International Business

International business can be more costly and more risky than domestic business, and never more so that when the "r" word - recession - is bandied around.

But pulling back from the UK market now, despite all the economic doom and gloom, might not be the best strategy.

The UK market has always been strategically important to Australian companies. It's never just been a "bigger market" for Australian companies. The UK offers companies an English-speaking gateway into Europe, it's a huge source of inwards investment, knowledge exchange and northern hemisphere partnerships. And Australian companies come here in their thousands.

In fact, it's estimated that there are more than 1 500 Australian companies with a physical presence in the UK, this represents the highest concentration of Australian businesses anywhere other than the United States.

Because of the strategic value of the UK market, Australian businesses that are already here need to think very carefully about abandoning ship. Once you pull out, it will take years to get back in, not to mention the potential spill over effect on any other northern hemisphere business.

But according to a Business Sales Report, in the last quarter of 2008, 2,428 firms were placed into corporate insolvencies. This was a 220% increase on the same quarter in 2007.

So with big name businesses closing down almost daily, unemployment soaring and trade finance hard to get, what choices do firms have?

Times are definitely tougher for firms, just about anywhere in the world at present and the UK is no different. But before Australian firms decide to up and leave the UK they need to investigate every other alternative option. If you pullout now it will take years to get back in once things look up and you may have lost a golden opportunity to steal market share from your competitors and show loyalty to your UK partners.

So what options might exist? Try to manage your inventories tightly, identify what savings can you make in energy, water or waste management, clearly identify your unprofitable customers and either up-sell them or make the decision to let them go, for your profitable customers be sure to service them very well. And think about how you can attract new customers through low cost e-marketing, partnering or perhaps a low cost diversification of your product that would attract a new market segment.

Importantly, and perhaps counter-intuitively, try not to fire people or cut back on your marketing spend.

As the pie gets smaller, you need to market heavily to protect your piece of the pie. This doesn't mean big stunts and crazy spends, but you need to keep communicating with your customers or they will assume you're not there. And you never know, as some of your competitors collapse there may be an opportunity to actually gain new customers.

And most importantly, if you can, try to maintain or increase your marketing spend. Business studies emerging from each of the recessionary cycles in the 70s,80's,90's and 2000's tend to show that those firms who are able to maintain or increase their marketing spend in recessionary cycles tend to enjoy increased sales during and after the recession, as well as greater market share than competitors who reduce or stop their marketing activities.

Lastly, as with all boom or bust cycles, there are new, different pockets of growth still occurring within the UK economy.

We are still getting good growth stories from Australian clients active in areas such goods and services into clean tech, security, education, government services, health, energy/water and waste efficiency, outsourcing services, and small niche luxury items.

Interestingly, many of the new growth areas coincide with areas of targeted fiscal stimulus or are the result of new market drivers.

For example, the increased focus on changing the regulatory controls on the financial industry, as a result of the financial crisis, has lead to good opportunities for security and compliance software providers like DTEX Systems. The need for greater delivery of e-government services, provides opportunities for companies like Neo Products.

Increased demand in the education sector due to the growth in the unemployment market is creating opportunities for e-content providers like Roar Educate.

And "Green" spend continues to remain strong, driven in part by a desire to reduce costs by finding ways to reduce energy, water and waste costs.

Firms like Closed Loop Recycling, provide food-grade recycled plastic for reprocessing by the packaging industry, are seeing good growth in their business as companies seek to decrease their waste and landfill costs, while also reducing their carbon footprint.

So remember, every cloud has a silver lining and as a result, for some firms, now may actually be a great time to attack the UK market. But, if you can't attack, at least think twice before retreating.