Gearing up for competitive Asian markets

Over the last few years, a number of New Zealand companies have undertaken ‘lean manufacturing’ training programmes that have helped them improve their operational performance and get ahead in Asia.

When premium pet food company ZiwiPeak moved into Asian markets, it did so cautiously. The company, founded in the early 1990s, had already invested two years in research and development, and was doing well selling its unique, high-end products into the North American and European markets. But it knew that Asian markets could not be taken for granted, says ZiwiPeak’s Director Nigel Woodd.

Going through the New Zealand Trade and Enterprise (NZTE) Lean Manufacturing programme last year helped ZiwiPeak to increase efficiencies on the factory floor, find smarter ways of working with distributors and manage channels to market.

“It’s incredibly important to understand that each Asian market is quite different and there’s no vanilla solution that applies to them all”, says Mr Woodd.

ZiwiPeak’s unique pet foods use only 100% natural ingredients sourced from New Zealand to provide the nutrition cats and dogs require, rather than the cheap carbohydrate often used to add bulk to pet foods. It has invested heavily in that point of difference, and trades on the New Zealand story of a clean, sustainable environment where meat-producing animals are free-range and not kept indoors.

There’s no secret to breaking into Asian supply chains, says NZTE’s Director of Specialised Marketing, Hans Frauenlob.

“Asian markets are fast and dynamic, and they are looking for businesses that can demonstrate value and long-term commitment.”

He agrees with Mr Woodd that it’s important not to generalise about Asia. Even within one Asian country, the market characteristics can be vastly different between cities and smaller towns, he says.

ZiwiPeak uses importer-distributors in its Asian markets, and says finding, educating and supporting them is a major investment. ZiwiPeak managers visit each Asian market at least 4-5 times a year to build relationships there - a key to the company’s success.

“Developing good partnerships and relationships is always crucial in Asia”, explains Mr Frauenlob. “Companies there want to be able to trust you, and know they can deal with you. That’s why having people on the ground in each market is important.”

It’s all about doing the research, understanding the market and knowing why you want to be there. Asia’s fast growth provides great opportunities, but is also complex and results will not be easy or quick, he stresses.

“It’s easy to underestimate the time needed to break into to Asian markets.”

While in mature Western markets the key to success may be after sales service and support, in emerging markets like those in much of Asia, cost and the ability to deliver on time are major drivers.

“The key is to understand the subtleties of what your customer base wants, and ask yourself, is that different in Asia than in other markets?”

For ZiwiPeak, there were definite differences. Its principal markets in Asia are currently Hong Kong, Japan and Taiwan, where it targets the discerning buyers at the top end of the market. In general, people in Asia are only just learning how to raise domestic cats and dogs, Mr Woodd explains. For most, they are a status symbol - showing that you can afford to spend money on a treasured animal.

“In Hong Kong, some dogs cost thousands of dollars to buy. In Japan, 20 percent of homes have at least one dog, and they spend a fortune on pet accessories. But the Japanese consumer is only just becoming aware of the need to feed their pet quality food.”

ZiwiPeak not only had to invest in translating its packaging, point of sale and website in the relevant Asian languages, it also had to change the size of its packaging to suit preferences there.

“Asian people generally prefer both smaller animals and smaller packets of pet food”, says Mr Woodd.

Flying into Asia

Pacific Aerospace, a Hamilton-based company that designs and manufactures utility aircraft which perform in challenging environments, also believes that NZTE’s Lean Business programme helped it become more productive and more competitive in Asian markets.

Ford is often considered to be the first practitioner of Just In Time (JIT) and Lean Manufacturing. But it was Toyota that took ‘lean’ to a whole new level, which led to its development of the ‘Toyota way’ which epitomises lean manufacturing. The challenge for Pacific Aerospace was to adapt it to highly regulated aircraft manufacture.

Within 18 months of starting the programme, the company had achieved a 42 percent increase in manufacturing capacity with modest expenditure.

“The increase in manufacturing capacity is great but it is the enthusiasm and commitment to improvement by everyone in the company that has been the best result.  Our PACE Programme (Pacific Aerospace Competitive Edge) has taken on a life of its own and is now unstoppable” says CEO Damian Camp.

Pacific Aerospace started its PACE programme in anticipation of increased sales.Although the global financial crisis has had an impact, the company has ramped up its efforts to expand sales in Asia by displaying and promoting the company’s P-750 XSTOL aircraft at air shows and conducting demonstration tours with potential customers throughout Indonesia, Cambodia, Vietnam and Laos.

Southeast Asia is one of the company’s fastest developing markets, because they need high performance from rough airstrips, in ‘hot and high’ conditions.

 “The performance characteristics of the P-750 XSTOL are perfectly suited to the sorts of operating conditions experienced in SE Asia and we have a good chance of taking a significant market share if we put in the work,” says Camp.

The costs of doing business in Asia vary enormously across the region. The industrialised eastern seaboard of China is, like Japan, very expensive to set up in, while other parts of Asia (such as Vietnam) are relatively cheap.

Mr Frauenlob recommends that New Zealand companies target just one provincial Chinese city as a market, rather than aiming at the whole country or a larger city.

“Even a third tier city like Shenzhen has 10 million people”, he says.

He also recommends that Kiwi companies look at sourcing components from China for manufacture here. Increasingly, the components New Zealand businesses use come from China, he says. 

“These days, a manufacturer might source some materials from Asia, design and create the finished product here, then sell it back into Asia. So the supply chain relationship with Asia might be both into the market and out of the market.”

Any company doing this needs to be careful to identify more than one source of supply, says Mr Frauenlob. A competing company with larger volumes might suddenly demand the entire product you have ordered.

“Don’t put all of your eggs in one basket, and keep up the relationships so that you manage the risks.”Asia is one of the few regions of the world where there is still growth and change happening. The challenge is to tackle the markets there carefully, and step by step - it is too big and complex to take on as a whole, warns Mr Frauenlob.

“The good news is that even small sections of the Asian market offer huge opportunities for New Zealand companies.”

- by Diana Burns

Images owned by Ziwipeak and Pacific Aerospace.