SMEs, Why the Export Uncertainty?

Half of small businesses cited market intelligence (MI) as a major challenge to exporting, according to a recent report published by the Enterprise Research Centre, based partly at my own alma mater at Aston Business School. Likewise, a seminal study from the OECD and APEC cited "identifying foreign business opportunities" and "limited information to locate/analyse markets" as the second and third most significant barriers for SMEs, with the latter the most frequently cited. But this need not be the case, as data on overseas markets – for almost any product – is plentiful; the challenges, therefore, are in the awareness of this fact, and having the inclination, capacity and skills to utilise this data to reduce uncertainty and identify opportunities.

Fig. 1, Source: ERC, p.41

The survey of small business exporters showed that 46% considered market intelligence a challenge (Figure 1), surpassed only by the challenge of finding strategic partners (something MI can also help with), and well ahead of regulatory and financial concerns. Given that – as the same report shows – the proportion of SMEs exporting has been on the wane, from 24% in 2007 to 18% in 2014, it is imperative that these challenges are addressed.

The MI challenge is important because export decisions should be intelligence-led in order to minimise risk and maximise returns on investment; and this is particularly so for SMEs, where limited resources must be used more astutely. Broadly speaking, there are two stages to understanding possible export markets: firstly, a quantitative assessment and comparison of these markets, to identify opportunities; secondly, gaining more detailed intelligence – both desk-based and ‘from the ground’ – on countries of interest. This article focuses briefly on the first stage, while a future article will look at the second.

Happily for the 46%, access to copious amounts of data – for every country and every commodity code – is available for free via the UK Government, European Union and United Nations. It’s all part of the ‘Open Data’ revolution, and is great for SMEs – industry challengers – as it is just as accessible to them as it is to their larger competitors which, with greater resources and capacity, do not face the same set of challenges, in the same way, when exporting.

But there is a considerable difference between accessing this ‘data’ and producing ‘intelligence’, and this raw data often comes in an almost impenetrable format. Considered analysis bridges that gap, and provides answers to some of the key intelligence requirements for those companies seeking to understand export markets. These are some of the questions that I answer through such analysis, with some examples of past projects – one relating to sweets and another to generators – shown in the various images below:

• Which countries have the largest import markets for this commodity?
• Which countries have the fastest growing import markets for this commodity?
• Does a market for UK exports exist for this commodity? What is the UK market share in each country?
• Which countries demonstrate potential latent demand for UK products? (i.e. UK has a large share of overall imports, but a lower share in this commodity).
• Which countries is the UK competing with for exports of this commodity?

For the half of small businesses that see MI as a challenge, this analysis will help them to make initial assessments on the best target markets: the output of this first stage is a shortlist of target countries for further investigation. The next stage is further desk research to produce detailed country profiles (e.g. using the PESTLE framework) on the shortlist – all the time, refining and refreshing that shortlist – before making contacts in-country for further, more nuanced, intelligence gathering. Such programmes as the UKTI’s ‘Export Insights’ can be good for the latter – some more information about that, from Shropshire Chamber of Commerce, can be found here.

The OECD and APEC study also observed that limited firm resources, including lack of managerial time and knowledge, was a problem for SMEs in pursuing overseas markets. All of these things, I can provide; so get in touch if you’re one of the 46% that deems market intelligence a challenge to exporting!

Tom Fletcher is a Market and Competitive Intelligence Analyst, specialising in MI & CI for SMEs, with particular interests in Challenger Brands and Guerrilla Marketing.