Monday, 3 December 2018

Barriers & benefits for NZ business

I was pondering about the barriers that New Zealand businesses have, and I came up with a list of key issues, which are:

  • Economies of scale. It is hard to get cost out of business here, because we simply aren't big enough to have a factory with 40,000 people in it and to cough up $1b for robotics. We don't have the investment, the infrastructure nor enough engineering nous to be able to do this. 
  • Remoteness. Everything has to come a long, long way. We have to fly things in - expensive - or ship it in - still expensive. And that all takes a long time. By sea we are 70 days from New York or LA, 16 days from Hong Kong, 42 days from Hamburg (check out global shipping routes here and here). 
  • Higher costs. We have to import goods long distances, we have to import raw materials.
  • Difficult balance of payments. Though this is largely governmental, it impacts business through tax. We have few minerals here and not enough manufacturing to be able to be self-sufficient. All metals must be imported along with electronics. Then our government requires taxes and bond at the border. Check out New Zealand (NZL) Exports, Imports, and Trade Partners.

On the other hand, those issues lead to some benefits:

  • Small, fairly homogeneous market. It is relatively easy to test and scale a product for world wide release here.
  • Remoteness. Not too much competition, and an uncluttered place to do business.
  • Higher price points. People are used to paying more, and if you are smart, you can undercut the existing - often complacent - markets and become a lead-player quite quickly.
  • Global focus. Because we are so far away, we have to constantly develop relationships with global partners to get products designed, made, marketed and distributed. We are used to going off-shore for everything. It holds no fears for us.

Interesting how the first four 'barriers' probably lead to the perceived benefits. When we can't do something, we find another way, and it shapes our culture differently.


Sam

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