David Irving

1
International Business at the Firm Levelfor
Auckland Chamber of Commerce

• David Irving
• April 2008

2
Globalisation is Impacting New Zealands Ability
to Attract and Retain Businesses
Centralisation Businesses who operate in NZ and
offshore are rationalising their NZ operations as
they centralise Eg Heinz Wattie (HQ) Brierly
Investments (HQ) Bendon (HQ and Manufacturing)
John Sands (HQ)

• Increased Competition/Opportunity
• Firms now exposed to global competition are
  choosing not to locate here
• Small market
• Lack of skilled workers
• Limited amenities
• Limited track record for innovation
• Geographic isolation
• Lack of financial incentive
• Eg Fisher Paykel
• ANZ

Expansion NZ firms seeking to globalise are
moving overseas and locating their HQs in larger
markets Eg Lion Nathan (HQ) Carter Holt
(Packaging Tissue HQ) Fernz (HQ) Pacific
Lithium (HQ) GLG NZ (Manufacturing)
Acquisition NZ firms doing well are acquired by
overseas companies and have their assets and
workforce taken offshore Eg Dorf Industries
(Manufacturing)
Source Competitive Auckland
3
OECD Comparison Distribution of Enterprises
4
Compared To Europe A Small Of Our Firms Export
Source Australia Knowing Growing the Exporter
Community
5
80 Of NZ Exports By 1.5 Of Exporters
20.6b
20b
5 b
4.5b
4.1b
2b
2.26b
500m
100m
4.65m
72m
No of exporters
5524
2656
1312
401
99
55
lt50k
50 - 499
500 4.99
5.00m - 24.99m
25m - 74.99m
gt 75m
Export Value Segments
Source NZ Dept of Statistics
6
NZ Goods Export Growth Versus World Import
Growth, 1985-2001 (CAGR)
Note Bubble equals value of NZ exports
2001 Source United Nations COMTRADE database,
BCG analysis
7
More Exporters Fail Than Succeed
Source NZTE Longitudinal Profile of NZ Exporters
8
The Three Circles Of The Hedgehog Concept
Source Good to Great, Jim Collins
9
Core Competency Knowledge

• Three conditions
• Difficult to copy
• Easy to replicate
• Adds value to consumer
• Some examples
• Sony miniaturisation
• Phillips optical media expertise
• Honda small engines
• Watties ?
• Competitiveness derived from build core
  competencies at lower cost and quicker than
  competitors and spawn unanticipated products
• Regional competencies lead to collaboration

10
Competencies The Roots Of Competitiveness
End Product
Flowers
Competence 1
11
Business Model Economic Engine
12
Kim Crawford Versus Tradition Crawford Wins
Hands Down!
13
Wine Example Cable Bay
14
What Is Fixed And What Can Change
Source Built to last Jim Collins, Jerry Porras
15
Key Learnings to Export SuccessNew Zealand
Flea on the Elephants Back

• The owner manager commitment
• Balance of financial risk time demand tensions
  against personal ambition and lifestyle needs.
• The right owner for the going concern
• While foreign ownership will provide access to
  global distribution and freedom from financial
  risk their ownership will frequently destroy the
  owner managers speed, innovation, team work, can
  do attitude customer focus.
• Ensure stakeholder alignment exists
• Stakeholders are bonded through agreement of
  purpose, values, strategy and expectations.
  Misalignment will lead to major distractions for
  management.

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Key Learnings to Export SuccessNew Zealand
Flea on the Elephants Back

• Determination of supply chain model selection
  and management of in market representatives
• Getting this wrong will cost the exporter in
  export dollars and more importantly, time.
  Changing distributors is often essential yet
  dangerous.
• Management of the resource necessary to match the
  export demand
• Resource of production capacity, new product
  development, supply chain investment etc require
  people money which must not dilute established
  business requirements.
• Gushing and forex exacerbate the challenge.
• Knowing your competitive advantage and sustaining
  it
• Given the NZ advantage is usually innovation,
  speed and is applied in niches where large scale
  NZ equals small scale global then we must
  constantly stay in front by front line knowledge
  and rapid solution.
• Contribute the NZ firm core competence into the
  right global value chain

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Key Learnings to Export SuccessNew Zealand
Flea on the Elephants Back

• Understanding and managing cross cultural
  differences
• At its most basic, understanding difference
  between those countries that exercise collective
  decision making versus those that exercise
  autocratic decision making.
• Are the issues the same for traditional
  categories and knowledge industries?
• Doubtful, they are certainly not in matters of
  scaling up, business models. Need to understand
  the differences.
• Utilise the networks and seek good advice
• They are considerable including Beachhead
  Boards in market, KEA, NZTE, retired NZ
  multinational managers etc.
• Retain as Advisor, Mentor or Director.

18
See the Future by Going There
?
Wrong Way
Right Way
?
There/Future
There/Future
Here/Now
Here/Now
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Planning Takes Place At The Time of Planning
Horizon

• Six Planning Steps
• Decide horizon time and place
• Mentally move to that time and place
• Record the business environment
• Record you business performance
• Look back to here/now and compare with
  there/future
• Record what you need to do to get from here/now
  to there/future

20
Managing Foreign Exchange Apply Common Sense
(no business)

• Must create some certainty
• Not too far out
• Tailored to the company financial strength
• Recognising New Zealand economic fundamentals
• Need a ceiling to prevent business failure and
  leave open upside for the likely plummet
• Share the risk with overseas customers
• Remember the natural hedges
• Match up with complimentary situations outside
  your business

(highly profitable business)
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Resilience During Tough Times Just Common Sense

• Frequent communication with key stakeholders
  shareholders, key employees, customers,
  suppliers, advisors and bank preferably in
  person
• Face up to the brutal facts, do what has to be
  donee.g. Avoid discretionary costs, reduce fixed
  overheads and non key people, cease non
  productive business, allocate resource to key
  business
• Adopt innovation as your mantra products,
  processes and business models
• Look for global solutions
• Adopt shorter term horizons
• Demand reliable financial reporting and staff
  accountability
• Engage key staff in the collective responsibility
• Celebrate any and all wins!
• Focus on and address your health and well being

22
My Observation Owner Manager The Really
Critical Things He/She Must Do

• Show the stakeholders the future
• Get the right people on the bus
• Know and live by your values
• Face up to the brutal facts
• Optimise the firm
• Enable performance
• Stay balanced

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