Let’s Talk: Overseas expansion
Due to Australia’s relatively small population and the country’s remoteness from global markets, some businesses will need to expand overseas in order to reach their growth potential. Of course, there are numerous factors businesses must consider before venturing abroad, not least of all laws governing intellectual property (IP) including patents. Indeed, overseas expansion plans can be derailed by a failure to protect one’s IP abroad or even an inadvertent infringement of a foreign competitor’s IP.
This week – for our exclusive “Let’s Talk…” feature examining overseas expansion and intellectual property – we posed the following question to a line-up of thought leaders: “What must SMEs consider when entering an overseas market?” Some commentators honed in on IP-related matters, while others provided hot tips on how to go global in a meaningful, sustainable way.
What must SMEs consider when entering an overseas market?”
Nick Mountford, Principal, IP law firm Griffith Hack: In terms of IP, here are seven considerations for SMEs seeking to expand overseas…
- Don’t assume that because you’ve had no trouble with IP in Australia that you will be OK overseas. More IP is protected in bigger markets so you are more likely to encounter a problem when you go into a larger market such as the US.
- Do some due diligence, particularly if you know of competitors in your space. At least have a look at their products/websites to see if they reference patents. Better still, get a patent attorney to run a patent search to reduce your risks.
- Consider the impact having to withdraw from a new market due to IP infringement would have on your business.
- Check you can use the same trade mark overseas. Leaving aside the possibility that someone else thought to use the same name, in some countries, e.g. China, data mining is sometimes used to identify trade marks filed overseas to see if they can be misappropriated. There is 6 months to file a trade mark overseas claiming priority of an earlier filing in Australia.
- Consider local language versions of your trade mark. In China, you should have a Chinese character version and engage a native speaker to help select the mark.
- If you’ve invented something, file for patent protection in Australia and then take advantage of the International patent system to seek protection overseas.
- The cost of some IP protection can be clawed back using the Federal Government’s Export Market Development Grant program.
Amanda Watts, Co-founder/Design lead at Girl Geek Academy: My advice is to look at the broader picture… You may have created a strong local or ‘colloquial’ brand for your product here in Australia, but in other cultures your chosen name may have a different meaning or even worse – already be taken. This can be an opportunity to refresh your brand and think about a new way to talk about your product. You can set up a free Google Alert with keywords, or brand and product names to see how people around the world may be referencing them. Google also has a patent search which lists current patents and filing dates.
It’s also important to consider where you plan to launch. Some countries will protect your IP better than others. The U.S. has been ranked 1st in providing IP protection across 50 countries. China sits about halfway at 27th which may have something to do with their often substandard manufacturing copyright practices. Be wary of newer potential markets like India who has yet to set up good IP policies.
Dr George Vuckovic, General Manager Patents, IP Australia: Applying for a patent is a complex process, and it’s even more difficult when you are applying overseas. We generally recommend that you use a registered patent attorney who can arrange for overseas counterparts to help process your application in other countries. This can be of great assistance because patent laws differ between countries and some require that you have a local attorney.
There is no such thing as an international patent, and you will need to get a patent in each country you want protection in. When it comes to filing a patent overseas, there are two pathways. You can file separate applications with the IP offices in every country you want a patent. Alternatively, the World Intellectual Property Organisation’s Patent Cooperation Treaty (PCT) allows you to use a single application for multiple countries, greatly streamlining the process. This can also help defer some costs until later when you have a better idea of your commercial prospects.
Finally, it’s important to remember that IP Australia is here to help. We have appointed an IP Counsellor to China to help Australia businesses in that market and our website has a great deal of useful information including, ‘decide if you need an international patent application’.
Julius Wei, Head of Investment Analysis, BMY Group: You always need a local partner, but choose wisely because big brand names aren’t always the best choice. SMEs normally have limited resources, and even more so when they’re in a foreign market. So, the logical step is to partner with someone with more local knowledge.
It’s also really important that you get your patent asap. However, a mere patent isn’t going to stop others from trying to adopt your idea. Ongoing active protection of your IP is, therefore, just as important as the patent itself. One important way of protecting your IP is to market yourself as the owner of the patent. This also makes commercial sense by bundling the IP to your brand name to build greater brand awareness.
Mick Spencer, Founder & CEO, ONTHEGO: You will burn a lot of money fast tackling new markets without preparing adequately. From a top-line perspective, ensure you have knowledge of the market before you start investing heavily; find complementary partners; reach out to experts in those regions and start building your network.
