It’s a scenario that will be familiar to so many entrepreneurs: you start out selling your product or service locally then expand throughout your region and finally you go national, serving customers throughout the country. For a growing number of businesses, the next step is to trade overseas.
“Scotland is a small country, with around 5.3 million people, and so international trade is important not just for individual companies but also for the nation as a whole,” explains Neil Francis, international trade and investment operations director at Scottish Enterprise. “From a company’s point-of-view, trading internationally gives you access to larger and faster-growing markets that can complement the domestic marketplace.
“From the nation’s point-of-view, internationalisation is important in order to continue with sustainable economic growth. We know that companies that trade internationally tend to be more productive, innovative and competitive and this in turn helps with Scotland’s overall productivity and growth.”
The benefits of exporting aren’t just about growing your sales either. “There’s well-established research that shows there’s a strong link between being innovative and trading internationally,” Francis points out. “If you trade internationally then there’s often a requirement for ‘localisation’ of your product. You need to understand the specific requirements of the marketplace such as customer preferences and local regulation and you need to ensure your product is customised to meet those needs.
“That might be around packaging, the performance of your product or branding. For food and drink products, there might be the requirement to slightly alter the taste or portion size to meet the exact requirement of a particular market.”
Scotland’s exports are already growing, up by £1.9 billion in 2013 to a record £27.9bn. Yet only about 100 companies account for around 60% of those exports and so more businesses are being encouraged to trade internationally.
“We’ve established a model that represents the international journey for companies – ACE,” says Francis. “A is all around ambition and awareness, C is around capacity and capability, and E is around market entry.
“One of the most important things we have to do in Scotland – and it’s not just a job for Scottish Enterprise or Highlands and Islands Enterprise but across the range of partners from Business Gateway and Chambers of Commerce through to industry groups like Scotland Food & Drink – is to raise the ambition to trade internationally and the awareness of the benefits. Companies tend to overestimate the challenges and underestimate the benefits.
“Obviously Scotland’s enterprise agencies have a big role to play, but we need everyone in Scotland to play their part in helping to raise the ambition and awareness of becoming increasingly internationally competitive. The Scottish Export Awards are a significant opportunity to do this and allowing companies to see what their peers have achieved already is hugely effective.”
Francis adds: “There are specific skills that are required to trade internationally and it takes time, so companies need to build their capability and capacity. Companies need to have a clear and coherent strategy that can drive activities needed to become successful in the international marketplace.
It’s all about going to market – selecting your market, determining how best to enter that market and then going to that market, which is incredibly important, getting companies out to the market so they can see the dynamics of that market for themselves. They can meet potential customers or potential partners, like agents or distributors.”
Peer-to-peer learning is very powerful so hearing stories of people who have been through the process and are successful is an important way of supporting and encouraging businesses to internationalise.
“Having Scots overseas who can open doors is very important,” says Francis. We have the GlobalScot network, we have SDI staff in 29 international offices, we have the Saltire Fellowship, we have alumni from our universities, and we work very closely with UK Trade & Investment, which is in more than 100 markets worldwide. Being able to leverage all of these resources to support our companies is absolutely critical.” Francis also highlights the need to continue to support those companies that are already exporting, both through helping them to enter new markets and increase the range of products that they’re selling overseas.
The food and drink sector has been hailed as one of the nation’s biggest success stories, with exports already reaching £5.1bn and industry body Scotland Food & Drink setting an ambitious target of growing that figure to £7.1bn in 2017. Exporting is about more than just bottles of whisky or tins of shortbread though. Francis points to other sectors that are also enjoying success, including chemicals companies based around Grangemouth, financial services firms, and engineering businesses, both in the oil and gas sector and beyond. He says that the twin messages about provenance and premiumisation apply not just to food and drink producers, but also to textile companies, tourism operators and even universities and other educational institutions.
Francis also highlights the fact that a sector doesn’t have to be large to enjoy exports success. “Our textiles industry is small but it is highly internationalised,” he says. “A lot of its products are sold abroad.”
While products such as beef, salmon and Harris tweeds clearly lend themselves to exporting, Francis also thinks that Scotland needs to have a change of mind-set when it comes to trading internationally. “We need to think differently around tourism – most tourism businesses wouldn’t count themselves as international businesses but when you service international visitors, you are an international business because they are bringing with them spending power from out-with Scotland,” he points out.
The importance of bringing tourists to Scotland – whether as leisure travellers or for business meetings and conferences – also ties in with the role that internationalisation plays in attracting foreign direct investment (FDI).
“When it comes to access to markets, we’re not really selling Scotland on the size of the Scottish marketplace; instead, we’re telling companies that, by coming to Scotland, they will have access to the largest single market in the world – the European Union,” says Francis. “A large number of our foreign direct investors export, so they’re a very important piece of that overall exporting picture.”