Much more than a quarry to Australia’s business landscape

Mining companies deliver 54 per cent of Australia’s goods exports by value, according to the Australian Bureau of Statistics (ABS). But those same statistics show that these miners represent only 1 per cent of the number of Australian goods exporters.

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So who are the 99 per cent of exporters who don’t mine? What sorts of companies are they? where do they operate? And what do they regard as their major challenges offshore? 

The Export Council of Australia, in partnership with Austrade, the Export Finance and Insurance Corporation and a team at the University of Sydney Business School, have surveyed over 1600 internationally active companies. 

What we found was an incredibly diverse range. Australia’s internationally active companies can be large or small. A range of geographical markets are important to them. And they are from a mix of different industries. 

While the ease of operating abroad varied, participants indicated the most significant barriers to international business were a lack of information on local cultures, languages and business practices, followed by regulations and problems in receiving customer payment. 

Despite the barriers, survey participants were optimistic about their international growth prospects with 74 per cent planning to expand over the next two years into two or more countries, the most important being China and the United States. 

Size too is no obvious barrier to export. Even the smallest companies can be internationally active. We found 84 per cent of survey participants were small and medium-sized companies, including micro firms with less than 4 employees. In fact, small companies were just as if not more dependent on overseas income than their larger counterparts. 

Some of the results are surprising: far from being dead (or moribund), the manufacturing industry is a mainstay of our international business community. Manufacturing (specifically elaborate manufacturing and food and beverage manufacturing) comprised two of the top three industries in the survey. 

At the same time, service sectors (e.g. education, professional services and software) represented more than half of the top ten industries that are internationally active. 

(To round out a profile of Australia’s internationally active companies, we do need to factor in service sectors (such as education) which are not included in these ABS statistics, as well as companies that do not export at all but rather set up foreign affiliates, licences or franchises offshore.) 

When asked about their most important international markets, survey participants identified a mix of advanced and emerging economies. Traditional markets for Australian companies – notably the United States, United Kingdom and New Zealand – are still major destinations. 

Perhaps most surprisingly, while China remains Australia’s largest trading partner by value, more survey participants rank the United States as their most important market. 

It may seem anachronistic in this Asian century when all eyes are on China but the United States was the number one market for several key industries: elaborate manufacturing, software and media, technical services and mining support services. 

China ranked second overall but was the number one market for Australian firms engaged in education and training, food and beverage manufacturing, professional services and agriculture. The US and China were followed by the United Kingdom, Japan and New Zealand as important targets for Australian trade and investment. 

Less surprising is that when asked about local factors adversely affecting their international competitiveness, 50 per cent of respondents chose the value of the Australian dollar. 

Given Australia’s geographical isolation, it is perhaps also not a surprise that the next most important factor was transportation and freight costs. The degree of concern expressed by participants suggests that reforming Australia’s transport and logistics infrastructure should be a matter of urgency for policymakers.  

Labour productivity, regulatory compliance and access to finance were also cited as significant local factors impeding the international expansion of respondents. The one-third of participants who sought finance in the 2012-13 financial year largely rated the task as difficult or very difficult. 

Certainly worth further investigation was the finding that obtaining debt or equity financing for international business from an Australian financial institution was rated as harder than sourcing it from overseas. 

While the overall optimism captured in our survey is heartening, the survey results do suggest areas where help is needed. 

Many respondents called for improvements in the levels and types of support from Austrade, including strengthening the Export Market Development Grants scheme and on-the-ground assistance with the development of contacts and networks. There is no doubt government policy can do a lot more to smooth the way for Australian companies, especially in countries where government support for business is extensive and the norm. 

View the Australia’s International Business Survey: 2014 Report.

The University of Sydney Business School’s research team comprised the Professor of International Business, Professor Sid Gray, Dr Maria Rumyantseva, Dr Sandra Seno-Alday and Associate Professor Catherine Welch.

Photo: Arsineh Houspian.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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