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SMEs and Micro-Multinationals Spread Their Wings and Drive Economic Growth

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FedEx latest studies reveal both SMEs and micro-multinationals in APAC are generating considerable financial benefits from selling beyond their own borders.

Check the infographic to learn more about the trend of SMEs and micro-multinationals in APAC going global and top 5 best practices on how.

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SMEs and Micro-Multinationals Spread Their Wings and Drive Economic Growth

  1. 1. In APAC, SMEs account for 98% of all businesses, employ 50% of the workforce1 and contribute 42% of regional GDP2 . Today, technology is enabling businesses of all sizes to expand beyond their borders. SMES ARE DRIVING THE REGION’S ECONOMY LOOKING FORWARD In APAC, both SMEs and micro-multinationals rank logistics service providers among their top sources of advice on exporting and an important aid to operating internationally: TURNING CHALLENGES INTO OPPORTUNITIES GOING GLOBAL:SMES AND MICRO-MULTINATIONALS SPREAD THEIR WINGS AND DRIVE ECONOMIC GROWTH Recent FedEx research reveals an increasingly global mindset among the small- to medium-size enterprise (SME) sector and the emergence of a new class of businesses in Asia Pacific (APAC) known as ‘micro-multinationals’. Findings are based on two FedEx-commissioned studies, entitled Global Opportunities: Examining Import and Export Trends Among Small Businesses and Micro-multinationals and Cross-Border Growth. Completed in September 2015, Harris Interactive interviewed senior decision-makers in SMEs and micro-multinational companies across four regions: Asia Pacific; Europe; Latin America & the Caribbean; and Middle East, Indian Sub-Continent & Africa. In Asia Pacific, the two research studies were conducted in China, Hong Kong, Japan, Singapore, South Korea and Taiwan. Workforce Regional GDP 42%50% Micro-multinationals are a sub-set of SMEs that operate in multiple markets. They enjoy advantages that are unavailable to SMEs operating in a single market, such as the ability to exploit global variations in knowledge, skills and labor costs3 . THE RISE OF MICRO-MULTINATIONALS In APAC, 58% of micro-multinationals export goods to overseas markets, compared to just 36% of SMEs as a whole. What’s more, 63% of micro-multinationals are reporting revenue growth from their international operations, versus 50% of all SMEs. Micro-multinationals are small, self-starting and service-driven companies that are either ‘born global’ or else complement their domestic operations by entering one or more overseas markets. Micro-multinationals rely on online business platforms and the increased openness of the global economy to operate across borders4 . WHAT MAKES MICRO-MULTINATIONALS DISTINCT? By leveraging technology, APAC SMEs are harnessing considerable business benefits from selling beyond their own borders. While APAC SMEs recognize the considerable potential of going global – through exporting to other markets or establishing a presence there – they feel held back by certain barriers and a lack of support to overcome them. APAC SMEs generate the highest annual average revenue from exports among all regions: E-COMMERCE – THE NEXT FRONTIER FOR SMES AND MICRO-MULTINATIONALS? APAC SMES STILL HAVE CONCERNS ABOUT “GOING GLOBAL” 88% of APAC SMEs that export have encountered barriers. Their top concerns are: Legal and trade rules are among the top challenges that APAC micro-multinationals face compared to single-market SMEs. 58% Micro-multinationals SMEs 63% 36% 50% EXPORT GROWTH Finding the right sources of support is essential for SMEs exporters and micro-multinationals to go global. 23% of SMEs rate logistics providers as their top source of support for exporting. 50% of micro-multinationals regard logistics providers as an important aid to operating internationally. With clear evidence of the benefits of going global, APAC SMEs and micro-multinationals are increasingly looking to overseas markets to drive business growth. 52% of SMEs believe they will be generating international revenue in five years’ time – an increase of 16% on the 36% that are currently exporting. 59% of micro-multinationals believe having a presence in multiple markets makes it easier to sell goods across borders. TOP 5 BEST PRACTICES TO HELP SMES AND MICRO-MULTINATIONALS GO GLOBAL: APAC Europe MEISA LAC US$1.78 million Global US$1.51 million US$1.39 million US$1.05 million US$1.14 million Your company website is your “window to the world”. Having a multi-language website is essential. Consider offering alternative payment methods for online purchases too. The way products are presented and even the products themselves need to conform to the cultural norms and expectations of each market. There’s no substitute for effective research prior to market entry, and support from local experts is invaluable, e.g. free advice via government programs. Ensuring market-specific requirements and complexities are understood and handled in a few markets paves the way to successfully expand more widely later on. Customize for an international audience Go ‘Glocal’ Fail to prepare? Prepare to fail! Test market validity of your product first APAC SMEs that export are twice as likely to experience rapid growth5 as SMEs that do not export. 22% of exporters are growing rapidly compared to 11% of non-exporters 77% agree with this statement 42% agree with this statement, making online marketplaces the biggest single enabler for micro-multinationals in the region A majority of APAC SMEs recognize there is a whole world of customers out there. APAC micro-multinationals report that access to online marketplaces has made it possible to operate across multiple markets. Develop a strategic plan and follow it. Consider the business scale, market reach and logistics arrangements for each market. Go broad or narrow? Potential costs of exporting Increased administration Different trade rulesLegal challengesDifferent culture Risks of not getting paid Potential foreign exchange losses Lack of technical knowledge, e.g. taxation requirements in international market 1 “The Role of SMEs in Asia’s Economic Growth”, SME Finance Forum, April 25, 2014 2 “Asia SME Finance Monitor 2014”, Asian Development Bank, 2014. Note that this figure refers to the ADB’s 20 Asia SME Finance Monitor countries, covering Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific. 3 Varian, H., Micromultinationals Will Run the World, Foreign Policy, 2011 4 Source: Mettler and Williams, The Rise of the Micro-Multinational, The Lisbon Council 2011. 5 This is defined as growth of 11% of more. 22% 11% 21% 34% 32% 29% 36% 35% 34% 33%