SME Exporting In association with FÁS

Conquering The Exporting Hurdle

John McGrath, Services to Business Manager, FÁS

John McGrath explains how SMEs can move forward with the help of exporting.

Stop and think about the goods and products that you use on a daily basis. Did you know most of these goods come from another country?

For example, the car that you drive is imported. The oil used in that car is from the Middle East. In the same way, the British buy spices from India, Americans buy Japanese cameras; Belgians import oil from Kuwait and the beef that they eat in Germany comes from Ireland.

All this is possible only because of trade. Trade increases output and incomes. It increases living standards. It balances supply and demand. In other words, without trade each person would have to be selfsufficient. Thankfully, this is not the case. International trade is quite abundant.

And of course, trade benefits economic growth. In Ireland, exports remain the primary engine for the Republic's robust growth in the past decade. But only 10% of these exports are implemented by SMEs and this situation needs to be changed.

What is needed now for SMEs to expand into exporting is a planned, streamlined and well-supported approach to realise their full potential.

ACCESS FOREIGN MARKETS

Exports can form a large part of Irish SME growth and profitability due to the country's restricted size and demand of the domestic market. But the lack of product innovation and weak marketing skills are hampering potential exporters.

So what must be done? Firstly, what is needed is a strong commitment from the Government to support early-growth SMEs seeking to export. It is clear that Irish SMEs are relatively underrepresented in the export global market. The Irish Exporters Association's (IEA) research and day-to-day experience indicates that a majority of SMEs have the vocation to serve only local markets.

However, a significant share of businesses need to access foreign markets to ensure their survival and expansion. Improving the flow of information to SMEs on the opportunities available in export markets will reduce fears and encourage companies to expand internationally.

GROWING STRONG

Simply put, exporting is good for business. Overseas expansion and exporting are dependant on businesses growing to a medium sized enterprise, yet the research indicates that only 7% of Irish SMEs intend to expand abroad in the next twelve months. This contrasts sharply with the UK where medium enterprises, which employ 30% of the workforce, are the powerhouse of the economy.

In Ireland, SMEs need improved market information on export markets to encourage expansion. Why export? Because exporting help sales, growth, competitiveness and ability to innovate and build brands. It also benefits employment numbers and provides higher quality jobs at higher wages. Exporting also helps the bottom line and increases profitability of an SME.

GETTING THERE

WHY EXPORT?

THERE IS AN ABUNDANCE OF MOTIVES FOR AN SME TO EXPORT.

To increase profitability and utilise production capacity to the full. To develop a company's strengths and abilities and to sharpen your innovative edge. To open up opportunities that might never come your way if you limit yourself to the home market. To learn new skills, technology and marketing techniques using global approaches. To transfer knowledge and skills from international markets to Irish SMEs. To benefit other businesses like freight forwarding, warehousing and financing.

The quickest and most recommended way for an SME to explore exporting is to implement an e-business model for itself. Research has confirmed that ICT and e-Business contributes significantly to a company's profitability, cash flow management and foreign debtor receivables management. It also provides the ability to test export markets more easily, launch existing products into new markets or launch a new product onto the market.

SMEs also need an ongoing sales methodology. Some SMEs tend to export, but only sporadically. SMEs must review a target market and go after it.

Also needed is assistance in defining and accessing SMEs' sales representation and physical distribution channels. These two are interdependent and there is a well established range of solution structures in practice. SMEs need to think in terms of channel evolution rather than picking the one best structure.

Exporting is like any other business expansion decision and needs to be thought of as an investment rather than a quick way to increase profits. In time however, exporting fosters
growth and profitability.

EXPERT TRAINING A MUST

Remember that export and international trade are complex areas to do business in. For a business to succeed in an export market, it is essential that those involved have a level of quality professional training.

In essence, a training plan should be implemented to help you to develop exporting skills within your company. The plan should be flexible and tailored to the company's needs. Aftercare services should also be at hand.

Courses are delivered locally through a network of further and higher education providers, or by distance learning. FAS provides several courses teaching the skills and knowledge needed to export goods and services successfully.