks. You are already entering a market you don't understand. You don't understand the culture, the language, the sales cycle. Why would you inflict more pain on yourself by changing your business model?
Stick with your business model
As a key risk management strategy, businesses need to stick to their knitting when they go overseas.
"When you compromise your business model, you immediately open yourself to risks. You are already entering a market you don't understand. You don't understand the culture, the language, the sales cycle. Why would you inflict more pain on yourself by changing your business model?"
Never ever cross ethical lines
Never make ethical compromises to get a foothold. When it comes to the safety of your employees or corruption there are bright lines that should never be crossed.
"When we go to a country we are unfamiliar with, we do specific risk assessment. But ultimately my policy is simple: if I am not prepared to visit a country, then I will not send my people there."
In many markets around the world you will work extensively on deals, only at the last minute to be asked for a bribe to get it across the line. However painful it is for your blood, sweat and tears to go to waste, Janse's advice in such situations is brief:
"Refuse to get involved."
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