At the recently concluded International SME Convention 2018 with theme of “Business Beyond Borders”, which was attended by Union ministers, the general conclusion was that we need to do more to make our small and medium-sized enterprises (SMEs) globally aware, globally visible and globally competitive. SMEs are the lifeline and backbone of our economy, and for a vibrant India, we need a vibrant SME sector.
Earlier this year, at World Economic Forum, the theme was to embrace globalization and global opportunities. Even the first statement that Union minister Suresh Prabhu made after assuming his new responsibility of industries and commerce ministry was “We need to increase exports”. This shows how much importance exports or rather global trade hold in shaping a country’s economy.
Dependency on domestic markets is no more an option, especially for SMEs, for companies elsewhere recognise the potential global markets have and are looking to penetrate these markets including India. Also, the Prime Minister, Narendra Modi, has mentioned earlier that we need to take our weavers global.
The benefits are many. Diversifying your business in more markets not only allows you to mitigate your business risks but also enables you to achieve economies of scale. It opens up infinite growth potential and makes you more competitive in dealing with domestic competition, too. It increases credibility and customer faith in your brand, as the customer feels that your products have world class quality since you are a global brand, neutralizing the advantage of multinational corporations and other larger companies.
Global trade is more than just selling your product to other countries; it is a process of evolving your business and transforming it to a global phenomenon.
But the question is, why have SMEs not gone global yet?
India has more than 60 million micro enterprises and SMEs (MSMEs) but only a very small percentage of that trade globally. Global trade contains a number of barriers and risks that restrict companies from trading globally.
The lack of knowledge of global trade and overseas market scenarios make global trade an unknown territory for SMEs, and stepping in to an unknown territory is a risk they cannot afford, and trying to gain knowledge is again a long and expensive process.
After knowledge comes understanding, for having data is one thing, and making sense of it, another; one thing can mean something in the context of global trading and something else in the context of domestic trading. Therefore, to draw useful insight and sense out of this knowledge requires understanding of global trading that professionals have possessed.
Then comes experience. After drawing out conclusions, executing global trade efficiently takes experience. The company must be familiar with the processes to avoid rejection or loss of his consignment, furthermore, he should be experienced enough to mitigate the risks related to quality and payment, two of the main issues of global trade.
However, if done right, these barriers can be overcome and risks be mitigated but the only way to this is by bridging the knowledge and information gap in global trade. Here arises the next question.
How can an SME overcome these risks and barriers?
To begin with, companies need to think like a global brand, they must think outside the domestic market and see the whole world as one single market. This will enable them to pace their operations to meet the requirements of global trading.
Quality assurance is one of the major factors in global trading; your product can’t be just affordable, it must have quality for it to be accepted in global markets. To take maximum advantage of these markets, SMEs must enjoy economies of scale, by producing and then selling more.
Additionally, technology today has the power to enable these companies to gain meaningful knowledge about global trade, and understand prevailing trends and potential. As global trade itself is complex and takes specialization, the best practice for an SME would be to take the partnership approach. They need a partner that would go till the last mile with them and help them sell their products to the world.
Today, there are integrated global trade platforms available to enable SMEs to go global. Using the modern day technology and advanced data sciences, these managed marketplaces have innovated new ways to neutralise the barriers to trade and made it safe and easy for SMEs to trade globally. Today, SMEs can get end-to-end managed global trade solutions for their business.
What are the consequences of SMEs not going global?
With all the technology advancements, integrated platforms and access to knowledge and information, SMEs leading the way in going global would emerge as industry leaders whereas as the ones lagging behind might even risk their survival. Prabhu mentioned at the ISC-2018 that we need to promote SMEs in the fastest way, aiming at enhancing the global supply chain and that there is a complementary relationship between big enterprises and MSMEs. Only if the small survive will the big prosper. However, within this framework, for the small to survive, the small has to go global’. With integrated platforms and managed solutions that could manage the end-to-end process for you, today global trading can become second nature for these SMEs as all they will need to do is to keep doing what they are best at, i.e., producing goods, while their global trade partner would do what it does best, i.e. enable them to go global effectively and efficiently.
Global trade now is a necessity that SMEs cannot afford to ignore. It will not only halt their growth, but hamper their domestic existence amid increasing competition.
( The views expressed in this article are not those of Fortune India. )
The author is the founder & CEO of Connect2India, a company enabling Indian Micro, Small & Medium Enterprises to trade globally and overseas SMEs to trade with India. A graduate from London Business School, Pawan started Connect2India with a goal of evolving and simplifying the global trade ecosystem in India.