What do SMBs need to know before they enter new markets?
Small and Mid-sized Businesses (SMBs) in both developed and developing countries play a vital part in economic development and social well-being. Working with – or without – big businesses, SMBs can now more easily enter new markets and operate in Global Value Chains (GVCs) of goods and services, creating jobs for local, national and international communities.
But they face several barriers.
The challenges of new markets
With the evolution of international trade (from agreements to technology), SMBs can now enter new markets much more easily than in the past – in theory. In reality, SMBs still face many challenges. And many view them as too great to deal with and give up on their international aspirations, after exploring the idea of entering a foreign market.
Barriers include time zones, cultures, regulations, languages, financial aspects, making the logistics look too complex for businesses with limited resources. In addition, there is now a sort of “deglobalisation” trend (see the related blog article on ‘Adaptive Organisations’ below for more on this).
However, there are plenty of opportunities in new markets for those SMBs who are open to make the necessary steps and changes. The key for businesses is to find the new markets that are ready for their offerings and where they have an advantage, following a sensible due diligence process.
The opportunities of new markets
SMBs do not need to master a whole GVC to be able to participate in it, adding value and grow in one or more new markets in the chain. What they do need to do is to look for the weaker links in that GVC. Bearing in mind that some chains offer more opportunities than others.
A smaller business may know that they developed a product or service valuable to people or businesses abroad. However, understanding what link to strengthen/ replace in GVCs will require some serious homework, and possibly partnerships with local businesses.
Your business should talk to government agencies such the Department of International Trade and the local Chamber of Commerce for good local contacts and general support. Your business should also consider hiring an export consultant to help with the delivery of the new market project.
Examples of projects taking advantage of GVCs:
- A a family-run whisky distillery in Scotland wants to sell its Scotch whisky to select countries in North America, using a French agency to run a digital marketing campaign remotely and local third parties to promote and distribute the product
- A start-up in Germany plans to raise capital via a London-based crowdfunding platform to engineer an electric car, designed by Italians and built by Vietnamese to be sold across Europe, using the Internet and local independent dealers
- A fintech in Spain will provide international payment services to smaller businesses (with EU/US clients or customers) in ASEAN countries
The technology side
Another relatively recent trend (positive for SMBs), is the digitisation of business. That is the process of creating business revenues and value from the unprecedented combinations of people, information technology and things. It is allowing SMBs to access new markets and sell goods and services in a fully digital way, joining and improving GVCs more rapidly than ever before. (This is also a trend covered in the already mentioned article below.)
Part of this trend has been the rapid development of financial technology companies, referred as fintechs, that offer SMBs help to overcome some of the barriers they face entering new markets, from funding (using platforms that allow “the crowd” to fund projects they like using traditional currencies or crypto-currencies) to international payments. (See the blog article ‘The Era of Fintech’ for more on this.)
Technology is transforming international trade like never before. SMBs can now access the global business and consumer markets in ways unthinkable just few year ago. However, your business must: collect sufficient information on the new market(s); establish the right contacts with trusted suppliers and business partners abroad; and – last but not least – make sure it has the ability to finance and run those international operations!