Small businesses fail quite often and hardly 30% of them make it past their tenth anniversary (Fundera). In order to stay competitive today, any company needs to strive for growth and use every opportunity to boost its productivity while cutting costs.
One of the best things to do for achieving these results is to go global. A business that is fully local today has little chance to become a major success.
Why All SMEs Should Consider Going Global Today
SMEs of today are increasingly going global, reports Real Business. This isn’t a surprise because doing this offers a variety of benefits and can be the deciding factor in a company’s success.
The most important advantages of expanding to foreign markets or using resources from abroad to boost one’s own business are:
a. Access to Cheaper Resources
Outsourcing some of the essential business tasks as well as purchasing cheaper resources from other countries can help a company save a lot of money.
Cutting the costs is essential for staying competitive today because for all that consumers value brands, they are still more likely to buy the cheapest option.
Unfortunately, locally sources supplies and labor are rarely the cheapest, thus going international to seek out more affordable options is often the only chance to cut down the costs significantly.
b. Access to New Customers
Entering new markets greatly increases the customer pool that a business can reach. As the targeted audience will be very similar to the one the company targets locally, they will need to do only minimal adaptations to branding and marketing strategies to make them fit the new culture.
Going global is a risk, but it’s also an opportunity to diversify the risks that every business faces by default. Foreign branches can act as “backup” in case some issues occur with the primary company due to the local economy or other issues that are out of the owner’s control.
Challenges of Going Global for SMEs & Tips for Overcoming Them
1. Political Risks
When doing business abroad one must keep track of the political situation as it can affect one’s chances of success greatly. This is most important for businesses that choose to expand to unstable regions, like Asia or the Middle East.
Some of those economies are extremely volatile and business owners from the US, Canada, or the EU, where political situations are mostly stable, might not be prepared to deal with that volatility.
Unfortunately, there is nothing one can do to minimize political risks when going global, aside from expanding to politically stable regions. One should also have a quick exit strategy prepared for the case of some big upheaval.
2. Extremely Expensive Money Transfers
Both sending and accepting payments from other countries can cost so much money that it will eat up all the revenue.
Bank money transfers and services like Western Union and PayPal all charge rather large fees. However, the majority of the losses comes from high foreign currency exchange rates.
As the total amount of losses counts in thousands, and only gets bigger on large transfers, finding a better to make and receive payments from abroad is a must for any business that wants to go global.
The solution is to use services that offer cheaper and better rates. Authorized money transfer providers like TransferWise, World First, Global Reach, and Currencies Direct charge small or no fees and offer currency exchange rates close to mid-market.
Moreover, they also ensure that any transfers are quick and secure. These services also offer hedging tools, like forward contracts, which can make big regular transfers even cheaper.
3. Different laws
The laws of every country are unique and the rights and obligations of foreign business owners who want to start dealing with the country’s people vary as well.
Not understanding the laws of both one’s own country and the one the business plans to expand to can not only cause the venture to fail but also result in heavy fines and even jail time.
Therefore, no one should even attempt entering another country’s market without consulting a local legal expert first. It’s essential to hire a local lawyer as they are best qualified to prevent the business owner from making any legal mistakes.
It’s also no less important to hire a lawyer who has experience in dealing with foreign businesses, preferably specializing in the same industry.
4. Cultural Differences
Cultural differences that can cause problems for SMEs trying to go global are rather diverse. They range from language differences to traditions and customs that might require the company to change some parts of its marketing strategy.
To overcome these numerous challenges business owners need to complete detailed research of their target location and incorporate all the important cultural differences in their business plans. Hiring highly qualified and experienced localization professionals is the best investment one can make in this situation.
The total globalization trend that is currently taking over the entire planet prompted the rapid development of transportation systems. Therefore, it’s possible to create an efficient logistics strategy for any locations.
However, international services are never cheap and there are issues like local regulations and bans to consider. To solve these problems one needs to research and plan carefully as well as find local experts and services to help. It might also be prudent to partner up with other small businesses in order to cut the costs.
Should Small and Medium Businesses Take Risks and Go Global?
There can be no doubt that going global is a necessity for many small and medium businesses today. They simply cannot remain competitive without capitalizing on the benefits they will be able to get by entering international markets.
However, SMEs are at an inherent disadvantage in going global as compared to large widespread corporations. To succeed, they will need help from specialized services and a good lawyer, as well as some very careful planning.
The gig economy of today offers a great number of opportunities for defying geographical borders in order to increase a company’s access to customers and resources, even when the budget is tight.
So, long as one remains thorough in their preparations to enter a new market and sticks to expanding to one country at a time, any company has a chance to succeed.
Author: Jane Koval