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Reasons to Go Global

This book has been written to help you take your business to the world and there’s never been a better time to have this on the agenda. Here’s why:

1. Market opportunity

In 2010 the UK faced budget cuts and pay freezes, and business owners were staring at a domestic market that wasn’t what it once was. The situation was summed up by Ernst & Young in their ITEM Club Spring 2010 report:

“2010 will be a gloomy year for consumers, with disposable incomes flat and spending increasing by just 0.5%. With government also retrenching, GDP is forecast to grow by just 1% this year.

Further growth is dependent on the UK increasing its overseas earnings to replace the massive overseas borrowing that financed the ‘noughties’. UK Plc needs to develop new markets, especially in fast-growing emerging economies, and to finance overseas expansion and new export capacity in order to provide the economy with an export-led revival from 2011.”

So an opportunity for business owners is to open up new markets. The good news is we have the means to access these markets (see ‘Technology’ section) and they are home to millions of online and consuming customers:

 By the end of the first quarter of 2010, there were 484.97 million broadband subscribers worldwide, up 3.2% on the previous quarter and a figure that continues to increase.

 Source: Point Topic

 Global monthly internet traffic in 2010 was two-thirds higher than in 2009.

 Source: Cisco

 US e-commerce will hit almost $250 billion in 2014, up from $155 billion in 2009.

 Source: Internet World Stats

 Growth for Western Europe is expected to be even greater, with a predicted increase in the e-commerce market from $93 billion in 2009 to $156 billion in 2014.

 Source: Forrester Research

 E-commerce will continue to be one of the fastest growing retail channels, with a 2009 European Commission Report showing nearly one-third of individuals in the EU27 member states shopped online and 51% of retailers sold online.

 Source: The European Consumer Centre

 With over 2 million internet users (equal to a third of the nation’s adults online) Egyptians collectively spent $2.1bn online in 2008. The value of e-commerce in China was over US$36bn in 2009, or 1.7% of disposable income; proving there’s still plenty of room for growth.

 Source: The Digital Economy Rankings and China Internet Network Information Center

An increasing number of people buying online makes for an enormous, worldwide, lucrative market. The potential is significant when you take into account the low base from which we are starting. Research from Eurostat shows that the majority of turnover from e-commerce in the UK (83%) comes from sales within the UK, 11% is from the EU, leaving only 6% from the rest of the world.

This highlights a major opportunity; an opportunity to increase that 6% of non-EU sales and start selling to the world. I pose the question asked by Google on their Export Advisor service:

There are 1.2 billion online consumers around the world. Wouldn’t you like to add some of them to your customer base?

If your plan is to increase sales, it’s time to look beyond the UK. Selling across borders is the wisest route to take.

“With the internet making it possible for SMEs to export around the world, overseas sales are big business. In cash terms, exports make up one in six sales for British online businesses.”

– eBay Online Business Index, summer 2009

2. Exchange rates

Not only are markets outside the UK large and untapped, any weakness in the pound creates a prime time for exporting as your prices become more competitive.

If the pound falls and is weak against other global currencies, it sounds like bad news, but the good news is it makes British products and services cheaper for overseas buyers. The Bank of Scotland claims the weakness of sterling seen in 2010 encouraged its customers to consider trading overseas, and during his time as international trade minister, Lord Davies was quoted as saying:

“The fall in the pound has provided a window of opportunity for the British exporter, giving them an edge on price. It will enable them to develop initial supply chains and give the foot in the door they need to prove the quality and sophistication of our goods and services.”

In May 2010, results from the Purchasing Managers Index, which measures manufacturing and export orders, recorded its highest level of activity since the measurement began in 1996, demonstrating the impact of a weak pound on export activity. The currency situation is a market opportunity that all businesses can take advantage of.

Good up-to-the-minute currency converters are built into Google, Yahoo and Apple’s Mac Dashboard.

3. Diversify and innovate

Small businesses do not want to keep all custom in one geographic area or with one client and international trade allows you to diversify and innovate. A move into new markets is likely to involve learning new ways of doing business, and this is good for company innovation and the bottom line.

