By Shalini Khemka, CEO of the London Entrepreneurial Exchange
There’s a common perception that overseas trading is only for large companies. Unfortunately evidence does suggest that Britain has been trapped under this misconception and as a consequence is lagging behind the rest of Europe in terms of exports.
As an example, Britain actually exports more to Ireland than to Brazil, Russia, India, and China combined, while Germany and France are both ahead of Britain in exporting to the BRIC countries. But in the context of a depressed British market, business owners should not forget that new overseas opportunities are constantly opening up, and although expansion into high-growth markets may seem daunting to say the least, there are plenty of SMEs overcoming the challenges of unfamiliar markets and reaping the rewards.
Exporting just makes good business sense, and has clear economic benefits. Research shows that businesses that grow internationally tend to enjoy increased levels of productivity, growth, and innovation, and achieve stronger financial performance.
There are many other positive effects as well, like a highly likelihood to stay in business than those that don’t, or the ability to enjoy economies of scale that aren’t quite as possible domestically. What’s more, British products, services and expertise continue to be in demand across the world, opening up a wealth of lucrative opportunity to trade internationally, both in traditional, established markets such as Europe and the US, and the high-growth economies of the BRICs.
What with all the good press, you would imagine that entrepreneurs and CEOs have already been falling over themselves at the mere prospect of maximising business success. Yet despite all the advantages, just one in 25 UK companies export, and fewer than a third of entrepreneurs plan to expand overseas in 2012, according to recent statistics from the government body UK Trade & Investment (UKTI) and RSM Tenon respectively.
Why then, do British SMEs fare so poorly in exporting? A lack of finance, expertise, confidence, networks and contacts, and perhaps a reliance on the strength of the domestic economy over the past two decades, are just a few examples.
According to the chief executive of UKTI, however, there is no reason why the UK cannot close up their yawning trade deficit and become a trade-surplus economy again. The government has thrown a significant amount of money - £45m to be exact — into driving exports, but the government alone cannot turn around the country’s export performance.
Professional organisations such as UKTI, Pricewaterhouse Coopers and HSBC are playing a pivotal role in helping SMEs to go global, such as the long-term initiative to increase the number of SME exporters from 20% to 25% in line with stronger European competition through continued support from international trade advisors.
For a small company entering a new market — particularly those embarking on international trade for the first time — it is vital to get it right. The first step is to assess the business’s export potential and really take some time to consider the realities of exporting and their implications for all aspects of the business.
Thorough market research must then be carried out to identify target markets, as this will significantly minimise risks and help maximise the return on investment. Areas to examine include industry structure, predicted demand for your product or service, competition and how the business slots into to the marketplace, and any modifications required to make the product or service saleable.
After market research, an export plan can be drawn up that should include a marketing strategy incorporating international trade development, an understanding of the route to market (e.g. distribution channels), and the chosen business model. Awareness of local regulations, standards and law is essential, such as modifying packaging, export payment mechanisms, VAT rules, and any other export controls which relate to your product or service. Other issues to note include currency risks, insurances and intellectual property protection.
Most important of all, don’t forget that there are a wealth of resources and expert advice out there to draw upon. The UKTI website is a good start, providing detailed information on countries and sectors, as well as articles and further information should you need more advice.
Across the world are markets that are showing strong, long-term growth. UK entrepreneurs would be foolish to not capitalise on those opportunities and embrace the rewards that they can reap.
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