What do many Philippine-based businesses and Santa Claus have in common? They're both experts in exporting goods around the world! Here's a humorous take on a rather serious topic by our guest contributor, the famous Airport Economist, TIM HARCOURT.
For those of you who think economists are not a festive bunch, here’s a thought that will cheer you up for Christmas. Father Christmas, Saint Nick or, as he is better known, Santa Claus himself is a symbol of the global economy. After all, Santa Claus is an exporter. He delivers goods (toys) to consumers (children that are good) across the world in a regular, once a year, seamless service.
For those of you who don’t believe it, (“Ho Ho Ho” we hear you say), look more closely at the Santa Claus (Proprietary Limited) operation. You will find that Santa’s business operation; structure and delivery system have strong support in the academic literature on what makes a thriving export business tick.
First of all, Santa Claus is a born global. Santa realised a long time ago that the North Pole has a limited domestic market for toys. He therefore decided to run his business on an international basis. This is an important lesson for many companies in a small country like Australia. If you have a limited domestic market, you should think about exporting. UNSW research recently highlighted many companies that are ‘born global’. Take Lochard, an airport noise and flight monitoring company based in Melbourne. Lochard knew that its growth in Australia was limited to the small number of airports so it immediately looked overseas to sell its monitoring equipment. As a result it now sells the UK, the USA, Asia, the Middle East and South America. Many Australian companies are born global – particularly in knowledge-based industries. Around a quarter of new exporters are born globals.
Secondly, like most successful global businesses, Santa Claus is a well-known brand and he has built a sustainable export business around the brand whilst keeping his corporate headquarters in the North Pole. In this way, he maintains a worldwide brand whilst maintaining the company’s roots and strong local identity (which is part of his brand’s strength and reputation). This is a good lesson for potential exporters. As UNSW research shows, global brands can be built from small local economies – especially in rural and regional Australia.
Airport Economist Tim Harcourt
Thirdly, Santa Claus has maintained a high standard of human resource management. He has a stable, loyal workforce and good industrial relations. In fact, there’s never been a strike or lockout at the North Pole as Workchoices never made it that far north! Santa’s Little Helpers have been with the company all their careers and have hence built up strong networks and knowledge about the company and its operations. The academic knowledge management literature shows that long-serving employees are the best knowledge workers as their experience and social networks make them far more effective to the company than younger workers. Furthermore, good wages and conditions help too. UNSW research shows that exporting companies, on average pay higher wages and provide better conditions and job security than do non-exporters. This helps the company too in terms of skill development and productivity.
Fourthly, Santa overcomes logistical problems by using intermediaries. He cannot gain all the market knowledge he needs so he uses proxies (such as parents, grandparents, aunties and uncles) to ascertain the ultimate needs of consumers. He then franchises to reliable local parties to ensure that he goes the “last quarter mile” in satisfying the customer (and therefore avoids the pitfalls that have beset many dot.com companies).
Fifthly, Santa, like all successful exporters, visits the market on a regular basis and undertakes market research in the lead up to Christmas. He seeks advice about the market (where required) through strategic positioning at shopping centres and by making selective appearances at Christmas parties. This has enabled him to adapt his product to different cultures in countries all over the world. On the big night itself, he uses simple market entry strategies – via the chimney - and responds well to clear market signals (such as Christmas stockings hung over mantle pieces).
Finally, like all successful exporters, Santa Claus is flexible and innovative. Like all good exporters, he leads the market in terms of consumer tastes and trends. For instance, Santa knew when wooden toys were making way for plastics and electrical goods. He’s always up with all the latest technology. Furthermore, UNSW research shows that exporters are very innovative in terms of production methods and business practices. Santa is no exception. When faced with an unusual natural resource (a red nosed reindeer named Rudolph) Santa demonstrated his ability to think outside the box and had Rudolph lead the other reindeers in pulling the sleigh in bad weather.
So there you have it, Santa is a long-term, sustainable exporter operating a global business in many different markets. He knows his customer (through direct and indirect mechanisms), knows the importance of his brand and treats his workers and his reindeers well. So enjoy the Christmas break and let’s hope Santa delivers for you too.
Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business, UNSW and the author of THE AIRPORT ECONOMIST: www.theairporteconomist.com