Go Global. Emma Jones
in and to trade with.
– David Cameron, during a visit to the US, July 2010
Fine words from politicians and we welcome seeing them put into practice!
6. Broadened horizons
Doing business overseas is not necessarily all about business. Through trade connections you meet people with whom you may not ordinarily have come across and travel to places you may not have thought to visit.
Ensure you choose a territory that is right for your offer but, importantly, one that you like. Hopefully, you will be spending a lot of time there.
– Christine Losecaat, managing director of Little Dipper and chair of UK China Partners
In the process of growing your business, there is a chance to learn new languages, discover lost cultures and eat surprising delicacies. Consider business as the magic carpet that will carry you to adventures in far-off countries, steeped in commercial and cultural opportunity.
Crisis of confidence
The reasons laid out for going global are good ones, and yet despite growing markets, ease of access, political will and the opportunity to broaden horizons, out of a base of 4.5 million-plus small businesses in the UK, only 75,000 are currently exporting.
I believe the figure is low on account of a crisis of confidence.
This is reflected in many surveys that show a high number of business owners who want to export but are deterred by perceived business barriers.
The HSBC ‘Going International’ report claims millions of small businesses are unduly sceptical about the importance of international trade. Four-in-ten businesses contemplating international trade see it as potentially crucial to their overall survival, but this number rises to nearly nine-in-ten for those with experience of already trading overseas. Companies that have the confidence to sell abroad are reaping the rewards, with four-in-five saying they consider it to be a profitable venture. 78% of these businesses having grown as a direct consequence.
There’s also what Noel Quin, HSBC’s UK head of commercial banking, calls a “psychological barrier”:
“The reality of setting up overseas trading deals was perceived as more costly and problematic by potential exporters than was actually the experience of those that already exported. The benefits [of exporting] far outweigh the costs when you start to do it.”
Another high street bank, Lloyds TSB Commercial, commissioned similar research and came out with similar results. ‘British Businesses Missing a Trick in Export Markets’ ran the headline, with the facts as follows:
62% of SME [small to medium-sized enterprise] exporters have experienced growth in foreign markets in the last 12 months.
39% of businesses not currently exporting say fearing a lack of demand is the main reason for not doing so.
21% cite worries about late payments as a reason for not exporting.
“By far the biggest concern amongst small businesses questioned was that there would not be demand for their product or service overseas. And yet, amongst firms that are exporting, overseas trade is contributing to a growing proportion of company turnover with almost nine out of ten believing exports as a percentage of turnover will increase this year, or at least stay at current levels.”
This crisis of confidence has been sufficiently serious for trade Ministers and representatives to step up to the stage and voice concern.
UK companies overestimate the barriers and underestimate the benefits of exporting. I’ve been disappointed by the fact that although we are a nation of small and medium-sized businesses, we are not yet a nation of exporters.
– Lord Davies, former minister of international trade
Business needs to rediscover the mercantile spirit that has driven our wealth in the past and now drives other, younger industrial economies.
– David Frost, director general, British Chambers of Commerce
Future economic prosperity will only come from UK companies exploiting opportunities overseas.
– Andrew Cahn, chief executive, UK Trade and Investment
The only way the UK will recover quickly and sustainably from the recession is by trading her way out. That calls for our continued, indeed our increased, commitment to the export of goods and services.
– Digby Jones, former international trade minister
There is a common thread to these protestations. It is a call to action for companies to overcome fear and take our products and services to the world.
But before we look at how to do that, let’s examine what’s holding us back.
Based on the evidence, I have come up with a list of key deterrents or perceived barriers and divided them into two key categories:
1 Perceptual & psychological
2 Profitable & practical
1. Perceptual & psychological
The UK has a stellar record when it comes to trade, being the world’s second largest exporter of commercial services (data from the World Trade Organiastion) and the eighth largest exporter of merchandise (from the OECD Factbook 2008). It has one of the highest shares of services as an exporter across the globe. But my question to you is this: when you think of the word ‘export’ or the concept of ‘going global’, what comes to mind?
I will hazard a guess it is:
big business and large investment
cargo and freight
manufacturing and machinery
capital and infrastructure.
International trade carries with it the perception of being a heavy-duty task taken on by big companies with deep pockets. This is even reflected in the way we measure exports and the imagery that goes with it.
The international trade page on the Business Link website (www.businesslink.gov.uk) shows a large ship carrying big boxes, ploughing its way through choppy seas. The key export indicator as measured by the Office for National Statistics is ‘The Monthly Review of External Trade Statistics’ which notes oil, manufacturing, chemicals, road vehicles and power-generating equipment as top exports from the UK. There is little reference to the volume of smaller items sold via the web and packages shipped via the local Post Office.
Despite the fact this perception no longer matches reality, small business owners are put off, with exporting made to look an intensive and expensive affair.
“While exporting may have traditionally been seen as only suitable to companies in industries such as manufacturing, firms operating in other sectors have the opportunity to explore new markets and assess international demand for their products.”
– Donald Kerr, commercial banking director, Bank of Scotland
Many business owners speak of ‘fear of the unknown’ when it comes to doing business with people they don’t know in countries they’ve never visited and in languages of which they have little knowledge.
Certainly, international trade forces us out of our comfort zone. But what it does do is introduce us to new territories and ideally, lucrative ones!
Despite an insatiable consumer appetite in China and India, companies dipping their toes into international waters are opting to trade much closer to home.
– HSBC ‘Going International’ report