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View Full Version : NZ manufacturers should be selling product in NZ dollars



BIRMANBOY
13-10-2012, 12:59 PM
With all the ongoing complaints from all sectors (other than importers) that the NZD is "too high", perhaps its time to explore the option of pricing and selling our commodities and exported products in NZD as opposed to being pushed around by the swings in USD.

fungus pudding
13-10-2012, 01:14 PM
With all the ongoing complaints from all sectors (other than importers) that the NZD is "too high", perhaps its time to explore the option of pricing and selling our commodities and exported products in NZD as opposed to being pushed around by the swings in USD.

What on eath does that mean???

BIRMANBOY
13-10-2012, 01:33 PM
Exactly what it it says...instead of selling your exported goods and receiving USD in payment...request NZD. This way the seller can set a desired margin and realise this amount. At the moment if you get paid in USD you realize a greater or lesser amount in NZD because of currency fluctuations. If you get USD and for example have a USD bank account here in NZ at some point MFR here will have to exchange these to service purchases /wages/overheads etc. If you receive NZD it takes away the uncertainty of profit (or reduced profit) margins. Is that clearer?
What on eath does that mean???

fungus pudding
13-10-2012, 02:12 PM
Exactly what it it says...instead of selling your exported goods and receiving USD in payment...request NZD. This way the seller can set a desired margin and realise this amount. At the moment if you get paid in USD you realize a greater or lesser amount in NZD because of currency fluctuations. If you get USD and for example have a USD bank account here in NZ at some point MFR here will have to exchange these to service purchases /wages/overheads etc. If you receive NZD it takes away the uncertainty of profit (or reduced profit) margins. Is that clearer?

In any transaction using different currencies someone has to take a risk if credit is involved. If it's the buyer, he'll build it into the price he is prepared to pay, just as the vendor should build in a margin if he is the risk-taker. It's probably much more important to realise that the NZ dollar isn't too high. It appears that way against $U.S because theirs is low - but we have to get used to that. 80 odd cents to their dollar is the new normal.

BIRMANBOY
13-10-2012, 02:25 PM
Yes well my point is that most of the time its the the NZ supplier "who takes the risk". This is far too passive and allows the buyer all the control. Instead of taking the position of being positively gratefull for sales ..at any cost..we should be setting the circumstances in such a way that the buyer takes the risk. Especially for producers of prime products and commodities which are in international demand. We allow ourselves to be dictated to instead of saying...look here is our product..you know its good and we know you want it so here are our terms and conditions..(nicely of course).
In any transaction using different currencies someone has to take a risk if credit is involved. If it's the buyer, he'll build it into the price he is prepared to pay, just as the vendor should build in a margin if he is the risk-taker. It's probably much more important to realise that the NZ dollar isn't too high. It appears that way against $U.S because theirs is low - but we have to get used to that. 80 odd cents to their dollar is the new normal.

POSSUM THE CAT
13-10-2012, 03:53 PM
It is plain common sense to price goods you sell in the currency you wish to be paid in. Or is this to strange for University Graduates to understand. You do not sell a car & accept payment in cigarettes or Beer

BIRMANBOY
13-10-2012, 04:27 PM
Unless you're a kiwi who appear to really value those items..:) I'm an importer and over 25 odd years have always been asked to pay in USD so I have seen my costs go up and down from 0.48 to 0.83 which is a huge difference in my landed costs. I just find it strange that apparently mfrs and exporters have allowed their buyers to pay in USD ..regardless of what that did to their margins. I know many do hedge their sales by currency contracts but I'm curious to find out if actually there are some who do ask for NZD and what happens in those instances.
It is plain common sense to price goods you sell in the currency you wish to be paid in. Or is this to strange for University Graduates to understand. You do not sell a car & accept payment in cigarettes or Beer

fungus pudding
13-10-2012, 05:54 PM
It is plain common sense to price goods you sell in the currency you wish to be paid in. Or is this to strange for University Graduates to understand. You do not sell a car & accept payment in cigarettes or Beer

Why not? It might be a better deal than the cash. Remember Arthur Dailey.

