Small and medium-sized enterprises (SMEs) that work in international markets are twice as likely to succeed than those that only operate domestically, according to a survey by logistics company DHL Express and research firm IHS Global Insight. Moreover, the survey found that 26% of companies that were trading internationally significantly outperformed their home market.
In a survey of 410 SME directors from the G-7 countries and emerging economies of Brazil, Russia, India, China and Mexico, researchers found that SMEs have become increasingly globalised in their approach to business. SMEs that were founded in the past five years were more likely to have international business operations than older SMEs, despite having had less time to grow their businesses. Internationalised SMEs were found to be more bullish in their business strategy: the majority of SMEs that had outperformed their markets over the past three years indicated that they planned to increase the percentage of exports over in the next three years.
The key benefit of international expansion cited by the survey's respondents was access to new markets, which enabled SMEs to widen their technology base and know-how, as well as diversify their products and services.
The results are in line with trends in Africa, where SMEs have become the main drivers of growth. While no data is available on the number of SMEs operating in Africa, the study maintained that they make up more than 90% of formalised business within countries such as Ghana and South Africa.
“The results of this study are reflected in the outlook for SMEs in Africa,” Charles Brewer, managing director of DHL Express in sub-Saharan Africa, said in the report. “The possibilities opened up by new technologies, the internet and modern transportation means that there are many foreign trade opportunities out there for African businesses. With… a well-defined strategy, local SMEs can successfully expand into new markets… and use their size and nimbleness to their own advantage.”
However, inadequate business infrastructure and a paucity of information on foreign markets emerged as significant constraints faced by SMEs in their expansion plans. Although more SMEs are becoming globalised, the survey found that they have also worked harder to overcome infrastructure inefficiencies, especially when compared to larger companies, which have more resources. High customs duties as well as continued difficulties in establishing contacts with foreign partners, means that competitive SMEs need greater resources.
The study found that most of the top performing SMEs employed more than 50 people. “There are clearly still some hurdles that remain for small businesses with global aspirations,” said Ken Allen, CEO of DHL Express. “But we are delighted to see that more and more SMEs are looking at the fantastic opportunity that international trade represents.”