International trade critical for small business, DHL study says

International trade critical for small business, DHL study says

A recent global survey conducted for DHL Express by consulting firm IHS Global Insight posits that International trade and cooperation are key drivers for small business success.

The study which surveyed 410 small and medium-sized enterprises (SMEs) in so-called G7 economies – theU.S., U.K., France, Germany, Italy, Canada, and Japan – along with firms in Brazil, Russia, India, China and Mexico (BRICM) revealed that companies engaged in international markets are twice as likely to be successful as those that only operate domestically, based on three-year compound annual growth rates.

Of the SMEs surveyed by IHS on behalf of DHL, 26% of those that traded internationally also significantly outperformed the market, while only 13% of domestic-only SMEs also outperformed the market.

DHL’s study also discerned that inadequate business infrastructure can constrain a company’s competitiveness due to the reduction of business efficiency.

For example, SMEs have to work harder to overcome infrastructure inefficiencies, particularly compared to larger companies with greater resources. The main challenges in this arena are: a lack of available information on foreign markets; high customs duties; the difficulty of establishing contacts with foreign partners; and ability to successfully generate an overseas customer base.

Other key survey findings:

  • SMEs that were founded in the last five years are more likely to have international business operations than older SMEs, despite having had less time to grow their businesses
  • U.S. SMEs benefit from a relatively efficient business environment, where labor productivity, for example, is higher than the G7 average. They also prosper from higher levels of research and development as well as innovation compared to the G7 average, but suffer from the bleak macro-economic backdrop in which they operate
  • The majority of SMEs who had out-performed their markets over the last three years indicated that they also planned to increase the percentage of exports in their turnover over the next three years, despite the uncertain economic environment
  • BRICM SMEs placed more emphasis on logistics as a positive influence on their international operations than their G7 counterparts, suggesting that they rely more on efficient transportation and customs processes to overcome infrastructure obstacles
  • Most of the better-performing SMEs identified in the study employ over 50 people, underscoring the importance of resources in overcoming barriers to international trade.

“The strong correlation between improved business performance and cross-border trade suggests that there is a clear benefit for SMEs in going global,” noted Ken Allen, CEO of DHL Express.

“It not only opens up new markets for their products and services, but also gives them access to international best practices and innovations,” he added. “Perhaps most significantly, competing internationally forces them to sharpen their own internal operations and processes, which benefits their business in their home market as well as abroad.” 

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