JBmurc
01-05-2013, 09:40 AM
yes is happening worldwide Aussie just signed up currency deal with China to trade in their own currencies for many of their own products ...we also need to do the same ,,,,guess the reason why for decades the USD has been seen as a strong safe haven trade dollar (at one time with Gold backing)now as the USA biggest export is the USD many exporters are getting sick of the devaluing currency......the pound was replaced by the US dollar for the same reasons..whats next ..

JBmurc
01-05-2013, 09:41 AM
yes is happening worldwide Aussie just signed up currency deal with China to trade in their own currencies for many of their own products ...we also need to do the same ,,,,guess the reason why for decades the USD has been seen as a strong safe haven trade dollar (at one time with Gold backing)now as the USA biggest export is the USD many exporters are getting sick of the devaluing currency......the pound was replaced by the US dollar for the same reasons..whats next .. IMF believes the Chinese dollar will replace the USD 3-5yrs time

peat
10-05-2013, 10:38 AM
I always thought this problem would represent a good opportunity for NZ forex dealers to provide hedging services to exporters

BIRMANBOY
10-05-2013, 02:52 PM
You dont need forex dealers for currency hedging you just go to your local bank..you've missed the point. The point being that it would appear that too many exporters quote their products and sell in USD. If the exchange has moved in a negative manner from the time of the quote and the final payment then you previously known profit margin has been eroded by currency moving against you. This is of course why most experienced exporters take currency contracts to lock in exchange. My original point was this could all be avoided by pricing, quoting and receiving payment all in NZD. Let the buyer take the risk and do all the currency movements. This only works of course if your products are in demand. The relative strength/weakness of buyer/seller will dictate who controls the sale.
I always thought this problem would represent a good opportunity for NZ forex dealers to provide hedging services to exporters

peat
13-05-2013, 03:31 PM
I know I missed the point - my perspective is that of a forex trader on a forex trading forum.

Your original post might be more relevant in an exporters forum if such a thing exists?

BIRMANBOY
15-05-2013, 08:49 AM
That forum would be even thinner post wise than this...relevance or lack of, is a personal opinion and if you think its not I accept that. However there are other posts that reference copper, gold, silver on this thread....so I dont believe its necessarily irrelevant (but my opinion). If more overseas importers purchased NZD to pay for NZ goods it would presumably at some level affect forex rates and that would be something that would be relevant if I was trading USD/NZ for example.
I know I missed the point - my perspective is that of a forex trader on a forex trading forum.

Your original post might be more relevant in an exporters forum if such a thing exists?

zon
10-06-2013, 09:42 AM
Unless you're a kiwi who appear to really value those items..:) I'm an importer and over 25 odd years have always been asked to pay in USD so I have seen my costs go up and down from 0.48 to 0.83 which is a huge difference in my landed costs. I just find it strange that apparently mfrs and exporters have allowed their buyers to pay in USD ..regardless of what that did to their margins. I know many do hedge their sales by currency contracts but I'm curious to find out if actually there are some who do ask for NZD and what happens in those instances.

We would all love to sell in NZD, but...
Kiwi exporters (unlike importers) are competing in markets around the world and therefore have competition from around the world.
When I sell into USA I am competing against local manufacturers in USD and sellers from other countries that all sell in USD. If I charged in NZD and insist they take the risk, they would just buy a competing product instead - this is always misunderstood by media. Yes we hedge, but all that does is eat into margins by purchasing the hedge and it only really delays the rise a little bit, it is not a miracle cure against the rising $.
An alternative is selling 'niche' products, but by definition, a niche is a small business with a limited market.

