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Trends Affecting Global Small Business Expansion

[ 0 ] Jun. 3, 2013 | SBO Editor

By Jane Navarria, Citibank, National Sales Director for Small Business Banking

With the changing political and economic world, innovation in technology, and the growth of consumerism overseas, small business owners need to consider their own overseas expansion to stay competitive. Many small businesses already know that the world is their marketplace.

According to the Office of the United States Trade Representative, small and medium sized enterprises account for the largest group of U.S. exporters. Opportunities beyond U.S. borders can lead to dramatic growth and savings for small businesses across the country.

Before taking the overseas expansion leap, consider some key trends, challenges and important steps to get you where you want to go.

Expanding consumerism

Partially thanks to the boundary-breaking benefits of technology, emerging markets aren’t just becoming consumer markets – they are consumer markets. Even traditional trading partners are seeking greater cross-border activity.

According to U.S. government statistics, 96 percent of consumers live outside the U.S., representing two-thirds of the world’s purchasing power. Some of this purchasing can be credited to technology… making cross-border business more efficient and providing mobile service to people who were never connected before.

International government involvement

Foreign trade agreements have opened up markets in Australia, Chile, Singapore, Jordan, Israel, Canada, Mexico and Central America. Increasingly, international governments are improving opportunities and courting foreign investment.

Several special organizations have offices in the United States, representing countries that want to help U.S. businesses expand into their backyard. Japan’s trade office, for example, will connect you to their foreign investor support systems and provide a variety of services which might include arranging a special trip or visit, covering costs and leading introductions. The organization may even work with the government to offer help with rent for the first six months. Korea also has similar offices.

The U.S. government is also increasing services to help small business owners participate in international trade. The Small Business Administration provides special programs to help you begin exporting or importing according to your growth plans. For example, the SBA has three specialized loan guaranty programs to provide export financing, credit to close a sale and funds for working capital. Two important SBA resources are the Trade Stats Express and the Market Research Library that provide the latest information prepared by U.S. embassies worldwide.

The Department of Commerce and Ewing Marion Kauffman Foundation provide advice, information and networking support. The benefits and trends in forming alliances take networking to new levels — more like matchmaking across borders than just having an insightful chat.

Growing business opportunities

International business opportunities are more vast and diverse than ever. It can be a challenge to decide exactly what you want to accomplish and where.

Between the U.S. and Mexico alone, we see $385 billion in trade every year. That’s a billion dollars a day. We are both importing and exporting. Remember the fears that the U.S. was quickly losing the ability to export? That is changing, initiated by global consumerism, and growing as U.S. business structures and systems gain efficiency.

Years ago, food and goods travelled in and out of our borders. But today services are a major factor in the global economy. The amount of money being made from cross-border services is evident as governments work diligently to figure out how to quantify and tax the sharing of intangible property, otherwise known as knowledge and service.

Challenges of international growth

It may be easy to decide your business must enter global markets to remain relevant in the coming years; however, it can be difficult to achieve success without very specific objectives. First, do your homework. Research markets, competitors, and cultural differences, and converse with existing customers, your financial team, and trusted small business colleagues. Define your objective – to sell goods, buy goods, conduct operations or expand your supply chain.

Each country, each type of transaction, each industry will have different regulations that you need to know about before you cut the ribbon on any international business activity.

There are guidelines of business ownership in each country, sometimes even including a requirement for a local partner. That sounds like a great idea – a local partner. But it can be very difficult to stumble upon the right partner – unless you know how.

Even banking has more challenges than domestic companies are used to addressing. In the U.S. you can open an account in minutes, and begin conducting business. In Korea, you must be there in person, with your passport – and expect to be fingerprinted – all before they will submit your request for an account which might take weeks. Some countries do not allow accounts in any currency but their own. Global banking networks can be a vital tool to your success. Once you have a network to help you through the system, many countries will welcome your expansion. Though it seems complex to work with Korea, for example, it is one of many countries that desperately want your business and want you to succeed.

Three steps to jumpstart your expansion

  • Step 1: Talk to your professional advisory team. A global team will give you access to international knowledge, coordination and networks. If your current team is domestic only, then you may need to bring other experts on board. Work with people who have global relationships and resources, and who can help wherever you go. Is your accountant well versed in international tax issues? Can your lawyer practice out of the country? Does your banker have a global network of experienced colleagues that can guide you through the sometimes complex foreign banking process?

· Step 2: Find and explore government support. As mentioned earlier, the SBA has many great programs to help small businesses expand or do business beyond U.S. borders. In addition, the Export-Import Bank of the United States (Ex-Im Bank) enables U.S. companies large and small to turn export opportunities into sales. Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). On average, 85 percent of their transactions directly benefit U.S. small businesses.

  • Step 3: Get educated. Knowledge is not just power – it’s a make or break situation. Whether you want to manufacture something in Mexico or to sell your U.S.-made product in China, you must… Know the market. Know the regs. Know yourself. Know your product. If you plan to sell things internationally, work with someone who brings strong local awareness. That’s often when the right partner or the right advisors start to pay off. Some mobile apps provide quick lessons on country culture and traditions you will need to understand for business expansion.

Consider the following example. A Bronx-based small business makes very high end baby clothes, but their clothes are not sold on U.S. soil. Their primary market is China. Wealthy Chinese buy extraordinary baby clothes for the same reason wealthy Americans buy designer items: exclusivity. Global and local partners know how to help them deliver the goods with the right packaging, right distribution and right business operations. That knowledge spells success.

Succeeding overseas

The bottom line for selling internationally is to know your niche. Then find out what the local market would like. Then deliver it in the way they want to buy it.

As your view of your business opens up to new countries, your objectives will change and may need to take a broader view of overseas expansion. Many companies that expand to one foreign country soon start seeking expansion in others.

The desire for small businesses to expand is everywhere. And that desire is motivated in part by the need for sales. According to a Citibank Small Business Pulse survey, maintaining and increasing sales is the most important short term business issue for 74% of small business owners.

For some customers, the desire also stems from the need to reinvent themselves in a highly competitive environment. In one of our small business surveys earlier this year, a majority of respondents said they had reinvented their business. This strategy is reinforced in the current competitive climate that 38 percent of respondents described as “extremely intense.”

For small business owners, reinvention isn’t anything new. Small business owners have a strong ability to adapt and know how to seize an opportunity when the climate is right.

And the time is right, right now. Many small business owners have already made the first steps internationally. Learn from your peers, share knowledge, challenges and opportunities to get the perspective you need to begin – or to improve – your own journey to your next country.

© 2013 Citigroup Inc. Citibank, N.A. Member FDIC. [Citibank with Arc Design is a registered service mark of Citigroup Inc.

About the author:

Jane Navarria is the Citibank Small Business Sales Strategy and Execution Leader. Previously, Jane worked in the Citi Commercial Business Group as the Business Banking Director for the Mid-Atlantic.  She has nearly 30 years of experience in retail and commercial banking.

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Category: Features