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Take your agribusiness SME to international markets

For small and medium-sized agri-food producers, marketing their products in global value chains can be a challenge. This is because international systems demand compliance with high quality standards, being able to continually adapt to market conditions and having differentiated products with a high added value that makes them competitive.

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Published by ConnectAmericas

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These factors leave small and medium-sized enterprises (SMEs) in an unfavorable position, as their production scale is often small or limited, they have little or no access to financing, and they are not familiar with international production standards.

That's why in this article, we will discuss strategies and aspects to consider so that agribusiness SMEs can integrate into global markets.

Motivations and Limitations:

If you are thinking about internationalizing your SME, it is essential to know, before anything else, whether it is the right time for your business. The first and main question you should ask yourself before venturing into new markets is why you should do it.

Have you asked yourself what goal you are pursuing and what benefits you could achieve?

There are various reasons that may motivate you to open up to new markets, such as growing or improving your company's profitability, taking advantage of growing demand abroad, or diversifying your risks. If you are interested in evaluating your reasons for internationalizing your SME, we recommend reviewing this list of motives. Do you identify with several of them? Then it may be a sign that it's the right time to internationalize your business.

However, the report "Competing in Agribusiness: Business Strategies and Public Policies for 21st Century Challenges," published by the IDB, reminds us that, beyond motivations, SMEs also face very specific limitations to integrate into global value chains:

  1. Limited production volume, which may be insufficient for export.
  2. Limited capital availability, preventing small producers from making necessary investments in their production systems and adapting them to international market requirements.
  3. Limited or no access to knowledge about available technologies, potential business partners, export requirements, or consumer needs and interests.

Identifying these limitations in your company does not mean that you cannot internationalize your business, but it is essential to recognize them and take them into account when implementing an insertion strategy.

Internationalization Strategies:

The Competing in Agribusiness report also proposes different business strategies for integration into global value chains.

One of them is based on choosing the marketing channel. For a company with low production volumes (and therefore low exports), it is more convenient to use national intermediaries as its marketing channel, while larger companies can export directly to traders or wholesalers, or some can even supply directly to their buyers.

Another determinant of the marketing channel is the level of product differentiation. The more differentiated the product you want to export, the more convenient it is to use more direct or even exclusive marketing channels to ensure effective commercialization.

Another strategy is expansion through foreign direct investment, which involves producing abroad the same product that the company already produces in its home country or diversifying into the production of other products. This allows the company to have a more direct understanding of the target market's dynamics, quality controls in the destination country, and customer requirements; however, this is advisable for larger companies.

A final strategy is association, either vertically, meaning a medium or large company is responsible for processing and marketing, but its suppliers are many small producers, or horizontally, meaning in cooperatives or associations of small producers.

This strategy may be more useful for small and medium-sized producers who do not have sufficient scalability to enter international markets on their own. It can also help them obtain certifications as a group, diluting administrative costs and required investments, and even getting better input prices.

Vertical or Horizontal Association?

Both types of associations have common benefits for SMEs:

  1. Act as a cluster, allowing small and medium-sized producers to achieve minimum production volumes for export.
  2. Facilitate access to credit or even preferential rate credits.
  3. Facilitate the obtainment of certifications.
  4. Provide inputs at a low cost.
  5. Support research and technological improvements.
  6. Can invest in providing public goods in the regions where they obtain their production.
  7. Improve the quality of life for small producers.

However, to know which type of association is more suitable for your company, let's review the differences of each one, also outlined in the Competing in Agribusiness report.

In vertical association, small and medium-sized producers are linked to a larger company, called the "tractor" company. This link can be of different types, according to the interests and motivations of the tractor company. Get to know them and identify which ones align with your business.

a) The tractor company takes advantage of climatic conditions to establish itself in a specific location for the production of a particular crop and identifies producers that allow it to reach an adequate volume for commercialization.

b) The tractor company takes advantage of windows of opportunity to export products from a particular region.

c) The tractor company links with producers near processing or processing facilities, or by levels of technology or volumes.

d) The tractor company seeks to improve its corporate image or gain a niche market that requires social credentials, so it benefits from integrating local small producers.

e) The tractor company links with small producers out of a genuine interest in contributing to improving their lives or supporting environmental protection.

