Global Trading for SMEs

English is one of the main business languages so why would you need to bother knowing any other language when trading in export markets?

According to the ELAN study focusing on use of languages within Europe, there is clearly either an issue of complacency based on the lack of implementation of language strategies in Anglophone countries (UK and Ireland), or simply a belief amongst companies in these countries that English is adequate for all trading purposes, which diminishes the recognition of languages as a means to increase trade worldwide.

Language and communication strategy

It has been demonstrated that the most effective performers amongst export SMEs tend to have a language, or communication, strategy. In the aggregated and total European samples, 48% of the firms acknowledge having a formal communication (or language) strategy. The UK with 3% and Ireland with 1%, deviate substantially from the norm.

One of the most self-evident steps for an international trader is to develop a website in another language to enter a new market. This is the most common tactic used amongst SMEs in relation to international communication. On average, 62% of the firms in the European sample have produced websites in other languages for the purpose of export, in Ireland this figure is a mere 5%.

The above statistics are perhaps far less surprising considering the modest levels of SMEs that do presently export, but one could argue that not overcoming the language and communication barrier to trade internationally is precisely one of the causes that more firms are not exporting.

Compete effectively

All of the above strongly indicates that there is an acute need for Irish SMEs to adopt a language and communication strategy in order to compete more effectively in the export markets. There are several ways in which a company may adopt a foreign language strategy:

• Employing people with relevant language skills is one of the most straightforward ways in accessing a foreign language skill directly, and would make sense for a company that will have to use the prospective language over a longer period of time and if the intention is to build long-term relationships with countries in which such languages are used. The downside is that a firm cannot hire an expert in each language of each export market one would hope to trade with and the cost to benefit ratio may be very low in the early stages of exporting.
• Choosing and using local agents in foreign markets who can speak your own language can be the first step in opening up a new, or sometimes unknown, market. The downside to this is being able to control the pace and scope of activities in the foreign country less effectively and not having a direct presence.
• Use of translators and interpreters – this option is used very little at the moment - only 4% of Irish businesses engage translators or interpreters. However, it can be a very flexible option as it offers the benefit of being able to trade directly with the chosen export country without loosing direct management control, and can also offer higher cost to benefit ratio than employing people with relevant language skills, especially seeing that this method offers easy access to a great variety of languages instantaneously.

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Franchising is - in short - the practice of 'transplanting' firm's successful business model. Some of the most successful and well known businesses that use franchising as means of growth and international expansion are in the area of Fast food (Burger King), Restaurant (Pizza Hut), Retail Shops (O2), Business Services (Kendlebell) and Distribution/Delivery Services (Fast Way). Almost any type of business is capable of being franchised.

Advantages of Franchising for the Business

Franchising offers the opportunity to secure distribution for your products or services more quickly than it would be the case if you had to train up your own employees and develop your own internal marketing, sales and distribution organization. The use of your capital will facilitate the expansion of a network more quickly than it would be the case if you had to engage in fundraising. Franchisors, with their increased purchasing power (and possibly reduced overheads) may be able to increase the profitability of small units and are likely to have lower gearing than non-franchised businesses, and as a result may be able to survive better in a recession. Linking performance to rewards i.e. turnover to profit sharing is a useful motivational tool that can be used in the franchising process.

In terms of advantages in the context of international expansion, as franchising means that you are effectively partnering with a local firm, many barriers to trade are overcome - such as the language barrier, the cultural barrier and the lack of local market knowledge. Other aspects need to be taken into account, especially with regard to the surrounding legal issues, as franchising is heavily contract based, also tax issues need to be carefully considered, and adequate protection put in place to preserve the intellectual property, just to name some of the key issues.

Methods of Overseas Expansion

Franchising is increasing in popularity as a means of international expansion. Many businesses which do not use the franchising format in their domestic market choose to adopt one of the franchise methods set out below to expand overseas. These methods are:

• Direct franchising - whereby a business grants franchises to franchisees in another country
• Establishing a subsidiary/branch in the target country which grants franchises to franchisees in that country
• Establishing a joint venture with a local partner to grant franchises
• Entering into a master development or master franchise agreement. Under a master franchise agreement the master franchisee undertakes to grant sub-franchises to third parties. Under a master development agreement, the master developer undertakes to open outlets itself rather than by way of sub-franchising.

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Do you operate in the services sector and want to start a business in another EU country? If you are, you might be interested to know about what EU-GO does and how it can help.

Thanks to the Services Directive, "points of single contact" have been set up in each Member State. They allow service providers to deal with and to complete their administrative formalities electronically when they want to do business across Europe.

Through this page you can easily access the points of single contact in each Member State and:

- obtain all the information about the procedures you need to complete for your specific services activity

- deal with all formalities needed to carry out your activities (without the need to approach various public bodies one by one)

- complete the necessary steps by electronic means.

http://ec.europa.eu/internal_market/eu-go/

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With many of Ireland's SMEs facing a fall-off in domestic sales, exporting is becoming a key survival tactic. The benefits of selling to overseas markets include increased sales and a longer lifespan for products and services, lower production costs, more productivity, less vulnerability to fluctuations in the Irish market, invaluable experience and differentiation from competitors. Before you jump in head- first, however, it is important to prepare carefully to sell into new markets.

Here is a seven-point check- list you can follow to help make the move:

1. Determine your export readiness
Look objectively at your business structure, processes and strategies. Assess whether your weaknesses will negatively affect any exporting activities and how your strengths may help. Ensure your production, storage and logistical operations can accommodate export sales. Review your business plan in line with your findings and reassess your financial requirements and projections.

