Successful market entry strategies for New Zealand have three common elements: understanding the market, selecting the optimal partner, and providing ongoing support to that partner in the market. A common language and familiar business framework may lead Americans to overlook New Zealand’s cultural and market differences. It is vital to understand the New Zealand context for a product or service, including competitors, standards, regulations, sales channels and applications. Estimates of sales, market share or demand should be based in solid, product or technology-specific market research. The existence in New Zealand of an application served by a U.S. product does not guarantee market interest in the U.S. product. Success in the New Zealand market requires establishing a local sales presence. For many American exporters this means appointing an agent or distributor. Some American firms choose to give responsibility for marketing and sales in New Zealand to a distributor in Australia or elsewhere in the region, especially if the distributor has a subsidiary office in New Zealand. While there is increasing integration between the two nations’ economies, providing adequate coverage from one country requires a distributor to expend significant additional resources for a limited increase in accounts. The distance from many of their trading partners causes New Zealand firms to stress the importance of local support and service. Representatives of American companies should visit New Zealand both to meet prospective partners and to demonstrate ongoing support, as this is the common practice of their competitors, many of who are just across the Tasman Sea in Australia. Most of the criteria American firms use to select agents or distributors elsewhere can be transferred to New Zealand, with expectations adjusted to the scale of the market. Performing due diligence is just as important as in the United States, and numerous resources are available to assist that work.
Using an Agent or Distributor
We advise American companies to establish a local sales presence to improve their market position and chances of success in New Zealand. While some businesses will open a subsidiary in New Zealand, for most American exporters this means appointing an agent or distributor. Whether a distributor can “cover” the New Zealand market from a base in Australia or elsewhere in the region depends on the customer’s industry, as well as the product or service. We encourage American firms to research three key determinants: the purchasing practices of their target customers, the competitive situation in the New Zealand market, and the importance of after-sales service. Companies producing highly specialized products with limited and finite potential accounts can more easily justify a single distributor for the two countries and should select a distributor who is prepared to commit the additional resources to pursuing and supporting the New Zealand market.
New Zealand can offer steady and profitable sales but it is also a competitive market. New Zealand agents and distributors are aware of worldwide developments in their industries and participate in trade shows worldwide as both exhibitors and attendees. This activity places them in direct contact with new and competing products and technologies. As a consequence, American companies need to demonstrate the competitive advantages of their own products or services.
Establishing an Office
Establishing a permanent office in New Zealand can take several forms, all similar to structures available in the United States.
1. INDIVIDUAL PROPRIETOR: As in the United States, an individual may establish a business without incorporation, subject to various formalities and authorizations that may apply to specific types of activities. The owner has the sole responsibility for the operation and is personally liable for the business’ debts.
2. PARTNERSHIP: The types of partnerships and the general principles relating to the rights and liabilities of partners are similar to those applicable under English or American law. Generally, a partner is jointly and separately liable for all debts of the firm while a partner. A special partnership, similar to a limited partnership under English law, may be formed for transaction of business other than banking and insurance. Such a partnership must be registered and consist of general partners and special partners. Special partners may invest in, but not transact, the business of the partnership.
3. COMPANY: The Companies Act of 1993 governs all new companies and existing companies that re-register under the new Act. Companies may have limited or unlimited liability. However, the great majority of companies are established as limited liability companies (Ltd). The shareholders of limited liability companies are liable to creditors on dissolution only to the extent of any unpaid calls on their shares. A limited liability company must have the word "Limited" as the last word of its name.
