Lessons on breaking into a new market: it takes time

Michael Bleby Reporter

Lessons on breaking into a new market: it takes time

Published 27 November 2013 12:02, Updated 28 November 2013 07:56

It takes time to break into a new market. Whether that market is for large infrastructure projects or business in China, establishing relationships with local potential clients and building up a local track record is crucial, businesses say. Of course, foreigners’ access to the local market can be impeded. Italian construction company Salini says in a submission to the Productivity Commission that access to Australia’s infrastructure market is hindered by a Leighton-Lend Lease duopoly and infrastructure funder Hastings supports that view.Much is made of the need for Australian businesses to build relationshipswhen entering China. Australia itself is similar. And even engineering firms that feel on the outside say entering a new market takes time. Enrico La Civita, the Australia country manager for Salini, whose Productivity Commission submission criticises both the duopoly as well as Australia’s complex and costly tender processes, says it is necessary to pair with local companies to gain experience a new entrant won’t necessarily have.

“We’ve always been joining local companies because when you approach a new market, you need their capabilities,” La Civita says.

When you approach a new market, you need their capabilities. 

In the infrastructure game, this is all the more so, especially when it comes to large and complex projects such as public-private partnerships, which live or die according to the way they manage to share financial risk between participants. Local knowledge is crucial for these.

“Greenfield PPPs are basically about understanding risk allocation, bidding dynamics, local contractors and all the nuances of various state government,” says one infrastructure veteran. “That’s very much where Australian-domiciled builders, whether Leightons or Lend Lease, seem to have an inside running.”

In with a sporting chance?

Arguments rage about how open Australia’s major project market is to foreign contractors. Tenders are being finalised for Western Australia’s $700 million new sports stadium, on which construction is due to start next year, and much will be made of the nationalities of the winning contract.

Three consortia have been shortlisted for the job and only one (WestAdium, led by French company Bouygues and Plenary Group) has a foreign contractor. The other two are Confidem (Capella Capital, Leighton subsidiary John Holland, Spotless), and WESTADIUM (Brookfield, John Laing).

Leighton Holdings says it welcomes competition and Lend Lease says the Australian market is open to outside competitors. But the impression some companies get is clear. Consultancy NDY set up a joint venture two-and-a-half years ago with US firm LTK to bid for rail projects in Australia. In aBRW interview last year, NDY director Peter Koulos complained about a “parochial” local market that made it hard for newcomers to break in.

Koulos’s boss and the managing director of the NDYLTK joint venture, Dominic DiBrito, on Monday said the Australian approach to newcomers was cautious.

What we found is that in general in the Australian market, potential clients are conservative. 

“What we found is that in general in the Australian market, potential clients are conservative and you can’t blame them for being a bit conservative when it comes to hiring new entities,” DiBrito told BRW.

In his company’s case, NDYLTK started in Australia with small jobs, such as a technical investigation for Yarra Trams in Melbourne. The scope has grown, and it is now playing a technical advisory role for Transport for NSW in the Sydney Inner West Light Rail Extension.

“In every business, much of it comes down to reputation and relationship,” DiBrito said. “It’s about trust. It’s just taken us that time to gain the potential clients’ trust. We’ll continue to bid for larger and larger jobs as we demonstrate locally that we’ve got that capability and history and we are just basically taking it one day at a time.”