Small business exporting

Australia's exporting community is dominated by SMEs. Research from the Australian Bureau of Statistics (2007) reveals that almost 90 percent of Australian exporters are either small or medium sized enterprises. In addition, research conducted by Austrade and Sensis shows that around 15 percent of Australian SMEs now export their products and services around the globe.

But what are the benefits? Do exporters grow more quickly or make more money? Research shows that on average exporting does help the bottom line. SME exporters are more likely to have an aggressive expansion strategy than other SMEs - they are also more confident than non-exporters and are more bullish on profits, wages and employment.

There are a range of reasons why SMEs decide to enter the exporting market. For example, the foreign market may be a more profitable avenue or it may have a higher level of demand for a particular product or service. Conversely, the domestic market may be presenting challenges such as low profitability, high levels of competition and product stagnation, which could be overcome by exporting that product into other markets.

Exporting can provide a range of benefits for SMEs, including:

  • increased sales achieved as a result of access to new markets
  • decreased production costs and increased productivity, resulting from the economies of scale and better use of resources that can be achieved due to greater volume
  • diversion of risk resulting from an increased number of customers
  • decreased vulnerability to economic fluctuations on the domestic market
  • increased lifespan for products and services through links to new markets
  • increased expertise and experience
  • differentiation from competitors.

The global marketplace and emerging markets in particular, offer a wide range of opportunities for SMEs. However entering the export market only makes sense if it assists an SME to achieve its business goals. Organisational objectives will differ for every business however at a fundamental level; the main reasons for a business' existence include survival, profitability and growth.

Consequently, examining exporting as an option for business expansion should be conducted with the same objectivity as any other decision involving the expansion of the company. In doing this SMEs need to consider the ways in which export sales differ from domestic trade and whether or not they are able to address or overcome these issues.

The following are some of the issues that SMEs need to consider:

  • the buyers and sellers will be located in different countries and in most instances will be governed by different rules and regulations
  • there may be language barriers and different currencies involved in transacting with other nations
  • third parties over whom you may not have control will be involved in completing the business transaction i.e. shipping companies, customs, foreign banks and inspection agencies.

The business world is becoming increasingly globally interconnected and consequently, a company that trades internationally has the opportunity to improve its agility and become better prepared to face competition than an organisation which is solely dependent on domestic sales.  As costs increase and product life cycles get shorter, small companies that sell into multiple markets will give themselves the best possible prospects to grow the business and improve the bottom line. The key to success is to know your customer and country, ask lots of questions and establish solid terms of trade.

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