Steve Box, International CEO at Bibby Financial Services, discusses overseas opportunities for SMEs and how technology, data availability and finance are all playing a role in helping businesses to achieve growth in new markets.
Over the past 35 years, import and export activity has been on an upward path with global trade quadrupling between 1980 and 2011 according to the WTO. Regional free trade agreements have made it more straightforward for businesses to expand overseas. However, as more small and medium sized businesses consider international expansion as a means of achieving growth, the act of “putting your money where your mouth is” to gain access to new opportunities can be daunting.
There’s no doubt that the globalisation trend will continue, despite the ups and downs of the global economy, but it’s interesting to follow the relationship between international expansion and a business’s success. The Institute for International Economics, for example, found that US businesses that export are not only more likely to grow, but are almost 8.5 per cent less likely to go out of business than non-exporting companies.
Research we conducted across different countries at the end of 2015, found French SMEs ahead of the pack for planned investment in cross-border or overseas trade (23%), with Poland (20%), the USA (19%), and the UK (17.5%), following closely behind. Additionally, we know from our own clients that those using receivables finance are looking to international markets to increase sales. This is particularly the case in Ireland – where exports account for almost half of total economic output – and Poland where a weak Polish Zloty is helping to accelerate export activity.
What’s also clear is that, regardless of global external factors like the outcome of the upcoming UK EU Referendum or exchange rate fluctuations, businesses often see their nearest neighbours as the most crucial platforms for future trade and expansion. There are, however, opportunities further afield that developments in both technology and business finance are helping to facilitate.
International trade enablers
New technology is allowing international trade to flourish, helping to level the playing field for smaller companies by building connections with businesses speaking different languages, operating in different countries and with different customs. Companies like GT Nexus are enabling businesses to access and use information from the outside world to identify opportunities and understand the risks of entering new markets, or improve processes to gain competitive advantage.
However, while many businesses are seizing opportunities presented by data-driven technology and enhanced transactional capability, others cite a fear of not being paid, inexperience in dealing with foreign currency and cultural nuances as the top constraints holding them back from looking further afield. But there is support available from a ranges of sources – particularly when it comes to financing international trade.
Operating in multiple countries demands a specialist and adaptable approach to finance to help customers connect to new markets and provide liquidity and confidence to develop internationally – something global funders like Bibby are well placed to offer.
One growing international business we support is aircraft exterior finishing company MAAS Aviation, which operates across Ireland, Germany and the Netherlands. Bibby currently provides recourse factoring to the Group in each of these markets. Built on strong foundations, the group has recently landed a contract with Airbus as its aircraft painting partner for its US Final Assembly Line to be located in Mobile, Alabama.
Businesses such as MAAS have positioned themselves for growth by taking advantage of opportunities overseas and partnering with a funder provider that has an international footprint.
While barriers to exporting are unlikely to disappear entirely, advancements in both technology and finance are helping companies to develop new business and to leverage international trade to their advantage.