DTDIY SPECIAL THE 'HOW TO' ISSUE 2012
How to 'Take your Business to Tough Global Markets'
Considering the inherent weaknesses in the economy of the united kingdom today , Dr. Bruce Johnstone deliberates on the globalisation imperative for British SMES. However, the lessons he provides are quite universal and relevant for smes across the globe
Anirudh Raheja | Issue Date - 03/02/2012
Go to Page Number - 1 2
Are you focussing on expanding internationally? If not, you may be missing the best opportunity for growth in the current economic climate. British firms doing well at the moment tend to be those that are doing business globally. The domestic market is stagnant, with little or no economic growth on the horizon. British consumers, many on frozen public sector salaries, are increasingly cash-strapped as they pay higher food, transport & energy bills. The UK economy may be in for a long period of low growth. Contrast this with the developing world, where economic growth has continued unhindered and demand for consumer goods and services has been boosted further by a fast-emerging middle class. In 2007, Goldman Sachs predicted that by 2030, China will have displaced the US as the world’s largest economy (see figure 1). By 2050 India will be in third place, just behind the US; followed by Brazil, Mexico, Russia and Indonesia. By the middle of this century, these emerging economies will overtake Japan, UK and Germany.
SMEs are going global
It is becoming easier for Small and Medium Sized Enterprises (SMEs) to expand globally. Many are now being born global – established as small businesses that sell directly to people anywhere in the world. According to the HSBC Global Small Business Confidence Monitor (a survey of over 6000 small businesses in 21 countries), 29% of the world’s SMEs trade internationally, and 40% say they intend to trade internationally by 2013. In the same survey, only 20% of Britain’s SMEs were found to be trading internationally. But HSBC also reports healthy increases in export lending to UK firms, which are rapidly growing their exports to emerging economies in Asia, the Middle East and Africa. The big growth opportunity for many UK firms lies in finding an entry into the emerging economies and providing their consumers with the more sophisticated goods and services that they increasingly demand. International expansion is an attractive growth strategy because it allows companies to grow their business rapidly while continuing to concentrate on what they do best, instead of trying to do something they know very little about. It often makes more sense to expand globally than to diversify in a local market and risk a loss of focus. Business owners face a series of strategic choices as they consider global expansion. They must decide which markets to enter, and what mode of entry to employ.
SMEs can use international distribution and fulfilment services to directly supply end-users of their products, almost anywhere in the world. International customers can buy their offerings online or through an intermediary such as eBay or a television shopping network. A global SME might source goods from China using online services such as Alibaba.com, then sell them through its own website and then have the fulfilment managed by Amazon. The owners of successful automated global SMEs are making money while they sleep. The key to making this sort of business model sustainable is to add something special along the way. An example of this is a small jewellery designer in Derby that buys beads from China, and assembles them into attractive and unique jewellery to sell online.