SMEs Fall Short in Tapping International Market

SMEs Fall Short in Tapping International Market

102716_thinkstock_517711792_lores_kwCanadian small and medium business enterprises (SMEs) largely aren’t tapping into the markets abroad, other than the United States, even though they concede that exports are a key factor to remain competitive in a global market.

SMEs are keen to do business abroad, according to the sixth annual Small Business Challenge survey by United Parcel Service (UPS) Canada. Of 300 respondents in the survey, only 43% are doing business with countries outside of Canada and the U.S., although 61% said they hope to do business in Europe, while 42% are eyeing South and Central America.

“It’s important for [SMEs] to recognize that continued growth relies heavily on expansion, and international exports are key contributors to success,” said Paul Gaspar, director of small business, UPS Canada. He added: “Canadian and international governments are focusing on the easy exchange of international goods. Today, three-quarters of Canadian SMEs recognize that Canadian Free Trade Agreements create opportunities within foreign markets by reducing trade barriers.”

The survey revealed that 76% of Canadian SMEs exporting to international markets consider their websites as their main commerce channel. Facebook pages came in second, with 41% saying they used that social media tool for business.

More Highlights

Other highlights of the survey include:

  • 39% of SMEs don’t have a supply chain in place, and 9% of those said they weren’t sure where to find or how to create one.
  • 52% have a supply chain strategy, and 42% of those have a third-party partner.
  • 74% said they had met or exceeded their business goals, of which 25% attributed it to the low Canadian dollar and 20% cited a boost in e-commerce and expansion to foreign markets.

According to UPS, the products of Canadian SMEs are sought after internationally because of their quality, the reputations of Canadian companies and the low exchange rate of the dollar.

8 Tips

If you are interested in taking advantage of this by starting to export, here are eight tips to consider:

1. Plan your strategy. You need a detailed plan that includes a thorough risk assessment. It’s also important to ensure your business is equipped to handle the demands of international trading.

2. Choose a target niche early on. Import/export activities cover such a vast range of industries that new companies can benefit from focusing on a single target at first for experience and to establish a reputation.

3. Make contacts. This is likely the most important step. You may have relatives in a foreign country who can help or you may have frequently visited and established business relationships in a country. Sometimes you just have a feeling for what will sell in certain countries.

If you are starting from scratch, foreign consulates are a good place to start, and they can help you find out about a company’s solvency and reputation. And of course, the Canadian and International Chambers of Commerce, as well as the chambers of every city you’re aiming for, can help establish contacts.

Another, albeit time-consuming, step is to compile lists of all foreign and domestic businesses in your chosen niche and begin a direct sales and marketing campaign. Place calls, send emails and mail marketing materials directly to sales and purchasing managers in each company, and follow up on all conversations and agreements.

4. Find a local mentor or investor. This person can help guide you to understand the culture and the local consumer. If you don’t know one right off the bat, look to colleagues who might be able to connect you with others that are located in the country. You could also look at reaching out to local business networks or researching online for websites that specialize in expats living in the country in which you are looking to set up shop.

5. Determine your contacts’ needs. Compile a list of all the companies that expressed an interest in doing business with you in the previous step. Contact the purchasing and sales managers in each company to discover which products they have to offer to foreign buyers if you want to import and which products and materials they wish to purchase from a foreign source.

6. Develop a supply chain. Effective management of your supply chain is critical. When the supply chain plan is in sync with other operational plans within the company, the entire process of receiving and shipping products runs more smoothly. Build your supply chain plan in tandem with other senior managers to develop the most effective and efficient plan.

In simple terms, supply chain management is the coordination of all your activities related to filling client orders, from preproduction to delivery of the product. During this process, components of the product will change hands many times, from your suppliers to manufacturing, to storage, to shipping and, eventually, to the point of delivery and consumption.

7. Adapt to the local culture. In some countries you’ll need to customize your product or service to meet local customers’ tastes. At the very least, you’ll need to put your marketing message in the local language and make sure the meaning translates correctly.

8. Know your tax responsibilities. All roads lead to taxation. You’ll need international tax or legal counsel to identify which jurisdictions require sellers to be responsible for collecting sales taxes and which jurisdictions subject them to income taxes. Most U.S. states impose a sales tax on goods and/or services sold in that state.

Similarly, the European Union’s value-added tax (VAT) is imposed on certain services and goods sold to customers located in the member states of the European Union. Each member state may have different VAT rates, and different tax rules apply to sales of goods and provision of services.

Because in a typical e-commerce transaction, a seller based in one state frequently conducts business with a customer located in another state or a foreign country, the common issues are which tax laws of which state or country will apply. The federal, state and international tax laws applicable to Internet transactions are still evolving and can be complex and confusing.

Consult with your advisors. They can help you sort out your global plan as well as understand the laws and taxes in the countries where you may want to expand.

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