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Businesses with current overseas income

The survey asked businesses with current overseas income about the types, sources, and locations of that income; the strategies used to generate the income; the associated sales and marketing methods they undertook; and the barriers they faced. Appendix tables 2 to 8 relate to this chapter.

Available information on New Zealand’s overseas income

Detailed information on New Zealand’s external trade statistics already exists (Statistics NZ, 2007). This information is based primarily on data obtained from export and import entry documents lodged with the New Zealand Customs Service, with some additional data on trade in services obtained from Statistics New Zealand’s balance of payments data.

These existing trade statistics give rich information on imports and exports in value terms by country and commodity. The bulk of New Zealand’s exports are dominated by a very small number of businesses. Over three-quarters of the value of goods exports in the year ended March 2007 – the same reference period as this survey – were accounted for by just 176 businesses (Ministry of Foreign Affairs and Trade, 2007).

While the export performance of these larger players is important to the New Zealand economy, the performance of the thousands of smaller businesses who were goods exporters over the same period is also vital. The information collected in the BOS aimed to gain more information about these smaller businesses and those of services exporters: their overseas income, the nature of their overseas activities and supporting practices, and their potential for future export growth. This information offers not only additional insights into the overseas income of New Zealand businesses, but also gives a different firm-based perspective to the current value-based data.

Sources of overseas income

Of all businesses in the survey, 20 percent (nearly 7,000 businesses) indicated they had earned overseas income over their last financial year. They generated this overseas income by various means. The most common way was through the sales of processed or finished goods for use by other businesses (44 percent), while others gained income through the sale of finished goods for personal or household use (20 percent). The provision of services was also a significant source of overseas income (38 percent of businesses reported this). Only a small proportion of businesses generated their overseas income from the sale of raw, unprocessed materials (8 percent).

Some businesses reported receiving income from more than one of these sources (18 percent).

Spread of overseas income

The overseas income generated by New Zealand businesses comes from many countries and the extent of market diversification by individual businesses can vary considerably. Results from the survey show the nature of this spread.

Of businesses with overseas income, 24 percent received that income from a single country. A greater proportion (43 percent) derived income from 2 to 9 overseas countries, a trend reflected across most industries and size groups, while 22 percent received their income from 10 or more countries overseas.

Locations of overseas income sources

Available data from New Zealand’s external trade statistics (Statistics NZ, 2007), which is based primarily on data obtained from export documents, gives detailed information on New Zealand’s export destinations in value terms by country and commodity. The BOS also asked businesses about the locations from which their overseas income was obtained. Table 3.01 summarises results from both sources for comparative purposes.

Table 3.01
New Zealand’s Key Export Destinations

By location
Year ended June 2007 and last financial year at August 2007

Location New Zealand External Trade Statistics (1) Business Operations Survey
Year ended June 2007 P Last financial year at August 2007
Exports (fob) (NZ$000) % of total export value Rank Businesses indicating exports to this location (2) % of businesses with current overseas income (3) Rank

Australia

6,514,675

20

1

5,403

77

1

Other Pacific

1,056,333

3

11

3,021

43

4

Malaysia

573,040

2

14

1,362

19

13

India

357,549

1

18

1,151

16

15

Other Central/South East Asia

2,849,511

9

5

2,051

29

7

Japan

3,476,185

10

3

2,081

29

6

Korea, Republic of

1,351,504

4

9

1,255

18

14

Hong Kong (SAR)

554,912

2

15

1,717

24

10

China, People’s Republic of

1,867,807

6

6

1,383

19

11

Taiwan

786,380

2

12

1,373

19

12

Other North Asia

6,132

0

19

653

9

18

United States of America

4,331,751

13

2

3,169

45

2

Canada

502,360

2

16

1,794

26

9

Other Americas

1,238,566

4

10

930

13

17

United Kingdom

1,586,299

5

8

3,067

44

3

Germany

782,454

2

13

1,918

27

8

Other Europe

3,082,187

9

4

2,552

36

5

Middle East/North Africa

1,648,139

5

7

1,005

14

16

Sub-Saharan Africa

491,860

1

17

385

5

19

(1) Data from New Zealand External Trade Statistics, June 2007.
(2) For more information on the businesses included, refer to chapter 7, ‘Technical notes’.
(3) Percentages are of New Zealand businesses in each business-size group or industry that currently generate overseas income.

Note:
SAR Special Administrative Region
Symbol:
P provisional


The two sets of results show a slightly different picture due to the different information collected.

The external trade data is based on dollar values and in some markets, the greater proportion of this value is accounted for by large volumes of a small range of commodities, the sales of which are dominated by a similarly small number of large New Zealand businesses that dominate the country’s export sector.

The BOS, on the other hand, collects qualitative and quantitative data from small, medium-size, and large New Zealand businesses, therefore providing an indication of the number of businesses exporting to various locations. This data gives an idea of the range of businesses behind the recorded values of export trade.

While several of the higher ranking destinations are similar, the countries that show a markedly different rank indicate the make-up of New Zealand firms exporting to this location and their range of products. A high rank in the count-based information from the survey indicates that export trade to that destination consists of either a more diverse range of commodities, or commodities accounted for by only a number of smaller exporting firms. A good example is that of Hong Kong, a destination that ranks as the 10th largest in survey results, but only 15th in external trade data. Further examination of this data shows that New Zealand’s leading export commodities to Hong Kong are crustaceans, fresh fruit, live horses, and leather, which are sold by a range of New Zealand businesses.

Overseas sales, marketing, and distribution methods

The BOS also examined the approaches taken by New Zealand businesses for sales, marketing, and distribution overseas.

Of New Zealand businesses with current overseas income, 61 percent reported that it was most common for sales, marketing, and distribution in support of these activities to be managed from New Zealand. Almost 40 percent used overseas agents or distributors, while less than 10 percent used overseas collaborations or operations partly or fully owned by the business.

However, the incidence of the use of majority or wholly owned subsidiaries overseas for sales, marketing, and distribution purposes varied across the different size and industry groups covered by the survey. While only 7 percent of the total number of businesses with overseas income reported this type of operation, the proportion reported by large businesses (those with 100 employees or more) was more than double (17 percent). Figure 3.01 shows how rates varied across industries.

Figure 3.01

Businesses using majority/wholly-owned subsidiaries for overseas sales, marketing, or distribution.

Comparative profit margins

Different profit margins may be realised in different markets due to a range of factors such as supply and demand, levels of competition, the costs associated with doing business in different locations, or the business models used. The survey asked businesses with overseas income where they obtained their highest profit margins – in New Zealand or overseas.
Results indicated more businesses obtained higher profit margins in New Zealand (47 percent). Twenty-one percent indicated higher profit margins were obtained overseas, while 23 percent indicated profit margins were similar. The agriculture, forestry, and fishing industry was notably different from all other groups, with a majority (53 percent) of businesses in this industry reporting higher profit margins were obtained overseas.

Strategies for generating overseas income

Various strategies can be used by businesses to create opportunities overseas or support existing overseas income streams. Customising goods or services to specific customer requirements was the most common strategy used over the last three financial years by businesses with overseas income. Offering innovative or unique goods or services was also a commonly used strategy, as was using pre-existing contacts or networks in overseas markets. Each of these methods was employed by over 40 percent of businesses with overseas income. All other strategies were reported at much lower rates – 20 percent or less.

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