Going global: SMEs can survive recession with cross-border expansion

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With many economists and business chiefs at this year’s World Economic Forum forecasting a recession in 2023, small businesses already battling inflation, high energy prices and shaky consumer confidence will be feeling dispirited. While there’s no consensus on whether the next downturn will be shallow or deep, brief or protracted, a recession of any kind means businesses need to look at strategies to weather the months ahead.

Past events, including the 2008 recession and Covid-19 pandemic, serve as a reminder that not all businesses will share a common experience of an economic downturn. While some industries may be harder hit than others, it is most often small businesses that are disproportionately impacted. They rarely have the same financial buffers as big businesses and are generally leaner so cost cutting isn’t much of an option. What’s more, they have less varied revenue streams, and tend to rely on a core customer base in one market.

Trapped in domestic markets

Although SMEs account for 90 per cent of businesses worldwide, their role in international trade is relatively low. When the pandemic hit, we witnessed rapid growth in e-commerce as consumers were forced to stay indoors and shop from home. Businesses without a digital presence had to adapt swiftly to cope, and this sudden boom in e-commerce not only helped them stay afloat but revealed growth opportunities outside of domestic markets. As a result, we saw a significant upturn in international trade, which now exceeds pre-pandemic levels despite the global challenges of the past two years.

Now, recessionary conditions mean that extending beyond the domestic market is not just an opportunity but a necessity. Diversifying revenue streams by expanding into foreign markets reduces risks for SMEs, ensuring they’re not putting all their eggs in one basket. Crossing into new markets not only improves prospects by broadening income opportunities but also increases the stability of international trade.

Targeted expansion

Adopting a blanket approach to international expansion risks undermining growth opportunities. As such, branching out into new markets requires careful planning, targeting individual countries or regions based on thorough market research, logistics planning and website and marketing updates. The first question businesses need to ask themselves when considering cross-border e-commerce is whether their products are suited to the needs and demands of a particular market. They then need to confirm that they meet all the relevant regulations before taking any further steps.

Image is everything, and to successfully tap into new markets abroad SMEs need to be perceived as trustworthy and accessible businesses. Achieving this can involve implementing numerous changes, from introducing options for different languages on their website to integrating locally accepted payment methods to clearly communicating shipping procedures for the new market.

Focusing on forecasts

With the International Monetary Fund forecasting that 45 per cent of trade growth through 2026 will take place in emerging markets, these regions shouldn’t be overlooked when SMEs are planning international expansion. Bold strategies can pay huge dividends: look beyond advanced economies and keep in mind new poles of trade growth which are surfacing in Southeast and South Asia, with trade growth also expected to accelerate in Sub-Saharan Africa.

Working with an expert global partner such as DHL Express can help SMEs navigate the challenges associated with crossing into foreign markets, offering specialist advice and support including preparing shipping documentation and calculating duty and tax prior to moving goods across borders.

Evolving to sustain growth

Lessons from the 2008 recession show that adaptability is key to survival. To keep abreast of a challenging domestic environment, SMEs will need to be fluid and look abroad for new revenue opportunities. By expanding into global markets, SMEs can tap into a long-term opportunity which will outlast periods of recession and establish a strong international footprint to drive growth.

Originally published on Business Reporter