Examine the article and provide explanation for the following question: What are some of the barriers
facing small businesses as they go international?
Your potential customer base is getting is expanding. But if you look too close to home, you may not see it. That’s because eighty percent of your customers and prospects aren’t in your traditional domestic markets. They’re part of the new global community of internationally savvy consumers and businesses. And they’re creating growth opportunities for companies like yours.
Foreign commerce isn’t the exclusive domain of large muinationals anymore. Now, middle-market and even small businesses are finding their place on the global stage.
Emerging markets aren’t just sharing in the growth of the new global economy–in many cases, they’re leading it. A report published by the World Bank in 2013 found that between 1998 and 2008, income levels at least doubled for 150 million people in China, 40 million in Indonesia, and 35 million in India.
The growth of the new middle class doesn’t stop there – it extends across Asia, Latin America, and even some countries in Africa. Each of those regions is seeing a surge in affluence and discretionary income among brand-conscious consumers who are eagerly seeking quality U.S. goods and services.
As your competition expands its global footprint, your company can’t afford not to tap into the opportunities emerging from this trend. Our studies show many advantages to expanding overseas, says Derrick Ragland, national head of Middle Market Commercial Banking at HSBC. According to our research, companies engaged in foreign commerce achieve faster revenue growth than those that are limited to domestic operations. What’s more, their margins are better over the long term. By diversifying your revenue streams, it positions you to pursue growth in expanding markets and mitigate the impact of contracting markets.
Think globally–build relationships locally
Finding the right market for your company will require research, a clear assessment of risks and rewards, and the right partner–one with the local knowledge, experience, and contacts necessary to expand your company’s sales, reputation, and market share across borders.
There are risks that you need to weigh before making that jump, Ragland says. But all of them can be managed. The key is tapping into a network that can provide you with the local knowledge you need to move ahead without making financial, operational, or cuural missteps. For example, you need to become informed about local laws and regulations, taxation, currency and exchange rate fluctuations, permitting, and insurance. On the cuural side, you need to learn to assimilate with local business customs, from contract negotiation style to how you shake hands, make eye contact, or smile in business meetings.
As a starting point, he recommends reviewing the in-depth country guides, case studies, trade forecast reports and tools, and treasury management profiles at the HSBC Global Connections website. This preliminary market research can provide a framework for your initial discussions about cross-border expansion.
HSBC’s relationship managers can help you take the next step toward your company’s globalization. Ragland recalls one client who had targeted a particular company as a prospective trading partner in Germany. We reached out to our colleague in Germany, who told me that we have done business with the target company for a long time and that he knew them very well, he says. Our network facilitated a conversation that could have taken longer to initiate or might never have happened. These are the types of relationships that we try to facilitate by being on both sides and dealing with international companies.
In addition to those one-on-one’ connections, the bank also sponsors international exchanges that allow business owners to visit their target markets, learn about them on the ground, and visit local companies. With HSBC relationship managers as local guides, companies can gain an understanding of cuural norms get insights into legal and regulatory requirements, and assess the local competitive landscape in advance of planning their market entry.
When you’re ready to design your global expansion strategy, count on HSBC’s guidance, resources, and local presence to help you conquer the complexities of international expansion and achieve your optimal competitive advantage. With 8,000 experts in 63 countries, our relationship management team has the expertise necessary to position your team for cross-border success To learn more about how HSBC can help take your business further, visit www.us.hsbc.com/business.