Why the high dollar should not scare exporters
- 22 October, 2010 10:22
If your business is heavy on import and resale, you’re in luck. If you’ve got an overseas holiday planned, you’re in luck. The Australian dollar has been soaring against virtually every other major currency, reaching highs we haven’t seen since pre-GFC levels.
And the prediction is that, while the rise of the dollar will steady, it will remain high.
But this does have a downside – Australia’s export market will now have to compete in international markets coming from a currency that is around $0.10-$0.20 cents higher than would be ideal.
For some, the impact will be dramatic. Manufacturing is always a quick casualty of a strong dollar, especially when we sit so closely to far cheaper Asian markets such as China. The wine industry, too, is now essentially exporting from a break-even position.
But it’s not all doom and gloom. Some resources industries have been able to extract high prices to cushion the impact of the dollar. Agriculture tends to be able to achieve reasonable prices in this kind of environment, too.
ICT seems to fall somewhere in the middle. Australia plays host to a vibrant ISV environment – ZAP Technology recently achieved Microsoft Partner of the Year, for instance, and three of the six nominees for NSW exporter of the year were ISVs. Beyond the ISVs, though, any Australian technology company (including those that provide services) that has a demonstrable uniqueness can find a paying audience overseas.
“If you’re a commodity exporter it can be difficult, because you’re up against commodity exporters from other places, who might have an advantage with exchange rates,” Australian Institute of Export general manager, Peter Mace, said.
“But if you’re in the IT sector, it really depends on how you position the product, so if you’re in a niche where you’re seen as the top dog or the best provider in that niche you might be able to adjust your prices up slightly, and the market still bears that.”
Australian ICT organisations can find a (relatively) easy home in a host of markets, including the European Union (building offices in emerging Eastern Europe is an effective technique for stepping into this market without the expenses involved with France and Germany), the UK, Middle East and Asia, and the US. However, those organisations might also find the need to disguise their Australian heritage to an extent to find broader acceptance.
“A lot of companies see that having an office in America for them is one of the most important things they have to do in terms of setting up their global positioning,” Australian Institute of Export national events and membership manager, Lisa McAuley, said.
“It’s about looking bigger than you are. There is a perception that Australia can’t really come up with its own innovations, which we all know isn’t true, but it’s important to be seen where the tech hotspot is.
“A lot of companies, their whole promotion is to have an office in London, America and Asia-Pacific and it kind of gives the impression that they are a multinational based in America, even if there is only one person in some of these offices.”
Interestingly, in some emerging markets – such as the Middle East – that perception could backfire, whereas an ‘Australian’ organisation can be seen as a relatively friendly organisation to deal with on a political level.
It’s worth considering, because exporting these more frontier environments can be more lucrative than you would initially expect.
According to Mace, Australian organisations tend to do well even within nations targeted by UN sanctions – such as Iran, provided they are careful with what, exactly, they export.
Australia also tends to find strong opportunities in rebuilding war or disaster-ravaged nations such as Iraq, Afghanistan and Haiti.
So, while the value of the dollar would on the surface hamper export opportunities for Australian companies, there are plenty of opportunities in overseas markets. Make good use of Government resources such as the Australian Institute of Export and Austrade, understand your value proposition and what you need to do to gain traction in a market, and keep an eye on emerging markets, and you’ll mitigate the higher prices that you’ll be charging.