International business can be more costly and more risky than domestic business, and never more so that when the “r” word or even worse, the “d” word, depression, are bandied around the UK.
But despite all the economic doom and gloom, pulling back from international markets, like the UK, might not be the best strategy. This is particularly true for firms seeking to enter the broader European market.
The UK market has always been strategically important, especially to Australian companies. It’s never just about how much ‘bigger’ the market is to our domestic economy. The UK offers companies an English-speaking gateway into Europe; it’s a huge source of inwards investment, knowledge exchange and northern hemisphere partnerships. And Australian companies come here in their thousands.
In fact, it’s estimated that there are more than 1 500 Australian companies with a physical presence in the UK; this represents the highest concentration of Australian businesses anywhere other than the United States.
Because of the strategic value of the UK market, Australian businesses that are already here need to think very carefully about abandoning ship. Once you pull out, it will take years to get back in, not to mention the potential spill over effect on any other northern hemisphere business. You may also have lost a golden opportunity to steal market share from your competitors and/or to show loyalty to your UK partners.
But according to a Business Sales Report, in the last quarter of 2008, 2,428 UK firms were placed into corporate insolvency. This was a 220% increase on the same quarter in 2007.
So with big name businesses closing down almost daily, unemployment soaring and trade finance hard to get, what choices do firms have?
Essentially, options exist to defend or attack.
In the areas of defend, its not rocket science, but in times of economic growth practices can get a little “looser” and so the challenge now is to re-establish good discipline. For example, try to manage your inventories tightly, incentivise early payment of invoices, tighten up debt recovery practices, identify what savings can you make in energy, water or waste management, clearly identify your unprofitable customers and either up-sell them or make the decision to let them go, and for your profitable customers be sure to service them very well.
Also don’t decrease your marketing efforts if you can at all avoid it. Instead think about how you can attract new customers through low cost e-marketing, partnering or perhaps a low cost diversification of your product that would attract a new market segment.
Economic study after economic study show that those companies that can maintain or even increase their marketing efforts in a down-cycle tend to enjoy greater sales and market share in the eventual up-cycle than those firms who did not maintain their marketing efforts.
In the areas of attack, if you have any cash reserves at all try to use them proactively to get or give better terms to your creditors and debtors, identify opportunities to buy-out some of your competitiors who may not be as liquid as you, extend your reach and/or diversify your offerings – premium vs value – or target the customers of failing competitors.
Lastly, always remember that no matter what is happening at the macro level, there are always pockets of growth occurring within an economy, including the UK. So track emerging growth sectors & market trends – eg. Online sales or eco-nomics (“green” offerings)
This is proving a good tactic for many Australian companies active in the UK where despite the fact that many sectors are contracting, there are still good opportunities to either enter or grow within niche sectors.
Areas such as goods and services in clean tech, security, education, government services, health, energy/water and waste efficiency, outsourcing services, and small niche luxury items continue to grow. As do online sales.
For example, the increased focus on changing the regulatory controls on the UK financial industry, as a result of the financial crisis, has lead to good opportunities for security and compliance software providers like DTEX Systems.
While the need for greater delivery of e-government services, provides opportunities for companies like Neo Products.
Increased demand in the education sector due to the growth in the unemployment market is creating opportunities for e-content providers like Roar Educate.
And “Green” spend continues to remain strong, driven in part by a desire to reduce costs by finding ways to reduce energy, water and waste costs.
So firms like Closed Loop Recycling, who provide food-grade recycled plastic for reprocessing by the packaging industry, are seeing good growth in their business as companies seek to decrease their waste and landfill costs, while also reducing their carbon footprint.
Topic: australian businesses, corporate insolvency, domestic business, domestic economy, doom and gloom, economic doom, investment knowledge, northern hemisphere, physical presence, uk partners