Why you shouldn’t put all your eggs in the one market

Any business is risky business – especially if you’re reliant on one market.

Of course, all businesses start by focussing on domestic markets, but there comes a time in the lifecycle of every (successful) business where leaders must ask: where to next?

Kick-start growth with exports

Once a business has validated its products with the domestic market and hit peak sales, they run the risk of stagnating revenue if they don’t find new ways to kick-start growth.

And the answer often lies in exporting to new markets.

Tapping into an alternative market gives companies access to new revenue streams that can be re-invested back into the business and see them surpassing their competitors in no time.

Exporting to an overseas market also increases stability by enabling businesses to overcome the seasonal peaks and troughs of domestic markets, or even extend the life of products as domestic sales dwindle.

But exporting products to a new overseas market isn’t a rite of passage to a fool-proof growth strategy – far from it – it carries serious risks if not approached in the right way.

The risks of market volatility

Exporting your goods to the same market puts your business in an incredibly vulnerable position in the face of unforeseen economic, political, or financial events.

We only have to look as far as the Australian wine industry for a great example of how “putting all your eggs in the same export market” can have a devastating impact on business in the event of burgeoning market turmoil.

From 1991 to 2007, Australia’s wine industry was awash with complacency after a prolonged boom time which saw exports soar – predominantly to the US. But then came the perfect storm. The global financial crisis of 2007, the rising Australian dollar, and increased competition from other wine-producing markets saw exports to the US plummet.

Today, there’s growing anxiety over exports of pulses to India. Here, a bumper domestic crop has led to oversupply in the market while competition from the Black Sea and Baltic regions is becoming more apparent.

Diversify exports and explore emerging markets

So, without a crystal ball to warn you when your seemingly unperturbed export bubble might burst, how can you protect your business against market instability?

The answer lies in diversification.

Exporting to several different markets concurrently allows export businesses to spread their risks and opportunities.

A diversified export business is far more likely to survive when one of its markets becomes unstable, while it allows the business to strategically target other emerging, fast-growing regions.

Export businesses that diversify to emerging markets are not only more stable, but they also perform better than those that export to other destinations.

This is exactly why Canada has identified trade and investment with emerging markets a top priority for the country in recent years. In fact, Canada’s total exports destined for emerging markets has increased from 4 per cent to 10 per cent over the last 10 years.

Australia’s wine producers are setting a great example for how this can work very well. Having weathered the post-GFC storm, Australia’s wine industry is booming once again, but this time, thanks to surging exports to China.

An emerging, fast-growing region – China’s demand for Australian wine grew by 42% through 2017. Meanwhile, other key export markets include the US, UK, Hong Kong, and Canada.

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