Registration must be granted by the Registrar of Companies and an IRD number assigned by the Inland Revenue Department. New companies must have at least one share, at least one shareholder, and at least one director. The New Zealand Companies Office provides guidance on the steps and documentation required to incorporate. Companies must maintain proper accounting records and
prepare an annual report, including financial statements, for shareholders. Companies also must file an annual return at the Companies Office. The Companies Act also provides for companies incorporated outside the country to carry on business in New Zealand. An overseas company must not carry on business in New Zealand unless the name of the overseas company has been registered with the Registrar of Companies. Overseas companies must file an annual return with the New Zealand Companies Office. Please note, however, that registration with the New Zealand Companies Office does not imply creditworthiness or good standing and, taken alone, should not substitute for the process of due diligence. Repatriation of overseas capital and capital gains is permitted. The New Zealand Government allows the remittance of profits, interest and dividends earned by overseas investors. This policy applies to loan investment as well as to direct and portfolio investments. However, American companies are encouraged to seek advice from legal counsel on tax policy and implications.
Franchising
Approximately 85% of New Zealand’s businesses are very small (fewer than 50 employees) and so franchising has become an important business model, especially in the last decade. By purchasing a franchise, New Zealand investors take advantage of the benefits of scale offered by a larger corporation, such as brand recognition, marketing and operations support, and training. Recent estimates suggest franchising in New Zealand is growing by about 25% per year. Most of the initial growth has been concentrated in retail, but has recently included the service sector. Regulations specifically governing franchising have not been enacted or proposed. U.S.-based companies have found a great deal of success in franchising in New Zealand. The best example is McDonald’s, which has its fourth largest franchise location per capita in New Zealand (after the U.S., Canada, and Australia).
Direct Marketing
Direct marketing has become a popular sales channel in New Zealand. The New Zealand Direct Marketing Association estimates that direct marketing is now a USD 1.5 billion industry, boosted by the growth of the Internet. The Association's membership includes more than 500 corporate members. The deregulation and privatization of New Zealand’s postal system (NZ Post) has opened competition for special mailing services. NZ Post offers standard services from bulk mailing rates, data processing, and bonded goods storage to remittance processing. Private companies also offer all of these services except for mail processing. Telemarketing is used for direct sales, lead generation, inquiry qualification, customer service operations, surveying and research, validation of previous orders, promulgating advertising messages and public image building, credit handling and 0800 number (akin to 800 numbers in the U.S.) marketing -- telemarketing's hottest growth area. Likewise, direct marketing through mass e-mail is growing at a rate similar to that in the United States, but with the same increasing legal concerns regarding “spam.” We advise American companies to consider the advantages and limitations of direct marketing carefully. A direct mail campaign (especially from the United States) should be -- at best -- a component of a larger marketing plan and should involve a local presence to provide effective follow-up.
Joint Ventures & Licensing
There are no compulsory requirements for foreign companies to form a joint venture with a New Zealand entity when starting up operations. Some U.S. firms do choose, for their own strategic reasons, to join forces with established New Zealand firms to jointly manufacture and market their products. Licensing by the New Zealand Government for export and import activity was repealed as part of the significant deregulation of the economy that began in 1984.
Selling to the Government
New Zealand has effectively removed all barriers to foreign firms’ bidding and winning procurement contracts. Government procurement follows the principle of best value through competition. There is no domestic preference policy or discrimination against foreign suppliers, but the New Zealand Government encourages “full and fair opportunity” for New Zealand suppliers. Procurement decisions are made at the individual department or agency level. Procurement information for most government agencies can be found on their websites. There is no official or comprehensive list of government procurement opportunities. However, two websites provide information about many tender opportunities: the Industry Capability Network New Zealand website and the Government Electronic Tenders Service (GETS). GETS also provides government procurement policy information. The Government of New Zealand views its procurement policy as exceeding the requirements of the World Trade Organization’s Government Procurement Agreement.
Distribution & Sales Channels
Marketing channels in New Zealand resemble those found in the United States. Until May 1998, the principal import channels were sales agents, importer-distributors (distributors who import and stock certain lines and take orders for direct shipment of others), and direct importers and users. In May 1998, the Government of New Zealand repealed its prohibition on parallel importing which raised concern that copyright goods might be imported outside of approved distribution channels. However, the Labour Government in October 2003 amended the parallel import law to give greater protection to film and video products.
