Most small and medium enterprises (SMEs) expect to go global in five years, with half of their income derived from international markets.
This is the highlight of findings of the recently-released report of survey conducted by the Economic Intelligence Unit (EIU) for DHL Express. Interviewed were 480 SME executives and experts from business lobbying groups around the world. ¹ also reveals that severe obstacles still remain for smaller businesses with global aspirations.
At the same time, the study also showed that challenges, such as political instability, cultural factors and inadequate infrastructure, still cause concern and often outweigh the raw growth potential of overseas markets.
Going global in trading involves hurdling many barriers, according to the respondents. These include quality of a target market´s infrastructure, the stability of its politics, administrative costs for establishing a local presence and cultural differences in doing business .
The executives surveyed also worry about unfamiliarity of foreign markets. Some 84% of described understanding a target market’s culture or language as important or very important in determining its attractiveness.
This also explains why most SMEs expand into markets similar to their own. The report shows that SMEs from BRICM (Brazil, Russia, India, China and Mexico) markets are more likely to seek growth opportunities in other developing countries, while SMEs from the G7 economies (Germany, France, Italy, Japan. Canada, United States, United Kingdom) are more active in other developed markets..
“BRICM SMEs are better positioned in other developing markets thanks to their superior ability to navigate the challenges that these markets present. They are also taking advantage of lower costs and smaller pools of competitors. If you consider these countries as the growth markets of the future, then SMEs in industrialized economies need to review their approaches to emerging markets and identify new strategies that will help them to compete internationally in the future,” said Ken Allen, CEO DHL Express. “From DHL’s own experience, we know that partners and service providers, particularly in the field of logistics and transportation, can provide critical support in overcoming cultural barriers and infrastructure challenges while managing costs in order to compete.”
In terms of expansion tactics, the survey shows that partnerships are an important consideration for SMEs. The majority of ambitious G7 SMEs prefer to work with distributors, resellers and other companies with established networks to keep their costs down as they fight to gain traction in a new market. The study identified a number of innovative approaches in this area, such as piggybacking on another company’s existing retail network to enter the sub-Saharan market in Africa.
Photo: from www.aphienterprise.com