“Five years ago, we said the main engine of economic growth will be SMEs and the private sector.”
- Jack Ma Alibaba.com CEO

There is no question that internationalization of markets is becoming increasingly important to the growth of small to medium-sized enterprises (SME) and their countries as these enterprises globalize their businesses and become the main engine of economic growth in their countries. Globalization has a direct impact on SMEs. The success of SMEs is directly related to jobs that helps stimulate the economic growth of a country.

As part of the globalization phenomenon, some SMEs may only market their product/service globally and others may have production facilities in one place and market their product/services in others. Most often SMEs use exporting as a primary mode of entry into a new market only because their risk is limited to the product sold.

While some SMEs realize the benefits of exporting/importing and are attempting to comprehend the world marketplace in which they must operate, many companies, have not looked to exporting/importing as a growth area. This is changing, however, as most SMEs are slowly realizing that success in the marketplace requires looking beyond national borders. The move to become a global player, whether it is a proactive decision or one imposed by competitive dynamics, has extensive implications for an SME’s growth. If a company is to export/import it has to evaluate available human and capital resources, commitment by top management, market strength, product strength and establishing good relationships with suppliers or buyers.

SMEs are no longer confined to their national boundaries as they have been for decades. In many countries supported by their governments, business-friendly incentive programs are looking for opportunities to capitalize on the removal of barriers due to regional economic integration or agreement by member countries of the World Trade Organization (WTO). Global economics is all but breaking down international barriers and encouraging the free flow of goods, services, capital and people. Good examples of this are the European Union (EU), the North America Free Trade Agreement (NAFTA), the Associations of South East Asia Nations (ASEAN), MERCOSUR in South America and ECOWA in West Africa. These are all regional agreements with objectives to remove trade and non-trade barriers among the member countries, thus providing opportunities for SME’s to gain market share.

Many SMEs recognize, now more than ever, the need to be competitive in the marketplace; they have to look to other countries for markets, raw materials, components and final products. Additionally, many SME’s have made dramatic changes in their organizational, quality and price structures for their products. These changes are helping them compete more effectively in the global marketplace. SMEs need to pursue aggressive business strategies for selling or purchasing goods and services if they are to remain competitive globally.

Making Export Decisions

Small and medium enterprises’ attitudes toward going global are slowly changing. Many are finding that their product is competitive in price and quality, and, as a result, are seeing an overall increase in demand for their product or service. This increase in demand could be for current proven products that they have in the existing market, or for products that are facing obsolescence. Generally, SMEs have always felt that exporting was only for large companies; this, however, is changing and is driven by advancement in telecommunication, the Internet and transportation technologies. Even the smallest companies with limited resources are participating and are gaining market share from outside their boarders.

There are several ways that SMEs can measure their products’ potential and to help them decide whether to export/import or not. One of the most popular indicators of a product’s potential is the company's success in the domestic markets. If a company is selling successfully in the domestic market, there is a good chance that the company will be successful in selling its products or services in the international marketplace. For some SMEs, exporting/importing may not be all that different from domestic selling. A company may choose to sell its products or services to another domestic company, which then sells the product or service in the overseas market or purchase good for resale from an importer that purchased goods from foreign markets. The seller or buyer will probably notice little difference between that sale and other domestic sales.

The second indicator is the introduction of new products into both the domestic and international marketplace. This could also include a product that has reached its maturity stage in the product life cycle; when its sales starts to decline, the same product could be introduced in other markets in which the product was not previously sold, allowing SMEs entry into newer markets.

Finally, in concept, most experts agree that any decision to export/import requires the same ingredients as decisions in domestic business. That is, the firm’s commitment, knowledge of the market, a realistic budget, time and patience. Still, going global can be a challenging experience for SMEs, but the rewards can be substantial. To remain competitive, profitable and to be part of the main engine of economic growth in their country, SMEs must look beyond their borders and seek and capitalize on new opportunities in the global arena.

Other articles by Tekle Sebhatu

• Preventing fraud when sourcing from overseas
• How to use and select import agents and customs brokers