With much of the world seemingly under some form of lockdown, it might come as a surprise to see overseas expansion becoming an increasingly prominent part of the growth strategies for SMEs.
Indeed, survival is the private sector’s watchword at present. The key question for many CEOs is how can their company brace itself to ride out the coronavirus storm?
However, such an approach could in fact be in the undoing of many businesses. This is particularly true among smaller firms and startups, whose often limited cash reserves mean that inaction could be fatal.
One World Express recently commissioned a piece of research among more than 900 UK businesses which underlined this point. There were many interesting findings to come from the study; ones that all decision-makers ought to take heed of.
What are the factors affecting SMEs growth?
COVID-19 – or more specifically, the social distancing measures it has prompted – has been hugely damaging to many businesses. In the worst cases, consumer-facing companies have been forced to close their premises. But the knock-on effect across supply chains has been sizeable, with countless other firms left without customers to sell to.
One World Express’ aforementioned research found that as of the start of May 2020, 42% of British businesses had temporarily shut since the lockdown began.
Moreover, almost half (45%) of decision-makers said the pandemic had made them realise that their company is too reliant on one particular market for its revenue.
Businesses cannot, of course, be blamed for this. It would be unfair and wholly irresponsible to criticise a company for only selling its particular product or service to one specific market.
It is completely understandable that a butcher would choose to focus on bulk selling to restaurants; that an agency would specialise in offering out-of-home advertising; that a broadcaster’s audience would rely upon showing live sport
Yet in the current climate, demand for these services – or the businesses’ ability to deliver them – has been damaged immeasurably; in many instances, the lockdown has severed entire revenue models.
The result is that overseas expansion is starting to play a greater role within the growth strategies for SMEs.
Why are UK businesses expanding overseas?
Businesses cannot be blamed for relying on a single market for its customer or client base. However, if it cannot sell to those same consumers or businesses, it must take action.
Positively, One World Express’ research showed that many companies are doing just that.
Over two fifths (43%) of UK businesses have made changes to their products or services since the lockdown began to ensure they are better suited to the current climate. Furthermore, just shy of a quarter (24%) have pivoted their revenue model to sell to a different demographic of customers.
Going further still, the majority (57%) of businesses are looking to expand into new territories as a means of limiting the impact of the coronavirus pandemic. This is a significant figure, particularly given just 42% of UK companies currently provide their goods or services internationally at present.
To me, these statistics encapsulate the two most viable options available to businesses requiring a way of protecting or enhancing their cashflow: pivot the proposition to cater to a different demographic or expand the reach of the business to cater to a large number of prospective customers.
Positively, a great many businesses across the UK – small and large alike – are open to the possibilities afforded by both options. And clearly, this positive mindset will help shape the growth strategies for SMEs in the weeks ahead.
How small businesses can find new markets to target
We find ourselves, then, in the midst of an interesting juxtaposition. On the one hand, many small businesses are evidently eager to reach new international markets; it is being considered as part of the growth strategies for SMEs across the UK.
However, at the same time, data from the World Trade Organization (WTO) shows that global trade is suffering at the hands of coronavirus – the closure of manufacturing and construction sites (and the subsequent impact on supply chains), as well as a dip in automotive sales, have contributed notably to a decline in exports.
There have been some suggestions that COVID-19 is placing globalisation under threat; that the trend of the past two decades towards goods and services being consumed cross-border will be curtailed by more nationalistic sentiments. I find this hard to believe.
The immediate challenges posed by the pandemic will undoubtedly spawn more lasting changes, most notably in companies’ working practices. Yet it is much too soon to suggest that globalisation is fundamentally at risk; the WTO’s findings are much more likely a short-term response to economic slowdowns across major economies.
Small businesses must assess the most viable markets to target – in doing so they must balance the cost and complexity of exporting to a certain place against the size of the potential market in that region.
Remaining alert to new opportunities
At very least, when looking at the growth strategies for SMEs in the midst of the pandemic, it is vital that British businesses remain alert to the opportunities that are available to them right now.
As we have seen, firms that are overly reliant on small, singular markets are leaving themselves dangerously exposed as lockdown measures look set to be extended for much of 2020. Indeed, any problems businesses are currently facing in delivering to their usual customer base are likely to continue for some time yet.
One World Express’ study shows that many business leaders have already accepted that change might be necessary. In the months ahead, we will discover which businesses are able to carve out successful strategies to reach new customers – and in the years ahead, we may well see these new strategies replace those of pre-coronavirus.
Atul Bhakta is the CEO of One World Express. Founded in 1998, One Express is a global logistics, e-commerce and IT solutions provider. The London-based company provides fulfilment, warehousing and final-mile delivery solutions for companies large and small around the world.