Before making the decision to expand to foreign markets, SMEs (small and medium-sized enterprises) must question the reasons that motivate them and keep in mind that they must offer a differentiated, competitive and high added-value product.

Exporting companies have double the chance of success than those operating only in the domestic market

A comprehensive study conducted IHS Global Insight and DHL Express reveals that trade and international cooperation have become key factors in the success of these companies since those that export have double the chance of success than those operating only in the domestic market.

The Inter-American Investment Corporation (IIC) sustains that exports can generate profitable business growth while expanding the market, enhancing protection from external competition and generating more regular sales. The document also includes 3 motives summarized as follows:

Profitability

Internationalized companies acquire certain strength to overcome situations in their own country that may reduce their level of operations, by diversifying their risk. Upon increasing the total amount of customers, each exporter ensures that the occasional estrangement of a buyer will not cause such a big impact on the business. Likewise, having buyers in different latitudes makes it possible to mitigate the effects of seasonal demand of products such as clothing and food. Also, international markets offer the opportunity of placing surplus production and of obtaining tax benefits by reducing the share of payable taxes. Additionally, by increasing the purchase volume of raw material it is possible to obtain better payment terms and delivery times, reducing the production cost per unit.

Innovation

When competing in the international market, a company must adapt to the technologies that are being used and make an investment that many times is postponed when operating only within the local market. An innovative company, which grows in profit and technology, can stand at the forefront of competition in its own market. Exporting goes hand in hand with the need to improve the available resources, for example by training workers or modernizing management tools. A company that ventures into exporting must create market studies and export plans, among others, which will increase development and professionalization. It may also generate the opportunity to improve production based on the characteristics of the existing foreign demand.

Growth

To grow means to acquire size and in a company growth is the natural consequence of its internationalization. Globalization implies increased foreign demand and the constant rise in demand of certain products from different regions. Exporting can create scale economies that will increase production in a more profitable way and place products in consolidated markets, while gaining prestige and improving internal image.