Look beyond PH, SMEs told

Survey by Economist unit says SMEs will derive up to half of revenues internationally by 2019

FILIPINO small and medium-sized enterprises should look beyond the country following a report saying SMEs that carve a niche in overseas markets have the greatest chance of survival.

According to a new survey by The Economist Intelligence Unit, the forecasting and advisory service within The Economist Group, SMEs in developed and developing countries will derive up to half of their revenues internationally by 2019.

While 40 percent of respondents currently earn nothing from international operations, a clear majority, at 72 percent, expect to derive between 11 percent and 50 percent of their revenues internationally in five years.

“International expansion is increas- ingly necessary for 21st century SMEs. Transformational change stemming from advancements in technology and communication is creating opportunity like never before-SMEs can either grab such opportunities, or give them away to a competitor,” the report said.

“Gone are the days when ambitious SMEs could sit back and simply own a slice of their home markets,” said. “Now they must think about the world at large, and engage a range of clients, suppliers, and contractors in multiple countries to survive.”

However, expanding internationally does not come easy, according to the paper, which is based on results of a survey of 480 SMEs spread across 12 countries and 20 industries.

SMEs polled pointed to unreliable infrastructure, prohibitive setup costs, political instability and the inaccessibility of local business networks as the biggest obstacles to international trade.

“They find it particularly difficult understanding local business environments which are different to their home market, as well as navigating through unreliable infrastructure and unstable political environments,” said Charles Ross, the editor of the report. “Still, they clearly see the potential with a majority of companies viewing international trade as vital to their survival.”

The study, entitled “Breaking Borders: From Canada to China, Barriers Overshadow Growth for Expanding SMEs,” showed that one of the ways forward-looking SMEs are creating openings in overseas markets is by tapping into established local networks and finding reliable distributors in order to limit the costs of expansion.

Rather than establish operations or joint ventures abroad, these SMEs |prefer to work with distributors, resellers and other companies with established networks to keep their costs down as they fight to gain traction in a new market.”

These enterprises that are actively seeking partnerships with foreign companies “tend to feel less equipped to incur excessive administrative costs, suggesting companies with strained budgets look to partners to share the burden,” it said.