Sales agents can be employed to market a variety of products, including materials produced to customer specifications and consumer goods for mass distribution. However, even before the legal authorization of parallel importing, New Zealanders preferred to buy direct from manufacturers when possible. To counter that preference, some sales agents employ specially trained personnel to offer technical and sales support.
Importer-distributors are a more common channel for products requiring technical knowledge, service, repairs or spare parts. The size of the New Zealand market usually allows one, or at most two, distributors per unique product/manufacturer. Many handle more than one manufacturer’s products. A stocking importer or distributor should be used where continuity of supply is an important selling point, such as for certain industrial or consumer goods. Large New Zealand retailers also work through purchasing agents or consolidators in the United States and other countries. Numerous subsidiaries of foreign manufacturers import directly from parent companies and distribute products to round out or supplement their domestic production. Import and distribution by a New Zealand branch or subsidiary is common when the volume is substantial and the foreign parent wishes to retain control of distribution. New Zealand’s modern distribution infrastructure supports any supply-chain or inventory control strategy. A number of well-established companies with nationwide networks of offices perform, in addition to trading activities, a broad range of other functions such as transportation, packaging, manufacturing, and distribution at both the wholesale and retail levels. These firms are usually excellent representatives for new products seeking to penetrate the New Zealand market, although they usually import products to complement existing lines.
With the growth of the New Zealand economy, the traditional pattern of distribution has become blurred. In the past, wholesalers provided the link between manufacturers and retailers. Today, a large volume of goods passes between department and chain stores dealing directly with manufacturers and associations of retailers buying in bulk. In addition, some manufacturers have established organizations to sell directly to retailers, while wholesalers have increased their vertical integration to include manufacturing, packaging and retailing.
Selling Factors & Techniques
Sales calls and one-on-one discussions with potential buyers are the predominant method of selling capital intensive or service products to other businesses. Retailers most often use mass media to advertise to the consumer public.
Electronic Commerce
New Zealand has been active in its use of E-Commerce platforms and was an early adopter due to its deep familiarity with the pre-cursor payment system EFTPOS (Electronic Funds Transfer at Point Of Sale). New Zealand has been described as the most EFTPOS-saturated country in the world. In aggregate, New Zealand’s use of ECommerce is smaller than in the United States, but its penetration for the scale of the economy is impressive. Numerous successful platforms operate at the wholesale level, enabling New Zealand’s primary industries to trade domestically and internationally.
Trade Promotion & Advertising
Advertising is well developed in New Zealand and used by a large cross section of the business community. Close to 100 advertising agencies operate in New Zealand, including local affiliates of global agencies. The largest advertising expenditure made through agencies is placed with television (36%), followed by daily newspapers (32%), radio (12%) and magazine (10%).
New Zealand supports 28 daily newspapers. Eight of these are daily newspapers with circulation greater than 25,000. The paper with the largest circulation is The New Zealand Herald, published in Auckland and with a circulation of over 200,000. Other major dailies include The Dominion Post and The Press. There are two national Sunday newspapers, the Sunday Star Times and the Sunday News. New Zealand has two major business journals: The National Business Review and the Independent Business Weekly. Neither of these papers has circulation exceeding 20,000. There are more than 6,000 magazines regularly available in New Zealand. Of this number, 650 are published in New Zealand.
New Zealand has four national television stations, a pay television vendor that offers five additional choices, a hybrid fiber-coaxial cable company, and satellite service. Television New Zealand (TVNZ), the operator of two of the four free-to-air commercial channels, is a State Owned Enterprise (SOE) that is run independently as a commercial broadcaster. TV3 Network Services Ltd. (TV3) is New Zealand's sole privately owned commercial network, and operates both TV3 and TV4. About 96% of the population receives TV3, while about 70% of New Zealand receives TV4.
There are two self-regulatory bodies in New Zealand's advertising industry, the Advertising Standards Authority and the Advertising Standards Complaint Board. Additionally, the Broadcasting Standards Authority (statutory) is responsible for approving codes of broadcasting practice, including advertising, developed by radio and television.
Pricing
There are no Government price control regulations.
