Mainfreight today announced that they have conditionally sold Pan Orient Project Logistics business and its 75% interest in LEP (New Zealand and Australia) to global logistics company Agility Group for A$83 million. It is the last of the non core Owens businesses to be sold. The funds released from the sale will be used by Mainfreight to fund its ongoing international expansion.

With Mainfreight, Freightways and others slowly establishing significant off shore businesses I wonder what a successful strategy would be for more NZ companies to do the same?

The road to overseas subsidiaries it would seem is littered with more stories of failure than success. Air NZ and Ansett, Telecom and AAPT (yet to see the end of this movie) are examples of huge companies struggling to make it happen. How then is it possible for a NZ company to stem the tide of Aussie investment and head into their backyard? What are the key points to consider?

#1 It is harder than you think.
Summed up well by Josef Roberts who launched Red Bull in the two countries. "Don't rush overseas. Australia might have five times the population, but it also has five times the competition, and Kiwis aren't used to dealing with Australian bureaucracy. Roberts worked out a worst-case scenario, and then doubled the cost and doubled the time. "We were about right," he says. "It took three times as long and was three times as expensive." [From Idealog "Meet the man who gave Red Bull wings"]

x NZ Herald

#2 You need to avoid the Valley of Death
Rod Drury wrote about the Valley of Death "From New Zealand, once you have saturated the local market, you then have a massive transformational change to address another market. You may need to introduce capital, add new staff, learn foreign rules – the list goes on. For us to take almost our first step of expansion, to enter only our second market – we bet our businesses. I'm calling this – the Valley of Death."

#3 You need to take your time.
This would be the key lesson I have gleamed from companies like Mainfreight, Freightways or even Michael Hill who have set-up in Australia. They seem to make slow educated decisions about their growth into other countries. They take the time to understand the markets, people, culture and regulations and they take small incremental steps. They have done this well and don't bet the NZ business on it.

I don't have much first hand experience. Hopefully one day I will, but in the meantime I am interested in your thoughts.