With the globalization of the economy, there is greater access to all types of products from around the world. This means that globalization opens the doors to new market opportunities for products from countries in other latitudes. However, before deciding to go international, an SME (small and medium enterprise) must determine if this will bring about any benefit for the company, always keeping in mind that participating in these markets requires offering a differentiated product with high added value to make it competitive.
An SME must determine if internationalization will bring about any benefit for the company The first and main question that a company must ask before exporting is: why should I export?
A document compiled by the Inter-American Investment Corporation (IIC) suggests that the answer to this question is that exports enable profitable business growth, which in turn facilitates access to an extended market, promotes cross-border competition and improves regular distribution of goods.
Here 16 other advantages benefits from exporting:
- A shrinking local or domestic market: if for any reason the domestic market shrinks, namely, local buyers reduce their purchase level, the internationalized company will be less affected by this situation.
- Opportunities in increased external demand: globalization leads to constant increased demand of products from several regions, which is a great opportunity for companies.
- Generates scale economies: a greater demand allows companies to increase their production and hence makes them more profitable.
- Diversifies client risk: upon deciding to export, companies will increase the amount of clients with which they work. The more clients they have, the less chance that a loss in this regard will impact their profitability.
- Improves company profits: an increase in demand leads to an increase in production and sales and therefore in company profits.
- Keeps companies updated on global sector innovations: upon competing in the international market, companies must adapt to technologies used around the world. Technological developments enable companies to grow.
- Enables a company to maintain a competitive advantage even in its own market: as a result of this type of growth – in profits,in technology – companies can be innovative and position themselves at the forefront of competition in their own markets.
- Improves Follow up with customers: once companies go international they will be able to improve their follow up with clients.
- Surplus production capacity: a company’s surplus production can be placed in the international market.
- Very mature product and/or market: companies can place their products in consolidated markets.
- Possible tax benefits: internationalization may allow companies to reduce payable taxes.
- Growth: a company’s growth is a natural consequence of internationalization.
- Skills development: in order to grow and export, companies must improve their own tools; e.g., training staff for new tasks.
- Gain capacity to compete: a company’s increased capacity will improve market competition.
- Gain prestige in the domestic market and improve image: access to the international market can improve a company’s image in the domestic market.
- Adapt what companies know how to do to the market’s needs: internationalization can be a good opportunity to improve a company’s production based on the existing demand.
Inter-American Investment Corporation