While it is vital to do your research, don’t let it paralyse you. Often businesses read too many reports and analyse things too much. As an early stage business, you want to let your product and paying customers do the leg work for you. Get traction and learn the market using a small group of users.
Work with key global partners to enhance brand reputation ahead of spending. For example, ONTHEGO sells to many sporting teams that are known in global markets because working with these reputable partners allows us an “in” with their local areas.
If I had to narrow it down, there are four, core questions to focus on and understand when entering an overseas market.
- What is the competition doing well and poorly?
- Is the market growing?
- Is it a similar pricing model as the region you have experience with?
- Are there things we have not thought of yet, such as duty and tax considerations?
Andrew Barnes, Co-founder & CEO, GO1: Sometimes even similar markets (like the US or UK) operate in subtle but different manners to what you’d expect – and these differences can be very important to know. It seems obvious but it’s important to not assume that things are the same in overseas markets as how they are in Australia.
Leigh Dunsford, co-founder of Waddle: Two core challenges that go hand-in-hand when entering a new market are pricing and distribution. Hitting the ground before knowing how you’ll get the product or service out there is a common mistake. If your pricing isn’t tailored to local market conditions, you’ll risk burning contacts and perceptions before even scratching the surface. That doesn’t mean you shouldn’t launch and learn, but be prepared to spend more resources figuring it out. No doubt it’s sexy to say you’re going global but, it’s always better to slow down before you speed up.
Branding comes next. Do you go all in on your own or partner/licence with a local player? There are many ways to consider branding from maintaining consistency across the globe or leveraging a partner’s network. This all depends on your own product or service and whether you need to grow the intrinsic value e.g. you could sell a key ingredient in food manufacturing that doesn’t necessarily rely on brand value alone.
Creel Price, cofounder, Investible: SME’s need to consider securing a local partner and need to make sure their ambitious time frames are tempered with the pace of deal making in that part of the world. ‘Yes’ may not mean business for a couple of years and numerous trust-building meetings involving social interaction may need to take place. Going deep in one market is usually preferable to spreading yourself too thin across multiple markets – there is no replacement for regular time in on the ground.
Matt Butterworth, CEO and Founder, Easy Weddings: Do you have staff you can send to the new market? Ideally these are among your best talent – but can you afford for them to be out of the local business for at least 12-18 months?
Have you done detailed research into your competitors there? Can you easily beat them on product or price or is your product significantly different? If your offer is only as good, then you’ll struggle to compete against their home ground advantage and historical strength.
Are you prepared to stick it out? Overnight successes don’t even happen at home and just because you’ve got a tried and tested offer, a new market will bring a whole new set of unexpected challenges
Allow for time difference. Moving to a new time zone means conducting business at times you’re not used to, which can impact on your family time or personal time.
Consider how long it can take to set up things like bank accounts – allow up to six months.
Professor Jana Matthews, ANZ Chair in Business Growth & Director of the Australian Centre for Business Growth, UniSA: It’s a misconception that only large companies export overseas. In fact, medium-sized Australian companies account for 46% of our exporting businesses. Here are four considerations for SME leaders when preparing to approach an overseas market.
- Have I done my research?
It’s important to make thoughtful decisions about which markets to tackle. Fortunately, there is plenty of valid and reliable market data and information available on many industries – thanks to work done by state agencies and industry associations.
- Do I have reliable contacts?
Local contacts, e.g., industry associations, banks, state agencies, can provide information about the “lay of the land” in the regions you are considering and can introduce you to reliable representatives, suppliers, wholesalers or retailers you can trust.
- Have I taken steps to mitigate risk?
There is financial risk when doing business in another country. Contracts with progress payments, letters of credit from your bank, hedges against currency fluctuations, building relationships through visits to and frequent communication with suppliers and vendors are a few of the ways to manage this risk.
- Is my business ready to scale?
Doing business in another country requires that your organisation be ready to scale. A strong executive team, a plan which includes “going global”, efficient operational systems, good execution, strong cash flow, capital reserves or lines of credit need to be in place. You’ll also need the ability to manage different kinds of supply chains, marketing messages, and operate in multiple time zones.
About “Let’s Talk…”
This exciting new, weekly initiative provides entrepreneurs and industry experts with a forum to share rapid-fire views on a range of issues that matter to start-ups and SMEs. Every Wednesday, we pose a themed question to a line-up of knowledgable industry figures, with a view to picking their brains for valuable insights to share with you, our readers.