Horizontal association, on the other hand, is a useful strategy to generate economies of scale that allow sharing fixed costs (such as investment in infrastructure and equipment), obtaining and processing information about export markets, and complying with certifications and standards for export.

That is, by associating, producers can reduce entry barriers to international markets that, otherwise, they would face alone. Associating horizontally also allows them to acquire best practices and develop group skills such as conflict resolution, defending common interests, and increasing their bargaining power.

Of course, this type of association also has challenges or weaknesses, such as possible conflicts of interest, lack of control, or free riding, which occurs when all members receive the same benefit even if they do not make the same effort, undermining the motivation of the most committed producers.

Added Value, the Key to Global Insertion:

Beyond the strategy you decide to implement for your company, entering international markets necessarily requires implementing innovations in the products to be exported to adapt to the needs and demands of international markets.

Innovations can range from meeting demands on physical attributes of products to the time of year they are offered. The goal is to differentiate the product and thus give it greater value.

Remember that innovation does not necessarily mean creating a new product, but only some degree of novelty. Of course, there are products for which differentiation is not simple, such as many commodities. But even in those cases, meeting the requirements of international markets will pose a challenge for improvement for producers.

We revisit six types of value-added strategies from the Competing in Agribusiness report focused on agri-food companies:

For fresh products:

  1. Meet basic requirements of external markets.
  2. Obtain attribute credentials.
  3. Develop products with more valued qualities.
  4. Take advantage of temporary windows.

For processed products:

  1. Develop derivative products.
  2. Differentiate yourself through your brand.

These strategies can also be combined; you don't have to choose one or the other. If you want to learn more about each of them, we recommend reading this article.

Arma tu estrategia exportadora

To assist you in your internationalization strategy, we have developed the PyMES Toolkit on ConnectAmericas, a free resource that gathers all the online tools that will be useful at different stages of your global insertion process.

Facing the infinite universe of online resources scattered across numerous websites or difficult to access, the PyMES Toolkit provides up-to-date and reliable tools organized by topics: trade agreements, logistics, foreign trade, statistics, and tariff and regulatory barriers.

For example, if in the development of your global insertion strategy you want to know where there are greater opportunities for your company, in the PyMES Toolkit module dedicated to Statistics, you will find statistical data on foreign trade and financial and credit situation by country, as well as sources of information on tariffs, market prices, or export performance indicators, which will help you in your market analysis.

On the other hand, if you need to know the documents and requirements to consider before exporting your product or service to another country, as well as the tariffs to be paid, the Tariff and Regulatory Barriers module will serve as a guide to sources where you can find information on regulatory standards, duties, and even find tariff advantages.

For each topic, the PyMES Toolkit provides global tools valid for all countries in Latin America and the Caribbean, as well as specific information and tools for each country in the region.

Get to know and download all the modules of this valuable resource for free [here]

7 claves para desarrollar un negocio internacional


Finally, we want to recommend this series of key factors that the founders of CEO Mentoring in Confidence, a firm specialized in mentoring organizations in times of stress, shared with us in this webinar, which is also available on the ConnectAmericas platform.

There are seven factors to consider to ensure the successful global market insertion of your company. They are the 7 Ps:

Painting: it is about visualizing your business in the medium and long term future. Planning: applies to all areas of your business, not just sales and costs. Think about areas such as human resources or your strategic alliances. Product: focus on your product, imprint your vision and values on it, that is, turn it into your brand. Understand and anticipate the trends in the market you want to reach, understand the expectations of your potential customers and pay attention to the logistics chain to deliver your product. People: think about your collaborators and partners, they will be key to the success of your product in a new market, and attract talented local people, with knowledge and networks. Promotion: think about your brand, the distribution channels and promotion channels suitable for it. Think about promotion in all its possibilities, from digital platforms to word of mouth among your clients. Processes: Your business involves various processes, ranging from recruitment, problem identification, complaint management, and knowledge management. Patience: remember that projects take time and are the result of trial and error processes. Focus on identifying and implementing the right tools for your business and maintaining a positive attitude.

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