International trade has traditionally been seen as the domain of large and powerful corporations.
In the past, smaller firms tended to focus on local and domestic markets. Moreover, when protectionism was rampant, smaller firms tended to be insulated from international markets. Distances, unique cultural characteristics, politics, tariffs and regulations all combined to protect them from international business competition.
With the emergence of the global economy, little of this traditional business environment remains.
As distance has been overcome and barriers have been overturned, smaller firms are now exposed to the full force of global competition, even if they don’t venture beyond their country’s borders.
The managers of a small retail store on Main Street cannot afford to ignore the international economy once Walmart comes to town.
Like it or not, the global marketplace is coming to them: international corporations are now present in their markets and international economic trends are reshaping their environment.
A more open global marketplace can be a positive for SMEs
Challenges understood in the right way are also opportunities. The same factors that are exposing the local environment to competition are also opening up new possibilities elsewhere.
As barriers come down worldwide, smaller companies will find it easier to access new markets.
This, in turn, may make it easier for those firms to develop economies of scale and grow into larger operations.
Is the FITTskills program for you?
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There are a variety of options available to smaller firms to help them enter foreign markets. For example, the Internet makes it possible for even small enterprises to market internationally. A couple of obvious examples of this include eBay and Etsy, which enable even individual sellers to reach a global audience.
Export trading companies and export management companies can handle many or even all of the functions associated with selling internationally. Foreign agents or distributors are also available to deliver the goods to foreign markets.
Even the presence of foreign corporations on their home turf opens up opportunities. Small domestic firms can look to these international corporations for new partnerships and new business. They can access technology or capital from them, provide them with goods and services, or partner with them for new ventures at home and abroad.
You have to put in the work to reap the rewards of global business
The presence of opportunities, however, is not synonymous with the achievement of success.
There are many obstacles and difficulties that smaller firms must overcome if they’re to compete effectively in the new global environment.
Perhaps the most basic is simply developing a clear understanding of what is going on, how it will affect the firm and what options are available in response.
Beyond understanding, however, smaller firms should be under no illusions about the large commitment of time and resources required to research and penetrate foreign markets. They will need to develop a whole new set of skills and capabilities just to operate in an international context. And they will need a source of capital to sustain them while they prepare and position themselves as international traders.
Even if they restrict their activities to local partnering with international firms, they will still need to understand their partners and what motivates them. They will need to commit time and resources to the partnership. And they will have to remain ever vigilant if they are to protect and maintain the relationship.
The time to think globally is now!
It is important to take note of what has ceased being an option.
Whatever their line of business, smaller firms no longer have the option of ignoring international competition.
Those who try to walk away from today’s reality will quickly find themselves out of business.
Do you think there are still too many SMEs ignoring their international business competition and their own global potential? What’s preventing them from taking the next steps?