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Can SMEs break borders successfully?

Researching market opportunities, finding partners and distribution channels, negotiating licences and permits, navigating customs, establishing production and building a customer base in an overseas market usually require considerable financial firepower, resources and political connections, all factors that favour heavyweight businesses. Stepping into the international ring with them, entrepreneurs and small businesses are in for a gruelling fight with the odds stacked against them.

A research paper issued by the Economist Intelligence Unit (EIU), Breaking Borders, also paints a rather gloomy picture about the international trading environment for SMEs.

The companies surveyed highlighted a large number of barriers standing in the way of their global expansion.

Infrastructure problems, prohibitive costs of establishing operations and networks abroad, bureaucracy, corruption and political instability were all cited as reasons for not entering overseas markets.

Of those that were venturing abroad, the vast majority were doing so very tentatively, and most SMEs expand into markets similar to their own. Despite the opportunities o� ered by air travel, telecommunications networks and the internet, it looks like globalization is still principally being driven by the big players.

T rading across borders can be a time-consuming, complex and risky business.

The EIU paper also o� ers a mixed assessment of the world’s growth markets. China remains the most attractive developing market for the majority of SMEs, mainly because of its enormous consumer base and the country’s economic policies, which continue to support growth. There are reservations, however, about the appeal of Africa, with 40% of surveyed companies saying that they see no potential in the continent.

At the same time, despite the doom and gloom, the paper still revealed a positive outlook. Most of the SMEs intend to generate over 50% of their revenue from outside their home market within 5 years. Part of the reason could be defensive: as globalization has taken hold and markets have opened up, competition has intensified for smaller businesses.

Domestic economies in most markets have also slowed or stagnated, which has put their margins under pressure and this is forcing businesses to look abroad to grow.

So how can SMEs go global without the financial “muscle” and manpower of bigger companies? Breaking Borders reveals that it takes resourcefulness, partnerships, a robust supply chain and the ability to make your size work in your favour.

DHL was a brash, upstart small business once. Thanks to an aggressive international expansion in the 1970s and 1980s and a ‘first mover’ philosophy, we have grown into one of the world’s most international companies.

That was a di� erent time, and we’re a very di� erent company today, but we still have a keen eye for the opportunities of international trade. For any small business doubting their ability to tap into Africa’s growth story, for example, we would say that the challenges are indeed there, but, as the experiences of many of our customers who are trading successfully with the region show, they are by no means insurmountable.

SMEs may have to learn to compete in di� erent ways and to make best use of all resources available to them in order to hold their own on the world stage.

However, with good planning, a well-designed supply chain, a clear understanding of their competitive strengths and the right mind-set, even the most lightweight of businesses can outperform the global heavyweights.

As globalization has taken hold andmarkets have opened up, competition has intensified.