Most SMEs expect 50% of revenues to come from overseas by 2019—report

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handicraftsFor most small and medium-sized enterprises (SMEs) across the globe, the key to growth lies in the international markets, but they must first put in place an effective strategy to overcome serious hurdles and successfully penetrate new destinations, according to a recent study conducted for DHL Express.

SMEs see growth opportunities internationally and expect to derive up to 50 percent of their revenues internationally in five years’ time, said the survey carried out by the Economist Intelligence Unit on behalf of the express service provider.

However, the survey of 480 SME executives and experts around the world also reveals that while aware of the importance of international trade to their long-term success, enterprises are constrained by severe obstacles such as political instability, cultural barriers, and inadequate infrastructure in their target markets.

“Many SMEs see barriers to trading internationally,” said the paper. “The 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 were all cited by the executives surveyed as factors that deterred them from entering new markets.”

The unfamiliarity of foreign markets received particular attention: 84 percent of respondents described understanding a target market’s culture or language as important or very important in determining its attractiveness.

In particular, since developing countries are considered “the growth markets of the future,” then SMEs “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 of DHL Express.

China remains the most attractive growth market for SMEs with a global mindset, said the report. “The pure size of the market and the Chinese government’s focused economic policy have created favorable conditions for growth. However, these same factors also mean that careful planning and the right entry strategy are important considerations.”

The study identified a number of innovative approaches in terms of expansion tactics, including piggybacking on another company’s existing retail network to enter new markets. The survey shows that partnerships, especially with distributors, resellers, and other companies with established networks, are an important consideration for SMEs to keep their costs down as they fight to gain traction in a new market.

“Tapping into new markets is clearly still not easy for many small enterprises with growth ambitions,” said Allen, even as he noted that they don’t need to be big to compete in the global village. “With meticulous planning, a well-designed supply chain, a clear understanding of their competitive strengths and the right mindset, SMEs can break through any border and make the world their market.”

Photo: Bgabel