Irish SMEs rule Europe when it comes to eCommerce and cross-border online trading. Ireland ranks first out of 28 countries in Europe when it comes to SMEs selling online. Irish companies are also among the top users of social media to achieve business ends, but despite the uptake in online selling, many small Irish businesses are failing to tap into international markets.
There are a number of reasons that drive SMEs to venture into international markets, including growth motives and resource-seeking motives however, the level of SME foreign expansion remains rather low. There are many factors that constrain the process, such as SMEs often possessing limited resources and international contacts, with foreign market knowledge being at times inadequate and difficult to gather.
Export barriers and supports
The identification of growth opportunities in international markets is a key driver of internationalisation. Indeed, efforts to achieve business growth, increased profits and market size, and decreasing the dependence on a single market, have emerged as key stimuli for exporting to foreign countries. However, many SMEs claim a lack of internal financial resources, access to external finance and awareness of available supports and market knowledge are the main challenges to exporting into international markets.
Many SMEs struggle to obtain adequate representation or appropriate foreign market partners in their exporting activities, thereby constraining the firm’s ability to reach and serve its customers. Additionally, SMEs often face the challenge of gaining access to suitable distribution channels.
Businesses have reported the lack of resources as a barrier to export growth, particularly a dedicated, on-the-ground resource in the target market. The resource issue is heightened by current pressures on cash flow and the need to see a commercial return from new markets within a short timeframe. Consequently, businesses state that the main form of support they require is the provision of resources, such as market knowledge, additional finance or networking assistance.
What to watch out for when expanding into international markets
SMEs often face different challenges than multi-national companies when moving into the export market. While it is relatively easy to establish personal networks in the domestic market, it may be expensive and difficult for an SME to establish suitable, trustworthy relationships in international markets.
To launch a new product or service to the overseas market an SMEs need to watch out for :
• Ability to set competitive prices
• Awareness of the support available
• Language barrier
• Market Intelligence
• Marketing communication
• Digital marketing
International markets present a wide range of business opportunities for SMEs, from market expansion to cost reductions. Internationalisation, however, can be a difficult strategic choice to pursue, largely due to its resource-intensive nature and the uncertainty associated with foreign markets.
Given the key role of SMEs as contributors to regional, national and global economic development, it is vital that policy makers intensify their efforts in the reduction of cross-country trade barriers and in the provision of support to SMEs, particularly with regards to financial and physical resources, international network development, and managerial knowledge.