BIRMANBOY
10-06-2013, 02:59 PM
Agree its very difficult selling into a market where there is a ton of competition for the products. I was thinking more of the products that have a noticeable point of difference and sell on their own merits as opposed to being priced to the market.. Also of course The Fonterra's etc. The brand has to be sold....You almost have to be arrogant and market it as such. Drive the marketing so that customers are waiting in line to be lucky enough to buy your product. Most companies however probably cant afford either financially or time wise to develop this type of branding positioning. If you are just one of 20 options all pretty much the same then its always going to be marginal.

macduffy
10-06-2013, 03:26 PM
Nice theory, but Zon's spot on!

Two major problems. Foreign importers aren't normally interested in taking the forex risk on the NZD - and most NZ exports are competing in markets for commodities/goods which are internationally priced in USD or in currencies which have either a formal or an informal link to the USD. Good luck if you can "position" yourself against that!

BIRMANBOY
10-06-2013, 04:02 PM
Sorry thats just wrong. We export occasionally and we price in NZD and are selling into an international market usually quoted in USD. We still sell our products...why do you think that is? If importers want your product they will fit in with your terms and conditions. If they want it is the key. We dont have to sell ..thats our bargaining position. As they say.."if you dont ask, you dont get"
Nice theory, but Zon's spot on!

Two major problems. Foreign importers aren't normally interested in taking the forex risk on the NZD - and most NZ exports are competing in markets for commodities/goods which are internationally priced in USD or in currencies which have either a formal or an informal link to the USD. Good luck if you can "position" yourself against that!

zon
11-06-2013, 09:30 AM
Sorry thats just wrong. We export occasionally and we price in NZD and are selling into an international market usually quoted in USD. We still sell our products...why do you think that is? If importers want your product they will fit in with your terms and conditions. If they want it is the key. We dont have to sell ..thats our bargaining position. As they say.."if you dont ask, you dont get"

Selling now and again and when your business does not rely on it is not the same as running a company that depends on export sales. Would you open a cafe and only sell coffee at $10 because they are your preferred conditions?
To answer another point - no we don't sell commodities and we do have points of difference over others - we would be out of business if we didn't. But, ultimately it comes down to what the customer wants - they will only spend what they want on the product that gives the benefits they want, despite whatever marketing classes anyone has been to.

One thing I find disappointing (not just on here) is that commentators in media talk about exporting businessmen as if they are stupid and ask questions like - market better, sell niche, be more productive...and so on, as if we hadn't thought through that years ago and were a long way down that track already.

BIRMANBOY
11-06-2013, 11:55 AM
Flogging.....dead.....horse....... If I owned a business that was reliant on someone else dictating the conditions of business I would change the business in some way/shape or fashion that repositioned it in a better space. Just boxing on without any movement forward is a waste of time (in my opinion). However, I do appreciate its easier said than done and I have the advantage of being a small, agile company. The bigger the size the more difficult it is to change direction. Does not mean it cannot be done however. Most business owners suffer from the problems associated with working in a business as opposed to working ON a business. What started out as a good idea and a good product with good sales can gradually change into a non-productive marginal waste of space. Sometimes it becomes clearer when a fresh pair of eyes is looking at the problem. I cannot speak about any other business than my own with any certainty but I do know what it started out as is hugely different than what is now... and that change was driven by HAVING to do something different or getting trampled by my competitors. I do symphasize with someone where exporting is necessary part of the business. If you are in that position I have had good results , feedback and advice from my accountant..if yours hasnt helped you I would look for another.
Selling now and again and when your business does not rely on it is not the same as running a company that depends on export sales. Would you open a cafe and only sell coffee at $10 because they are your preferred conditions?
To answer another point - no we don't sell commodities and we do have points of difference over others - we would be out of business if we didn't. But, ultimately it comes down to what the customer wants - they will only spend what they want on the product that gives the benefits they want, despite whatever marketing classes anyone has been to.

