By Nagesh Devata
As most of the world has slowly eased out the pandemic over the last two years, the aftereffects had undoubtedly left the global economy severely disrupted, which unsurprisingly, impacted SMBs everywhere. These challenges have highlighted their vulnerability despite their importance to the global economy, and emphasised the need for support to ensure their stability and growth.
While many SMBs have achieved remarkable success through global expansion, venturing into new markets can be a daunting endeavour with unique risks and complexities.
The time is now for SMBs to look beyond their borders and expand into global markets in order to seize the most opportunities and ultimately catapult themselves for greater growth and to reach their full potential.
But how does one go about it?
In Asia Pacific (APAC), Europe and North America, 35% and 27% of SMBs respectively, view supply chain disruptions as the most significant disruptive factor in the next two years. For SMBs in the APAC region, the most significant barrier for entry into new markets is external events and disruptions, which account for 40% of their concerns. The limited financial and resource capabilities of most small and medium sized businesses also make it extremely challenging to establish a foothold in foreign markets.
APAC SMBs are more likely than others to have been hurt by global events in the past two years, particularly those in the Philippines and Vietnam. According to data from recent Oxford Economic research, the Philippines is less prepared than other nations to deal with global disruptions, especially geopolitical conflicts (42% unprepared versus 34% in APAC). Supply chain issues were also the top disruptor for SMBs in Vietnam. The region continues to struggle with building a reliable network of vendors, preventing them from breaking into new geographic markets and adding more challenges on top of the existing supply chain disruptions.
Language and cultural differences can also create communication barriers, impeding effective market understanding and hindering the establishment of strong relationships with local stakeholders. SMBs often lack the necessary expertise to navigate the complexities of international trade, overcome supply chain and logistical hurdles, foreign regulations, and bridging cultural and language gaps. The general consensus is, it’s not an easy feat for a small player.
All these differences pose challenges when navigating legal and regulatory frameworks, negotiating contracts, and complying with local customs.
Despite an increasing volume of international payments, SMBs also continue to encounter considerable challenges with cross-border transactions. The top three cited payment-related obstacles for global SMBs engaging in cross-border trade are financial exchange rates, transfer fees, and slow transaction times. Over 90% of surveyed SMBs send and receive payments to and from three or more countries. However, almost half cite payment-related challenges (foreign exchange rates, transfer fees, payment delays and confirmations) as a significant barrier to doing business globally.
These challenges often pose as massive barriers to smooth international trade operations.
Wading through challenges
The growing trend of international expansion showcases that the ambition to tap into global markets and seize new opportunities is very much present. It is safe to say that business of all sizes recognise that going global not only results in diversification, but also access to larger markets, technological advancements and a new unparalleled competitive advantage. So it goes without saying that by fostering the innovation of unique products and the gusto to enter new markets, companies will also open themselves to a world of opportunities and another level of higher revenue streams and long-term growth prospects.
The road to success in foreign territories is fraught with challenges that can deter even the most ambitious SMBs, therefore to flourish on the global stage, these enterprises businesses must embrace strategic solutions that enable them to navigate the complexities of international expansion.
Firstly, one of the cornerstones of a successful global expansion strategy is thorough market research and analysis. SMBs need to invest time and resources into understanding the unique demands, cultural nuances, and regulatory environments of their target markets. Tailoring products and services to align with local preferences will not only enhance competitiveness but also foster strong customer relationships. In a turbulent global economy, research or resources to act as guiding posts are more crucial than ever. Payoneer’s recent SMB Barometer Report for instance, revealed that SMBs are bucking conventional wisdom and proving the conversations claiming that globalisation is over are wrong. And yet, while they recognise that globalization has become integral to their success, most have not made it their main priority. Revealing that SMBs are potentially holding themselves back from their own growth ambitions by not preparing their business to weather the challenges and take advantage of cross-border expansion. Findings like these backed with tangible data points act as a guide for SMBs around the world to build a more reliable and connected cross-border economy together.
Secondly, collaboration with local experts and consultants is equally vital for SMBs eyeing international waters. These seasoned professionals possess invaluable insights into the intricacies of foreign markets, helping SMBs overcome language barriers, legal complexities, bureaucratic red tape, and cost savings. Strategic partnerships with reputable local businesses can further cement the foundation for success, enabling SMBs to tap into established networks and customer bases. Customer-centricity is pivotal aspect of triumphing on the global stage. Offering culturally sensitive customer support in multiple languages is extremely beneficial in fostering loyalty and brand advocacy. Listening to customer feedback, adapting offerings based on preferences, and delivering top-notch service will differentiate SMBs from competitors.
Lastly, in today’s interconnected world, technology plays a pivotal role in bridging geographical divides. Embracing communication tools and project management platforms will help facilitate seamless coordination between teams across different regions. It will also drive the growth of e-commerce platforms and enable businesses to reach a global customer base. The adoption of Industry 4.0 technologies namely automation, IoT, and AI, has enhanced efficiency and productivity in numerous sectors, manufacturing for one. Digital platforms have optimised their supply chain management, leading to faster, more cost-effective transportation and logistics operations. Cloud-based systems amongst other technological advancements have enabled real-time data sharing and empower SMBs to stay agile and responsive in dynamic markets.
While venturing into new markets requires capital, securing adequate financing is achievable through various avenues such as loans, grants, or investor partnerships. SMBs must meticulously plan their financial resources to weather the initial setup costs and sustain operations in the nascent stages of global expansion.
Technological advancements will drive the growth of e-commerce platforms and enable businesses to reach a global customer base. The adoption of Industry 4.0 technologies, such as automation, IoT, and AI, has enhanced efficiency and productivity in the manufacturing sector. Digital platforms have optimized supply chain management, leading to faster, more cost-effective transportation and logistics operations.
New frontiers of success for SMBs
Overall, the digitization of various industries in Asia has opened up new opportunities for growth and innovation, making it an essential driver for the success of SMBs expanding internationally.
While global expansion is undoubtedly a challenging endeavour for businesses of all sizes, much less SMBs, and requires a substantial amount of capital, it’s important to understand that it is possible to overcome these obstacles through varies avenues such as loans, grants, investor partnerships, et cetera. But more importantly, they must first educate themselves with the right market research, local expertise, technological prowess, and customer-centricity as their guiding stars, to confidently navigate the globe and unlock new frontiers of success.
Remember, the world is their oyster, waiting to be explored and conquered.
** To further understand the ambitions, and challenges, of entrepreneurs and business owners in SMB’s. Payoneer surveyed 3,575 SMBs across 15 countries in their SMB Ambitions Barometer. With the right tools and resources, SMBs can mitigate these risks and successfully expand into new markets.
Nagesh Devata is Senior Vice President, APAC at Payoneer