Sales Service & Customer Support
Sales service and customer support is important for New Zealand retailers and manufacturers. Under the controlled economy of the 1950s and 1960s, New Zealanders did not have many product choices or opportunities to express opinions about consumer products. With the end of import and export licensing and further efforts to encourage competition in the marketplace, the buyer has gained power and become more sophisticated. The entrances of U.S.-based retailers and franchises have contributed to increased service expectations. At the industrial level, service and technical support remains an important competitive factor.
Protecting Your Intellectual Property
Pirated goods are prohibited in New Zealand. Patent protections are legislated through the Patents Amendment Act 1994, the Trade Marks Act 2002, the Layout Designs Act 1994 and the Copyright Act 1994:
PATENTS AND DESIGN: The Patents Act 1953, as amended by the Patents Amendment Act 1994, and the Designs Act 1953, constitutes the basic New Zealand legislation governing industrial property protection. New Zealand uses a “first-to-file” patent system, while America uses a “first-to-invent” system. U.S. exporters are able, and well advised, to conduct a patent search through the International Patent Office of New Zealand (IPONZ) database. Those wishing to file a patent, copyright, or trademark can do so through IPONZ. Patents must be maintained, and most are granted for a 20-year period. The Ministry of Economic Development in December 2004 released draft legislation that is intended to replace the Patents Act 1953 and bring New Zealand’s patent law into closer conformity with international standards.
TRADEMARKS: The Trade Marks Act 2002 (replacing Trade Marks Act 1953), provides for the registration, for particular goods or services, of a sign or combination of signs, capable of being represented graphically and capable of distinguishing the goods or services of one person from those of another. Registration may be permanent subject to the payment of renewal fees.
As with patents and designs, there is a register of trademarks, which is publicly available for searching through the Intellectual Property Office of New Zealand (IPONZ) website. We strongly advise American companies to search this database before launching a new trademark to avoid infringing an existing trademark. We also encourage American companies to register their trademarks, as those who use marks without registering them must rely on common law rights and remedies. Registered users enjoy clear statutory rights.
COPYRIGHT: the Copyright Act 1994 protects the particular manner of expressing an idea or conveying information. New Zealand adheres to the Rome version (but not the Brussels revision) of the Berne Copyright Convention, and is also a signatory to the Universal Copyright Convention. These two treaties afford citizens of member countries copyright protection. The usual term of copyright (other than as indicated above) is the life of the author plus 50 years. The government has proposed amendments to the Copyright Act 1994 that aim to address developments in digital technologies and international developments in copyright law.
Since 1998, parallel importing has been legal in New Zealand. The Government amended the Copyright Act to take away New Zealand importers’ exclusive rights. Under the legislation any New Zealand importer may purchase, import, and sell goods from anywhere in the world without the permission of any local franchise holder of the copyright. However, in October 2003, the Government enacted a ban on the parallel import of film’s, videos and DVDs for the initial nine months after a films international release.
PLANT VARIETY RIGHTS: Because of the importance of agriculture and horticulture to New Zealand, the Government administers a system of protection for plant varieties or “plant variety rights” (PVR). The breeder of a plant variety may obtain a grant of PVR if the variety is new, distinct, uniform and stable. A grant of a PVR gives the breeder exclusive rights to commercialize the variety for 20 years in most cases. The Ministry of Economic Development in August 2005 released proposed amendments to the Patents Act and Plant Variety Acts that were intended to address significant advances in planting breeding techniques and international developments.
Due Diligence
The legal system in New Zealand developed from British law. Much of the law is codified, but English common law remains important in many areas. U.S. companies should hire a New Zealand attorney as they would in the United States: to advise them in drawing up or closing a contract, performing due diligence, acquiring a company, forming a joint venture or developing human resource policy. The U.S. Commercial Service in New Zealand maintains contact with a variety of local solicitors and barristers and can provide a list for business reference. Private credit reporting agencies are active in New Zealand. In addition, the U.S. Commercial Service in New Zealand provides background checks on New Zealand companies for a nominal fee.