One thing I find disappointing (not just on here) is that commentators in media talk about exporting businessmen as if they are stupid and ask questions like - market better, sell niche, be more productive...and so on, as if we hadn't thought through that years ago and were a long way down that track already.

zon
11-06-2013, 01:33 PM
Flogging.....dead.....horse....... If I owned a business that was reliant on someone else dictating the conditions of business I would change the business in some way/shape or fashion that repositioned it in a better space. Just boxing on without any movement forward is a waste of time (in my opinion). However, I do appreciate its easier said than done and I have the advantage of being a small, agile company. The bigger the size the more difficult it is to change direction. Does not mean it cannot be done however. Most business owners suffer from the problems associated with working in a business as opposed to working ON a business. What started out as a good idea and a good product with good sales can gradually change into a non-productive marginal waste of space. Sometimes it becomes clearer when a fresh pair of eyes is looking at the problem. I cannot speak about any other business than my own with any certainty but I do know what it started out as is hugely different than what is now... and that change was driven by HAVING to do something different or getting trampled by my competitors. I do symphasize with someone where exporting is necessary part of the business. If you are in that position I have had good results , feedback and advice from my accountant..if yours hasnt helped you I would look for another.

I haven't said we are doing badly, why assume that is the case? This was a discussion on exchange rates.
You have fallen into the default position that too many media commentators take as well...just because we raised the issue of the $NZ being too high, does not mean we are doing nothing as a business to improve and make our position stronger.
Flogging a dead horse seems a bit presumptuous as you know nothing about what we do. A few simple facts...
We are selling into various country markets - to think that NZ can produce something that no-one else in the world could think of doing is extreme.
We do not sell a commodity, but we have competitors that offer other uses of the customer's money - we are competing for that money.
We sell abroad as, like many NZ manufacturers, there is not a sufficient domestic market in NZ to grow, plus importers here use price as the main selling point ("buy from China it's cheaper" always quoted). This is quite a unique problem to NZ in that companies need to export much earlier in their life/growth plans. A company in the USA can hit $30m+ before needing to export, not here.
I appreciate your words are trying to help, but please believe me when I say that I, and managers within the company, have been very well educated and understand basic marketing and strategic principles. Why assume exporters cannot improvise and change? We network with many other exporters to learn from each other - no need to ask an accountant for advice,they are experts in accounting not our company.

BIRMANBOY
11-06-2013, 01:59 PM
Happy you are doing well. I dont know how it morphed into business as opposed to exchange rates...doesnt matter. Dont agree with you about accountant however...a good one is worth their weight in gold. However enough and on to making some money:)
I haven't said we are doing badly, why assume that is the case? This was a discussion on exchange rates.
You have fallen into the default position that too many media commentators take as well...just because we raised the issue of the $NZ being too high, does not mean we are doing nothing as a business to improve and make our position stronger.
Flogging a dead horse seems a bit presumptuous as you know nothing about what we do. A few simple facts...
We are selling into various country markets - to think that NZ can produce something that no-one else in the world could think of doing is extreme.
We do not sell a commodity, but we have competitors that offer other uses of the customer's money - we are competing for that money.
We sell abroad as, like many NZ manufacturers, there is not a sufficient domestic market in NZ to grow, plus importers here use price as the main selling point ("buy from China it's cheaper" always quoted). This is quite a unique problem to NZ in that companies need to export much earlier in their life/growth plans. A company in the USA can hit $30m+ before needing to export, not here.
I appreciate your words are trying to help, but please believe me when I say that I, and managers within the company, have been very well educated and understand basic marketing and strategic principles. Why assume exporters cannot improvise and change? We network with many other exporters to learn from each other - no need to ask an accountant for advice,they are experts in accounting not our company.

zon
11-06-2013, 02:07 PM
Happy you are doing well. I dont know how it morphed into business as opposed to exchange rates...doesnt matter. Dont agree with you about accountant however...a good one is worth their weight in gold. However enough and on to making some money:)

Interesting discussion though. :t_up: