AIBS 2016: First international markets

26 Aug 2016

Tags

  • Mark Thirlwell
  • AIBS 2016
  • International Trade

For the first time in our survey series, in AIBS 2016 we asked respondents to tell us about the first overseas market from which their business had earned overseas revenue.1

AIBS 2016 the first target market for respondents

For our survey participants, the most common first overseas market was the United States, followed by China, New Zealand, the United Kingdom and Japan.2 The relative popularity of the United States and China in particular as ‘starter’ markets was also supported by another AIBS 2016 result: in a new section of the survey we asked those businesses who had yet to start earning international revenue to identify their top target markets for future business, and these two markets were again the two most popular choices.

To some extent, that’s a somewhat surprising result, given that we know the most common export market for Australian firms – by quite some distance – is New Zealand, and for reasons both of proximity and overall ease of doing business, New Zealand would have seemed a strong and logical candidate for the first overseas market to be targeted, rather than the third place it achieved here.

It’s also noticeable that the top six markets listed above are the same top six markets (in only slightly different order – China and the United States swap places) identified by survey respondents as their most important current markets. Together with the only country difference between the two lists being the presence of PNG as a top ten first market and Hong Kong as a top ten current market, this also suggests a degree of persistence in market presence for AIBS 2016 firms that is consistent with our other survey data on international experience.3

AIBS 2016 key factors in targeting top markets

Why did businesses choose these particular markets to be their first international destination? The most common factor to be cited as very important by respondents across markets was the presence of strong growth and profit opportunities.

In the case of the top two choices for first market, for example, and looking at those respondents identifying a particular factor as ‘very important’, 66 per cent of those who said the United States was their first overseas market cited strong growth and profit opportunities as very important. This was followed in relative importance by low barriers to trade and investment (cited as very important by 40 per cent), an easy/safe business environment (39 per cent) and familiar culture/language (38 per cent). For China, strong growth and profit opportunities were also at the top of the list, cited as very important by an even higher 74 per cent, but this was followed by the presence of family or personal contacts (28 per cent) and participation in a trade mission or similar (25 per cent). The survey responses also show that the presence of an FTA was a relatively more important factor in the case of China than the United States.

AIBS 2016 ease of doing business

Finally, it’s interesting to compare our list of AIBS 2016 top ten starter markets with the information we have on the ease of doing business in those same markets relative to operating here in Australia. This exercise confirms that the relative difficulty of operating in these first markets spans a considerable range, indicating that the perceived ease of doing business in a market can and will be offset by other factors when firms are deciding when and where to first head offshore.

 

1 In the case of multiple markets, respondents were asked to nominate the most important.

2 The relative popularity of the United States and China as ‘starter markets’ was also supported by results elsewhere in the survey.

3 For example, on average respondents which picked China as one of their top current markets had been doing business there for almost nine years. Other markets in the top ten include the United States (eleven years of doing business on average), New Zealand (ten years), Indonesia (13 years), Japan (15 years) and the United Kingdom (nine years).