When Small Businesses Meet Big Opportunities

While SMEs may be driving economic growth, they’re doing it mainly from within their own borders. Is it that exporting overseas is simply not worthwhile, or is there actually a significant reservoir of untapped growth potential for SMEs?
Learn more about SME business going overseas

By Raj Subramaniam, Executive Vice President, Global Marketing and Communications, FedEx Services

For many visitors to Thailand, a trip to Bangkok’s famed Chatuchak Weekend Market is one of the highlights of their holiday. A hub for traditional retailers, the bustling, 27-acre site houses 15,000 stalls that sell an incredible variety of art, antiques, silk, and handicrafts from around the country. Today, the flea market features prominently in tourist guidebooks and makes a respectable contribution to the local economy.

It can, however, be easy to overlook the importance of small businesses like the Chatuchak stallholders, not just to their surrounding communities but also to the wider national economy.

Globally, small- to medium-size enterprises – or SMEs as we often refer to them – make up 90% of all businesses[1], more than 99 % of all employer firms[2] and more than 50% of employment worldwide[3], so it is important that they continue to succeed and grow.

Serving the community by looking beyond it

Today’s modern technology means that the growth potential of SMEs is not limited by the size of the communities around them. New suppliers and customers can be found much further afield, and even internationally, literally with the click of a mouse.

In a recent independent research study commissioned by FedEx[4], we were struck by the large proportion of SMEs worldwide that are missing out on the opportunity to leverage international trade. Globally, only 38% of SMEs currently export overseas, even to markets right next door.

So, while SMEs may be driving economic growth, they’re doing it mainly from within their own borders. Could it be that exporting overseas is simply not worthwhile? Or is there actually a significant reservoir of untapped growth potential for SMEs?

A world of possibilities

It appears to be the latter. Globally, SMEs that sell overseas generate average revenues of US$1.5 million from those exports each year.

There’s also a clear correlation between exporting and achieving rapid growth. In every market surveyed, SMEs that export are more likely to be experiencing annual growth of 11% or more than ones that don’t. In China, France, Germany, Italy, Japan, South Korea, Spain and Taiwan, exporting SMEs are roughly twice as likely to report such rapid growth compared to their non-exporting counterparts, while exporting SMEs in Brazil, Colombia and India are between 1.1-1.3 times more likely to achieve rapid growth.

Taken together, the study’s findings suggest a highly compelling business case for SMEs to export goods to other markets, beyond intrinsic benefits such as economies of scale, lower unit costs, reducing risks and balancing growth.

A good example of this is Australian fashion label, Jane Ramsay. A stint working in the L.A. fashion world convinced Jane that a gap in the market existed in her native Australia for original, genuine design. Determined to fill that gap, she founded her own label seven years later. Right from the start, Jane recognized the potential of exporting and designed a business model comprising physical and online stores. This allows her to make her collection available to both domestic and international consumers – particularly those in the U.S., the world’s biggest e-commerce market. The strategy has paid off, and Jane Ramsay womenswear is today available on four continents around the world.

Jane Ramsay is not an exception when it comes to recognizing the potential of overseas markets. In fact, almost three quarters of the SMEs surveyed say they’re excited by the potential of their business to go global.

Unlocking SMEs’ potential

With so many SMEs recognizing the significance of the export opportunity, but so few actually doing it, there are clearly barriers that need to be overcome. Globally, SMEs harbor concerns about not being paid or incurring foreign exchange losses. Some worry about the costs of exporting. However, one common thread runs through all these misgivings – in most cases, they can be overcome with the right advice and support.

Such support programs do exist, of course.

Most are national initiatives, but there are also supra-national sources of support. One example is the International Trade Centre (ITC). Established jointly by the United Nations and the World Trade Organization in 1964, the ITC creates integrated solutions by building institutional, managerial and entrepreneurial capacities simultaneously at government, institutional and enterprise levels. It offers up-to-date information solutions that cover tariffs, trade agreements, and the competitive landscape in potential export markets. Its custom-built market analysis tools have over 340,000 users worldwide and it ran almost 450 capacity-building workshops in 2013[5]. Both in terms of what the organization provides and the way it delivers, the ITC sets a good example for national SME support programs to follow.

Whether it’s from national or international sources, most exporting SMEs realize that there is information out there to help them, but the majority would welcome more support. When it comes to SME non-exporters, over three-fifths in the research study said they’d never received any advice or support. This is the group that is in most need of support programs. Left to go it alone, SMEs turn to the internet, the media and their logistics service providers for expertise on exporting.

A shared imperative

At FedEx, we’re happy that SMEs view logistics service providers as a valuable resource when it comes to exporting. However, we see the imperative to support SMEs as a shared one. Only 10% of SMEs believe they have the support they need to export successfully, and this should serve as a shot across the bows for the other stakeholders involved, such as banks and national governments. Whether they have adequate support or not, many SMEs plan to break into export markets in the next few years. Doing more to help them succeed will benefit communities by creating jobs, wealth and a more efficient pipeline for goods and economic growth worldwide.

[1]IFC and Small and Medium Enterprises“, International Finance Corporation, World Bank, March 2012.

[2] FedEx Global Citizenship Report 2014

[3] “A World Trade Organization for the 21st Century”, P. ix, Baldwin et al, Asian Development Bank Institute, 2014.

[4] “Global Opportunities: Examining Import and Export Trends Among Small Businesses”, a commissioned research study conducted by Harris Interactive on behalf of FedEx, September 2015.

[5]How ITC Works“, International Trade Centre

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