When I inquire if their company exports, many small and medium-sized business owners are startled, as they believe this is a field designated for larger corporations. True, this was often the case in the past, but there are other compelling reasons for small businesses to export as well.
According to the statistics, SMEs often make up more than 90% of the enterprises registered in a given market, yet they are under-represented in exports and international trade. Small businesses accounted for 28% of EU goods exports and 40% of EU services exports to third countries in May of last year (excluding the UK), as per the EU statistics. Textiles, furniture, and wood products all had a rate of above 50%.
The main reasons for not expanding trade relations globally could be a lack of awareness concerning worldwide expansion, concerns about cash flow and how to finance such a hazardous project, and international business profit doubts among others.
Why Should Smaller Companies Export?
Some of the points I'm about to make apply to all businesses, but I believe they also apply to small businesses. Smaller businesses may not have the same financial or time resources as larger businesses, but they do have some distinct benefits when it comes to international expansion.
To Increase Sales and Profitability:
No matter where you are in the world, there are more consumers and businesses outside your home market than inside. Even if you live in India or China, the global market for most products and services is far more lucrative than the domestic market.
To increase Business Competitiveness:
Many North American or European businesses believe their home market is the most competitive in the world. If there is one word that every company should avoid using, it is “assume.” I've found that operating in multiple export markets exposes you to a much larger range of business models and methods than operating in domestic markets. This may not be the case if you are based in China, where competition is fierce. Successful businesses must truly focus on their product offerings in order to compete against such a diverse spectrum of competitors.
Reduce Market Risk:
Even in 2020, countries like China, Vietnam, Nigeria, and New Zealand did well, despite the global slump. If you exclusively work in the domestic market, you are at the mercy of whatever crisis hits it. Diverse export markets can help spread that risk. As many European businesses discovered with Russia in 2022, relying too much on one export market puts you at tremendous risk.
Broaden Consumer Base:
As stated previously, clients from overseas outnumber customers from home. Accessing those clients through an export strategy can help you learn more about and get feedback on your products, as well as boost sales and profits. Small businesses often specialize in narrow markets or leverage disruptive digital technology. By extending into other nations, you can increase your consumer base. Niche items can break through the red ocean of an export market and succeed where larger competitors fail.
Seasonal Fluctuations in Business:
If you are marketing a seasonal product, what should you do? For instance, sports equipment or chocolate. Selling to the "opposite" hemisphere should be done logically in these circumstances. Is the Swiss ski season drawing to a close? Now is the time to profit from New Zealand or Australia. You're not interested in exporting your chocolate to Asia due to the scorching summers and the absence of air conditioning throughout the production chain? Consider Argentina, which has a milder season and maybe more favorable supply chain conditions.
Competitive Advantage in the Domestic Market:
This has two aspects. As a market leader in your category or specialty for a certain characteristic, you can exploit this to your advantage in export markets. Second, some markets are known for creating high-quality goods. Consider German engineering or Italian design. Even if potential clients don't know your brand name, having a "home market advantage" can help you in export markets.
It Drives Growth & Employment:
Exports sustain 37% of jobs in the EU. This demonstrates that exporting cannot only help a business develop but also provide excellent employment prospects.
"Micro, small, and mid-sized businesses are key to creating the 600 million new jobs needed by 2030 to keep pace with the growth of the world's working age population." Mohamed, Amina J.
Globalization Leads to Accelerated Innovation:
Exporting businesses have previously demonstrated that they are more adaptable in their approach to problem solving than domestically based businesses. Markets that are dynamically evolving across several areas make it even more important for businesses to speed up their innovation.
“On the Internet, Nobody Knows You’re a Dog”:
Are you familiar with that meme? This is an old yet true adage. Nobody cares if you're a large or small business online as long as your offering appeals to consumers. A small company benefits enormously from the world of e-commerce, where opportunities exist that were unimaginable 40 years ago. This is just another reason why every small firm serious about growth should consider exporting - e-commerce almost eliminates restrictions.
Strategic Agility Compared to Larger Competitors:
Corporate decision-making processes are frequently so lengthy that implementing changes is analogous to turning an oil tanker or container ship. A small business can react much more quickly to market developments and benefit from quick decisions.
Sustainability:
Small businesses tend to have products with medium digital densities and low emission density. A small business that wants to grow should export since they are more sustainable than other enterprises.
What Strategy Should SMEs Use to Expand Globally?
Small businesses have a smaller margin for error than big businesses, so the following factors should be taken into account:
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Are you already selling successfully in your home market?
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Are there any existing international enquiries indicating a demand for the products?
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How are your primary competitors coordinated? Are they already exporting?
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Do you have the financial resources and team bandwidth to focus on this project?
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Do you understand logistics and what is required to create agreements?
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Do you know the norms and cultural practices in your target markets?
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What is the focus on giving value to consumers and distribution partners?
There are four main parts to successful internationalization, and you should ideally have all of them in place to increase your chances of success:
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A strategy: (apparently, around 90% of US companies work domestically without one, but it is essential for export).
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A plan: For sure, things will change en route but it's better to have a plan in advance for whatever area of your business you’re thinking about.
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Resources: As I mentioned above, you won't get far on an empty tank.
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Executive commitment: The decision to export has to be carried by the whole organization if you want this to be a long-term profitable venture.
SMEs Committed to Growth Should Consider Exporting
Borders were traditionally a significant impediment to doing business, but practically speaking, the internet and digital technology have aided in shrinking the world in this regard. Even if you trade in the traditional manner, creating immaculate L/C paperwork with a software template is far easier than it was with a typewriter. Believe me when I say that I've tried both!
Global media enables you to communicate with people in nations on the other side of the globe, organize online meetings, develop connections, and stay informed about worldwide happenings. The internet acts as a great leveler, allowing competitors to compete on more equal footing. Additionally, it creates prospects for cross-border ecommerce. Even small players can benefit from deep market insights thanks to big data.
As technology has progressed, communication and tracking shipments have become much easier. This means that e-commerce, in particular, is becoming a more common way for small businesses to go global. Simple does not necessarily equal easy, but as noted previously, if your firm is serious about growth, you should definitely consider expanding into other markets. There are other ways to start making money too, but ecommerce is one of the most appealing as a first step.
Of course, there are other possibilities, and partnering with an importer to distribute your products is one of the most practical, but comes with its own set of issues associated with choosing the correct partner and managing the partnership. As a small or medium-sized business grows, this could be one of the most cost-effective and effective ways to market.
Whichever route to market is best for your business, being deliberate throughout the process is critical to success. Exporting to well-selected international markets may boost revenue and profitability, assuring your growth and helping to strengthen your business's resilience in times of crisis.