Spreading risk by going global
Greater Birmingham Chambers of Commerce
This article is part of the Greater Birmingham Chambers of Commerce’s Raise the BAR (Business Adaptability & Resilience) Campaign, sponsored by Western Union Business Solutions. For more campaign content click here. This campaign provides Chamber members with a platform to share learning and inspiration on this agenda. All views and opinions expressed below are those of the author only.
By Rupi Nandra MBE, Head of International Programmes, GBCC
Businesses are the backbone of the economy and at this time, against this ever-changing landscape it is important for industry to re-evaluate strategic direction and operations, in particular risk management, competitiveness, and sustainability and growth.
As a business strategy, international markets not only allow for business growth, but create new capabilities for the organisation; in terms of adaptability and the understanding of international trade practicalities. This in itself will build resilience into the business models as cash flows, productivity and supply chains will all need to be to flexible and re-evaluated and restructured. Seeking international growth by going global offers opportunity and advantages and sound business reasoning. It is also a mechanism for positive risk management through identifying, assessing and managing potentially beneficial outcomes.
Through expanding business operations internationally, businesses spread their risk in a number of ways. Establishing new sales as the domestic market have reached or close to saturation allows for continued revenue to mitigate costs of production, but also eliminates negative organisational impact for example workforce reduction. This can be further extended by identifying new relevance and applications in new markets for existing products can extend the product life of lines that were perhaps considered as completed and no longer required. This then generates new sales for the product as it is, new applications and, possibly some innovation management for market- appropriate modifications.
New markets also reduce the dependence on the markets already developed – whether these are domestic or international. Existing exporters can look at additional international markets whereas new exporters can identify first-time exporter opportunities. This spreads risk by having multiple revenue sources as well as an increase in overall income. Furthermore, some business models are predicated around seasonal cycles that can potentially be extended to all year round through international growth. Business operations and production cycles can be realigned for those with seasonal demand cycles so that there is continual production, delivery and sales processes.
Going global can expand horizons in other areas that will lead to reduced risk and in the mid to long term increase business growth. Through knowledge transfer and know-how businesses can create new partnerships and collaboration for research and development of new products and services that can be applied in the global marketplace. Through partnering with an international counterpart at the outset there is a phenomenal opportunity to bring specific expertise and know-how together, establish wider networks and create new product and service solutions for application across a multitude of markets and sectors.
Alongside adaptability and growth, these all contribute to making the business stronger and more resilient as it moves to being a more robust organisation with an increased level of security of business survival. This is paramount for SMEs who need to establish mechanisms to remain competitive with relevant and applicable solutions. The overriding reason to go global, of course, is to improve business potential for expansion and growth - there is always an opportunity to sell something, somewhere. Unearthing just the right opportunity involves more work, of course.
But going global is risky business so how can it help to spread and mitigate risk? Going international is all about preparation and due diligence. Going global requires planning and pertinent issues to be addressed in order to enter a global market place with success. These topics include understanding the market, market entry strategies, finances and payment terms, product / service compliance, packaging, labelling, culture, logistics, to name a few. What is absolutely paramount is in-depth market research which will allow for informed decision-making to enable the scaling-up process to be more linear. Once the market is understood in terms of opportunity it can be examined further for access and viability. Culture and language will play a part in the decision-making and this will influence your route into market. Maintain a focus – just because a number of countries show interest doesn't mean you're ready to sell your product everywhere. Patience is key. There needs to be a discipline in how business reacts to enquiries from a country which they know very little about.
With an economic emphasis on boosting exports, as well as technology and innovation, business support for planning strategy, examining opportunity, and ultimately spreading risk is of the utmost importance. By entering the international arena, business can protect themselves against the risk of decline in domestic markets and, most important, significantly improve overall growth potential.
For more information on how the Greater Birmingham Chambers of Commerce can help your business go global visit the Greater Birmingham International Business Hub.