In my last blog, we looked at how small and midsize enterprises (SMEs) are using technology and How Globally Minded SMEs Are Competing Beyond Bordersinnovation to compete on the global stage. This post explores how SMEs are translating their aspirations into real strategies by focusing their efforts on international markets.
For SMEs today there is little, if any, difference in doing business in their home base or in distant markets. From the center, technologies have made it possible to manage supply chain, inventory, and a worldwide distribution network. “Smaller companies need to be highly agile,” says François Hisquin, CEO of French IT consultancy Octo Technology, in the Oxford Economics study, SMEs: Equipped to Compete. “They should have a vision, but they should be able to move if the market is changing – and I think the market will change greatly in the next five years.”
Octo employs 190 people and has US$28.5 million in sales from operations in its native country and in Morocco, Switzerland, Belgium, and Brazil. It currently generates 16% of its revenue from abroad, and has a goal of increasing this to 50%. “We will target new countries by the end of this year,” says Hisquin. One reward of global diversification was that Octo started winning contracts in Brazil when its European order book was thinning. The other benefit of taking the international leap is that it is creating a blueprint for greater and wider expansion in the future.
This fast-paced internationalization is echoed by the research findings in SMEs: Equipped to Compete. Today, only one-quarter of the 2,100 SMEs surveyed currently generate no revenue outside of their home country. Within three years, this is set to drop to 17%. And, one-third now generate over 20% of their revenue internationally, a figure than is set to rise to 47% in three years. By 2016, SMEs operating in six or more countries will more than double from 15% today to 35%.
Collaborating with partners in local markets is a highly effective way for SMEs to expand their businesses. And many are already doing so. Take Poland’s Solaris Bus & Coach S.A. This manufacturer of buses and trams, faces significant competition in its markets across Europe, but cannot make the kind of global investments that its largest competitors can. Instead, Solaris uses local partners and local suppliers to shorten the supply chain and to adjust very quickly to customer needs. With key markets in Southern Europe faltering, the company worked with partners to shift production to trams and electric-powered buses. Its thinking was that these two products would be more attractive to budget-strapped governments. It’s a bet that is paying off.
In this increasingly borderless world, SMEs need to transform their business thinking needs if they are to realize their full potential. For many SMEs working to capitalize on opportunities in international markets, attack is proving the best form of defense. One thing is for certain – in the face of increased competition on home turf from companies based abroad, targeting new markets is about viability and sustainability as much as growth.
Visit our SME Community Experts page for more information on the Oxford Economics study.
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