Size doesn’t matter in the global marketplace

Size doesn’t matter in the global marketplace

More than nine out of ten small businesses in Yorkshire don’t even bother looking overseas for trade. They are missing a trick on two levels, says Maggie Choo.

With many businesses still feeling the impact of the recession it’s no surprise that the outlook for 2011 is less than rosy. Without a change in economic conditions, many small and medium businesses – particularly those operating with small teams and limited resources – could cease trading altogether. More than ever, reducing operating costs and driving revenues are essential to survival.

It will be the savvy businesses which are willing to adapt their approach that will come out on top. One obvious way of finding new revenues is to diversify your product or service offering and grow your customer base. To this end, all businesses should be considering how they can expand beyond the UK to exploit opportunities in overseas markets. A recent survey my organisation commissioned on 1,400 small and medium sized businesses across the UK found that 92% of businesses in Yorkshire fail to trade with countries outside the UK, with one in five considering themselves too small to do so.

This common misconception amongst small businesses is alarming.

Language barriers and trust issues were the most widely perceived inhibitors to overseas trade, yet thousands of UK SMEs have already taken the leap and regularly communicate and do business with overseas partners through a mixture of instant messaging and email. Many also exchange photographs and video to illustrate their requirements, especially when more complex dialogue is required.

The global adoption of online business tools has enabled all businesses, however small, to reach out, connect and trade easily and securely online. Businesses yet to embark on international trade often overestimate the difficulties and underestimate the payback. Largely thanks to the internet, opportunities have never been more abundant or varied.

Small and medium sized businesses can now find all kinds of goods and supplies that are simply beyond the reach of those who largely operate offline.

By searching online and using trading platforms like Alibaba.com, businesses can quickly and easily connect with suppliers and manufacturers across the globe, significantly reducing their sourcing costs.

Equally, for businesses looking to export, these platforms offer free access to a world of buyers who are just a couple of clicks away from finding you.

Currently the UK’s import growth still outweighs its exports, but as the recovery in UK export markets strengthens and sterling’s past depreciation boosts UK export volumes, the UK’s net trade is forecast to contribute positively to the growth of our economy.

The EU currently accounts for around 55% of UK visible exports and 40% of service exports.

Whilst businesses must continue to focus on trading with key European countries such as Germany, the current problems with some eurozone economies continue to present major risks to UK businesses.

As a result, many forward-thinking businesses are embracing the fast growing BRIC economies of Brazil, Russia, India and China.

They currently have a much greater buying power. What’s more, countries in the Far East are experiencing rapid growth, so British goods in virtually every sector are in demand thanks to their high quality and sophistication.

UK businesses must capitalise on this and be more ambitious in developing new markets.

The Government has promised to support small and medium business by maintaining the global network, re-focusing resources and working closely with UK Trade and Investment (UKTI) to align the UK with key international trade partners. This is essential if we are to win exports and create jobs for the British public and businesses need to take advantage of incentives on offer.

Companies that are embracing the global marketplace must be encouraged and held up as examples to other small and medium businesses in the UK. One such company is Portfolio Display, based in Elland, West Yorkshire.

Specialists in the design and manufacture of display for the promotional industry, they wanted to take their business to the next level and increase manufacturing output and develop exports.

They developed a plan that has seen training implemented throughout all departments of the company and enlisted the Manufacturing Advisory Service (MAS) to implement an improvement project that has helped them develop their capacity and productivity.

Today they are working with UKTI to explore new markets abroad and through its Passport to Export programme they’ve selected which overseas markets they want to target and developed a long-term export strategy.

The organisation is already making sales in Europe and America and exports look to account for an increasingly large part of their turnover in future.

However, opportunities to drive additional revenue don’t stop with exports.

Everyone can benefit from finding lower priced, better quality products and services and keeping costs down is a simple and effective way of driving up the bottom line. Integral to getting the most competitive deal is sourcing the right supplier, but this in itself can be an expensive process. Small and medium businesses spend billions of pounds each year doing just that. In fact Department for Business, Innovation and Skills figures released in 2009 suggest that an astonishing 89% of small businesses in Yorkshire spend up to £1,000 every time they review a supplier.

Nearly a third of businesses conduct this review quarterly, thus incurring a cost of up to £4,000 per partner per year.

What’s more, despite 38% of Yorkshire businesses believing that a regular review of suppliers is vital to remaining competitive, a quarter rely solely on companies they have used before.

This lack of proactivity will have a direct impact on the business.

About 30% of businesses take up to a month to find a supplier that they are happy with – valuable time that could be spent driving sales, especially for organisations looking to bring new products to market within a critical time frame.

As an example, Huddersfield-based Wellhouse Leisure, converters of compact motor homes, have proved that a proactive approach pays dividends.

To combat a reduction in income when the recession hit in 2009 they decided to diversify their offering to include bodywork and service repairs on any motor vehicle as well as turning unsold stock into a small hire fleet.

With market concerns growing over fuel prices and environmental issues, they also opted to offer a conversion on all petrol-driven vehicles to a less costly and greener liquified petroleum gas (LPG).

Aware that the problems in the vehicle industry were not confined to the UK, and that many European manufacturers in their sector had unsold stock on their forecourts, they struck a deal with a large German company to take 41 brand new motorhomes from a cancelled order. To date, a third of these have been sold, even though they are outside their usual market, and today the company has a much healthier cash flow across the business. Small businesses need not be cut off from the global marketplace or feel that international business is only for big companies – trading abroad can be the path to greater security for your business as well as a channel for growth and success.

For many, the rewards reaped from a smart international trading strategy can transform their fortunes forever.

Maggie Choo is EMEA director at trading platform alibaba.com