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To China and Beyond: An SME Perspective

Strategy

Trade with China can conjure up many visions of excitement ranging from the exotic imagery of the Silk Road through to the long awaited announcement late last year of the establishment of New Zealand’s first official Chinese angel investment network.

And while the newspapers tend to dwell on the larger deals (large, that is, from New Zealand’s perspective) there is a considerable amount of smaller scale trade going on ‘under the radar’.

A few years ago, I mentored a group of exporters who were taking part in a Small Business Development Program through Whitireia New Zealand. The businesses were all small scale enterprises with big ideas and a hunger to make things happen.

What was really interesting was the way in which two of these businesses used China to springboard their businesses into the New Zealand domestic market and then offshore.

Say that again? That’s right, they used trade with China to leverage their position in New Zealand and to create products with international value.

More precisely, they bought a consignment of a wood-based product that they could re-manufacture in New Zealand for their respective products.

It’s not that there is anything startling about buying product from China and there are many good reasons why a smart business would do this. Price is a commonly touted reason for sourcing product from China especially when New Zealand labour and compliance costs are taken into account. Quality can be another reason. And so can specialist production services.

What I thought was particularly clever was that our two businesses combined their research resources to find a supplier that suited them both. They were looking for a strong, cost-effective and sustainable timber product with good finish and workability. Together they bought a laminated bamboo product that ‘ticked all the boxes’.

Then they used each other as a check on production and supply by taking turns to visit the factory (which immediately cut their individual travel costs and downtime as a consequence). If there was anything that they were unsure about they would check with each other first to see if the other party had picked up any bad vibes from the supplier.

Apart from the obvious cost savings our two businesses effectively bought themselves a double-check system and a very basic ‘buyer support network’.

Of course, this sort of strategy isn’t foolproof. There is still plenty that can go wrong from a distance of 6,000 miles … and that’s before we take cultural differences into the reckoning!

However, there is also plenty that can go right in any trade deal. By reducing the risk element we can increase the likelihood of a good result for all parties involved.

Small businesses play an important part in building business confidence and creating market opportunities. If we want to foster trade between New Zealand and China then these are the sort of stories that we need to hear more about.

I would like to think that other New Zealand companies can learn a lesson or two from our two enterprising businesses by developing their own links with China in 2012.

In fairness to our two businesses, they each had an important ace up their sleeve to start with. Certainly, they were clever enough to think laterally and collaboratively. Equally as important, they had the foresight to see the benefits that a course such as the Small Business Development Program could offer.

Unlike many traditional business development programs, there is no ‘chalk and talk’ and no systems to follow in the SBDP. The program is based on each business setting its own individual goals and then using an action-research approach to achieve those goals. Along the way, their assigned business mentor facilitates by making introductions, suggestions and referrals as appropriate.

Each month the participants meet together to discuss their progress and to set their accountabilities for the next four weeks. They also share ideas, provide feedback and make their own recommendations to each other. In between meetings they can catch up with their mentor (or with each other) and complete any tasks that they need to.

And as you will have realized by now, this is how these businesses become so good at the ‘art of business’. They talk, share, challenge, test, act and reflect on the things that matter the most in their respective businesses. And whether they are exporting or not, they learn that good planning and execution are the corner-stones of good business practice.

As New Zealand becomes more dependent on Asian Pac-Rim countries the trading abilities of our small business owners will become more important. Good business and trade go hand-in-hand.

Phil Sales is a former business advisor with the Wellington Regional Chamber of Commerce and the Government’s biz Information service. He is currently managing Whitireia New Zealand’s Small Business Development Program for aspiring entrepreneurs and exporters. People interested in taking part in the program can contact Phil at phil.sales@whitireia.ac.nz or 027 331 9658.