“Exposing a business to overseas competition makes it more competitive, more productive and better equipped to deal with the challenges of globalisation.”

– Digby Jones, former trade minister

Fast Fact

The UK sold £4.82bn of food and non-alcoholic drinks overseas in the first six months of 2010.

“British sausages are going down a storm in Germany – with a 410% surge in sales. And the French are snapping up our cheese, boosting cheddar exports by 56% as Europeans cash in on the weak pound. At that rate exports could hit a record £10bn.”

Source: Food and Drink Federation featured in The Mirror, October 2009, ‘British sausage sales are soaring in Germany’

4. Technology

Nothing has enabled international trade more than technology. Having an online presence means reaching a global audience, and technological tools and applications offer cost-effective ways to secure customers and communicate easily with them.

“The internet is now fundamental to commercial success and social prosperity.”

– Digital Economy Rankings 2010

Research shows that almost three-quarters of exporters now use the internet to target customers, with the next choice being through agents and brokers (14%) or using a distribution firm overseas (14%).

eBay is an international mega mall that has helped many businesses go global (see the story of John Pemberton). The site claims that sales from UK traders to the US have increased by more than a third, and that sales to Australia are up by over a quarter. Despite the recession, says eBay, exports by UK online businesses rose by over 10% between 2008 and 2009, which is almost double the rate of growth of UK sales.

Alibaba is another site that has opened up international trade opportunities. Director Maggie Choo comments:

“Alibaba.com has made the process simple and efficient for anyone to try their hand at international trading. It costs nothing to set up an account and get started. Many users find this is the first step on a journey that delivers significant extra revenue. We already have some 700,000 UK companies trading across the platform and we look forward to helping many more tap into the world’s trading opportunities.”

Time zones are irrelevant when using online customer service tools and keeping in touch is a breeze with free conference calling and project management software. The technology is now at our fingertips, making sales and communication possible whether you’re in Bangor or Bangalore, York or New York.

“Increasingly, small businesses do not start off trading locally as they did in the past. If you have a website you can think globally from the beginning.”

– Clive Lewis, head of enterprise, Institute of Chartered Accountants for England and Wales

5. Political will

Political leaders across the globe are setting goals on exports and international trade.

In March 2010, in his state of the union address, US President Barack Obama unveiled the National Export Initiative and announced a target to double exports from the US by 2015:

“The National Export Initiative will help meet my administration’s goal of doubling exports over the next five years by working to remove trade barriers abroad, by helping firms – especially small businesses – overcome the hurdles to entering new export markets, by assisting with financing, and in general by pursuing a government-wide approach to export advocacy abroad.”

In Europe, Viviane Reding, EU commissioner for information society and media, has called for a digital single market as a top priority, saying:

“We won’t have a real digital economy until we remove all barriers to online transactions, also for end-consumers. This must be on top of the list of all policy initiatives to relaunch the single market project.”

And back in the UK, the prime minister and foreign secretary stand firmly behind export as a policy to improve the country’s economic wellbeing and social standing. This is reflected in David Cameron’s early trade visits to the US, Turkey and India, as well as comments from William Hague on Britain’s place in a networked world.

As a new government, we are absolutely focused on reopening Britain for business. We want to make Britain the best possible place to invest in and to trade with.

– David Cameron, during a visit to the US, July 2010

Fine words from politicians and we welcome seeing them put into practice!

6. Broadened horizons

Doing business overseas is not necessarily all about business. Through trade connections you meet people with whom you may not ordinarily have come across and travel to places you may not have thought to visit.

Ensure you choose a territory that is right for your offer but, importantly, one that you like. Hopefully, you will be spending a lot of time there.

– Christine Losecaat, managing director of Little Dipper and chair of UK China Partners

In the process of growing your business, there is a chance to learn new languages, discover lost cultures and eat surprising delicacies. Consider business as the magic carpet that will carry you to adventures in far-off countries, steeped in commercial and cultural opportunity.