Borderless busi­ness

Finweek English Edition - - INSIGHT: INTERNATIONAL - Jessica Hub­bard jes­sicah@fin­week.co.za

De­spite the in­creas­ingly dif­fi­cult con­di­tions that face small- and medium- sized en­ter­prises (SMEs) in South Africa, it ap­pears that their am­bi­tions re­main in­tact – and are per­haps big­ger than ever. Ac­cord­ing to the find­ings of a re­cent global SME study, which sur­veyed 2 100 ex­ec­u­tives across 21 coun­tries, South African SMEs now have global am­bi­tions – look­ing be­yond the coun­try’s bor­ders for the al­limpor­tant growth. Com­mis­sioned by soft­ware firm SAP a nd con­ducted i n con­junc­tion with Ox­ford Economics, the study ( SMEs: Equipped to Com­pete) re­vealed that al­most one-third of South African SMEs will gen­er­ate 21%-40% of their rev­enue glob­ally within the next three years, com­pared with 22% to­day. Over the same pe­riod, the num­ber of lo­cal SMEs op­er­at­ing in six or more coun­tries will rise from 16% to 39%.

“There has been a sig­nif­i­cant change in at­ti­tude among lo­cal SMEs, which are now ac­tively look­ing out­side of the countr y’s bor­ders for new op­por­tu­ni­ties,” ex­plains Des­mond Nair, SAP Africa’s Head of Ecosys­tem and Chan­nels.

Nair high­lighted that in some re­spects, lo­cal SMEs are mov­ing in the op­po­site di­rec­tion to their coun­ter­parts in other mar­kets, which seem to be turn­ing their fo­cus in­wards. While 45% of South African SMEs op­er­ate solely within the coun­try to­day, this will drop to 27% in three years. In­ter­est­ingly, the per­cent­age of rev­enues that SMEs gen­er­ate out­side of their home coun­try is pro­jected to de­crease by 30% at a global level.

En­ter­ing new mar­kets and en­gag­ing in in­ter­na­tional trade bodes well for SMEs, as a study con­ducted ear­lier this year by DHL Ex­press and IHS Global ( In­ter­na­tional Com­pet­i­tive­ness of SMEs) il­lus­trated. The study, which sur­veyed 410 SME di­rec­tors in G7 coun­tries (Canada, France, Ger­many, Italy, Ja­pan, UK and US) as well as BRIC economies, showed that SMEs en­gaged in in­ter­na­tional mar­kets are twice as likely to be suc­cess­ful as those that only op­er­ate do­mes­ti­cally. In ad­di­tion, among the SMEs sur­veyed, 26% of the com­pa­nies that were trad­ing in­ter­na­tion­ally sig­nif­i­cantly out­per­formed their mar­ket, in con­trast to only 13% of those with op­er­a­tions only in their home coun­try.

An­other sig­nif­i­cant find­ing was that 24% of SMEs in emerg­ing coun­tries are ‘ born global’ (trad­ing in­ter­na­tion­ally within the first five years), com­pared to 13% in de­vel­oped coun­tries.

“This in­di­cates that de­vel­oped-world SMEs are lag­ging be­hind emerg­ing econ- omy SMEs in terms of in­ter­na­tion­al­i­sa­tion of their busi­nesses,” noted Hen­nie Hey­mans, MD of DHL Ex­press’s South African busi­ness di­vi­sion.

One of the key fac­tors driv­ing the push for global ex­pan­sion amongst lo­cal SMEs, ac­cord­ing to SAP, is the adop­tion of new tech­nolo­gies – which are en­abling them to com­pete with their big­ger ri­vals and reach new mar­kets that were pre­vi­ously in­ac­ces­si­ble.

“I term it ‘ borderless’ – com­pa­nies have to start think­ing in a borderless fash­ion,” says SAP’s Nair. “The In­ter­net makes this pos­si­ble and SMEs are real­is­ing that in or­der to be­come com­pet­i­tive with larger or­gan­i­sa­tions – and in or­der to be more in­no­va­tive – they need tech­nol­ogy… it is a must.”

En­cour­ag­ingly, the sur­vey found that lo­cal SMEs are be­gin­ning to adopt and lever­age new tech­nolo­gies: 73% of SMEs re­ported that they view tech­nol­ogy as the heart of their busi­ness trans­for­ma­tion ef­forts and are will­ing to in­vest in new so­lu­tions. In terms of spend­ing, so­cial me­dia will re­ceive the great­est fo­cus among lo­cal SMEs, fol­lowed by busi­ness man­age­ment soft­ware and busi­ness an­a­lyt­ics.

“Glob­al­i­sa­tion, trans­for­ma­tion, and tech­nol­ogy will be the hall­marks of suc­cess­ful com­pa­nies go­ing for­ward,” Nair adds. “With a com­mit­ment to en­ter new mar­kets and will­ing­ness to adopt new tech­nol­ogy, SMEs have never been bet­ter po­si­tioned to win.”

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