Discover how one business is managing the rapid and severe changes in business competitiveness because of the high Australian dollar (AUD).
| Entrepreneur |
Tim Andrews, Managing Director |
| Company |
Arrow Machinery |
| Business type |
Arrow Machinery makes highly specialised kerbing and guttering machinery. It earns about two-thirds of its revenue from exports. Key overseas markets include India and South-East Asian countries. |
| Founded |
1984 |
| Head office |
Blacktown, NSW |
| Contact details |
www.arrowmachinery.com.au |
"Business is the worst it's been in the past 25 years due to the high Australian dollar."
- Tim Andrews
|
Business Challenge
The high Australian dollar has seriously impaired Arrow's competitiveness. In one of its main markets - India - the dollar is up 20% against the Indian Rupee.
Arrow's main competition is from US suppliers. The fall in the US dollar has made US suppliers much more competitive. Andrews says: "US machines used to sell for about AU$75,000 each; now they are selling for about AU$50,000. We are still about $70,000 per unit. It's very hard."
Management Problem
How to manage a rapid and severe change in business competitiveness because of the high Australian dollar (AUD).
Business Response
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Suppliers
As soon as the AUD began rising, new orders ceased, Tim Andrews began talking with his suppliers and creditors. He has been working with many of them for more than 20 years. He has lengthened payment terms out to 90 days.
- Staff levels
Arrow runs a tight head office of five staff. As a result of previous downturns, the company employs subcontractors for production. Head office staff have been cut from five to two. Wages - including Andrews' - have been cut by one-third.
- Trade shows
Arrow has cancelled scheduled trade show slots in Russia and the Middle East. Andrews is still considering whether to attend shows in China and India.
- Flexibility
Andrews says he has had to deal with a downturn affecting sales twice before, notably during the 1997 Asian economic crisis. He says: "There is nothing you can do to change the value of the dollar; you just have to tighten your belt and be flexible. We used to keep things in-house but now we find that using sub-contractors is best. When the business is there, we can expand our work force as much as we need to."
- Market focus
Arrow has focused on making local sales in Australia as FY 2011 budgets were spent. The company has sold units to local government buyers in places such as Newcastle.
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Government support
Andrews recognises that government cannot change the value of the dollar. He has had some NSW Government support in the past to attend international exhibitions as well as exporter assistance through the EMDG scheme.