Inciteful

The impact of the strength of the Aussie dollar for importers and exporters is clearly very different –but in both cases the challenge is to remain ‘strategic’ in your response to it.  

Importers:

Well the pressure is off as your cost of imported goods will been falling or at least not increasing. The question is what to do with the ‘windfall.’ The first thing not to do is to go and spend it all!

The volatility in the exchange markets over the last 5 years has been considerable (March 2006 the Aussie $ was buying 0.72 US$). The GFC, Euro zone debt crisis, recent tragedy in Japan, unrest in the Middle East portends a very unpredictable future in terms of exchange rates.           

This is an ideal time to step back and use the exchange rate ‘windfall’ to build your business, increase market share, invest in new marketing initiatives and if necessary refresh your brand.

Of course your customers will expect ‘competitive’ pricing –and in very price sensitive markets you may need to adjust your prices. However wherever possible I would challenge you to think of non-price related benefits to add value to your product. For example offering bundles - buy three get one free, co-branding with others by offering complimentary products that consumers of your product need. There are many options. 

The key is to think as broadly as possible; perhaps now is the time to run that national promotion you’d planned –upgrade the quality of your catalogue or –invest more into your web-site –or take your social media activity to a whole new level. 

By investing your exchange ‘gain’ back into the business –you might just be improving your customer loyalty beyond that of your competitors who may not have such a long term view. This could be the significant differentiator when the inevitable ‘fall’ in exchange rate happens.

Exporters:

It’s pretty obvious exchange rates have not been kind to Aussie exporters for the last few years. Many exporters have seen reduced sales, tighter margins, loss of market share and in some instances loss of markets.

For companies just starting on the export journey –all “strategic market entry” options are open. Regardless of whether you invoice in AUD or local currencies –the effect of the exchange rate movements will either impact your margin –or it will flow into the end-user price of your products.

For those with established markets often the first reaction is denial “we’ll just ride out this period and hope that it gets better.” Eventually you have to deal with reality and the challenge is to remain strategic.   

So can you be strategic in the face of shrinking margins and markets? There are a range of options –some are outlined below:

• Invoicing currency: If you invoice in AUD now’s the time to think about local currency invoicing –yes your margin will be impacted by the moving exchange rate –but your response to that is then under your control. The importers of your product –distributor-agent-end user –they are already building a ‘hedge’ or a margin on top of the current exchange rate to ‘protect’ them from short term exchange movements. Is it better you control that hedge factor and give them certainty in invoicing in their currency – this gives you greater control over the end-user pricing.

• Strategic relationships: Now’s the time to review your local sales ‘partners’ –distributors-agents–others. Are you working together to deal with the exchange issue –are your local partners the most effective. Now maybe the time to take an objective look at the effectiveness of your in-market support. 

• Alternate ’entry-strategies. Now may also be the time to review your market entry model –is it serving you well, is it the model of the future?  Perhaps now is the time to think about manufacturing- assembling or down filling in the local markets to take advantage of reduced freight and perhaps less expensive inputs?

• Are there too many intermediaries in your supply chain –can you eliminate a level –perhaps by investing in your online resources and outsourcing fulfilment? Time to set-up your own sales/distribution office and control the distribution costs?

There are many ways to respond to a strong dollar –if export is of strategic importance to your business –then perhaps it’s time to review your strategy. Seeking independent objective advice will help to gain ‘perspective.’