2. Identify your target market
Concentrate on territories which provide you with the best prospects. First-time exporters may focus on a single country or limited number of countries and expand from there. Explore any strengths and weaknesses in the potential market so you can develop your export strategy around this.

3. Research your target market
Identify any regulations and prohibitions relating to exporting from Ireland. Consider the expectations within your export market in regard to standards, brand names, quality, appearance and packaging as well as usage. Understand the market size, growth and competitive environment. Valuable country specific information is published by the World Trade Organisation, EU Market Access Data base and OECD. You may then need to modify your current product or service offering or develop a new product or service for export.

4. Network
Social media like LinkedIn, Facebook, Twitter and Xing allow Irish SMEs to identify and connect with potential international business partners quickly and cheaply. Do not forget about more traditional networking avenues such as Chamber of Commerce events, formal trade networks, trade missions and trade fairs.

5. If you need help, ask
Talk to other businesses who have 'been there and done it' and share their experience and expertise. Liaise with organisations such as Enterprise Ire- land, the Irish Exporters Association and InternationalChamber of Commerce. Investigate whether support through a local Irish business network exists (such as in the US and Germany).

6. Form local partnerships
Having a local partner takes away a lot of uncertainty and removes many barriers to entry they speak the local language, are familiar with the culture, provide local market knowledge, experience and connections, as well as being able to deal with regulatory and administrative issues as they arise.

7. Harness the power of e-commerce
A commercial website can offer you instantaneous access to global markets and global advertising. However, careful planning and research is required for e-commerce. Starting small and keeping it simple will help form a solid base for the growth strategy.

This article was published in the Sunday Business Post on 3rd July, and on the 'Small Business Can' Blog.

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• It is updated five times a week with approximately 1500 public procurement notices from the European Union, the European Economic Area and beyond.
• You can browse, search and sort procurement notices by country, region, business sector and more.
• Information about every procurement document is published in the 23 official EU languages. All notices from the European Union's institutions are published in full in these languages.

TED gives you:

• direct access to public calls for tender from across the EU and Europe as a whole;
• on average 1 500 new notices every day, which means hundreds of potential business opportunities for you;
• official, reliable and legally binding contract information from all sectors of industry and business, as well as the EU institutions.

How to access TED

• via the TED website: http://ted.europa.eu
• by using the OJ S DVD-ROM, available once a week on subscription from the Publications Office sales agents: http://publications.europa.eu/others/agents/index_en.htm
• from authorised licence-holders: info@publications.europa.eu

Note: Low-value contracts are not usually advertised in TED. Those with a value between EUR 25 000 and 60 000 may be found on the web pages of Commission departments intending to organise a procurement procedure. A directory of these pages can be found at: http://ec.europa.eu/public_contracts/index_en.htm

Read more on EC Public Procurement in the information Brochure 'Doing Business with the European Commission - Tips for potential contractors' http://ec.europa.eu/budget/library/biblio/publications/business/doing_business_en.pdf

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Ireland Concentrates only on 5-6% of the EC Funded Programme under FP7 framework and is instead concentrating on tendering in the declining domestic market

Denmark wins 10 times more contracts in the external markets of the International Financial Institutions (IFIs) compared to Ireland

In contrast, 18% of Irish tenders are won by foreign firms, as many European companies are able to submit tenders in English - compare this to only 4% of publc tenders being won by foreign firms in Denmark, France, and even UK

Opportunities in public sector can be tracked in over 200 countries and they are worth over 800 billion USD/p.a.

There are 5000 new tenders each day - equaling to 1.5 million tenders p.a.

On average, on any given day, there are 200 000 live opportunities available

As a comparison, there are 114 opportunities available in Ireland compared to 1200+ in Poland, 2300+ in France and 757 in Romania

EC contributes a lion share of opportunities by way of funds under the 2007-2013 Programme valued at 975 billion Euro, in addition to the Community Programmes and Structural/Cohesion Funding of further 347 billion Euro

There are many advantages to getting engaged in public procurement: secure payment, up to 60% is paid in advance, IFI work is 'recession proof', and english language is an advantage!

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I have read that, according to a study published by ISME in October 2010, a good 50% of Irish Businesses expect a deterioration in business conditions over the following 12 months, while 60% confirmed that their sales are down and that the expectations of future revenue is low.

Key survival strategy

I have been stressing that as small businesses face a decrease in domestic market sales and prospects of having to downsize, developing export activities is becoming a key survival strategy. Irish SMEs are perfectly placed to export. The analysis undertaken by the European Commission for Enterprise and Industry has shown that Irish SMEs excel strongly in the area of Entrepreneurship, Skills and Innovation and Responsive Administration. Irish SMEs are also far more active in Internet based trading and have a higher share of new products or income from new products.

Despite this, the EC Eurobarometer has shown that in 2007 (at the height of the economic boom!) only 11% of medium enterprises in Ireland have had income from exports. This is a disappointing figure, considering that some other small open economies have performed significantly higher, for example Slovenia with 21% and Finland with 19%. To add insult to injury, majority of exports have been attributed to foreign companies established in Ireland.

Facing barriers

It is widely acknowledged that SMEs face numerous institutionalised barriers to trade internationally, such as different legal systems, contract law, consumer law, differences in licensing laws and standards, different taxation systems and product liability rules. This, coupled with other barriers to trade including language, culture, poor access and a lack of market information has resulted in most Irish owner managers holding little enthusiasm for the exporting opportunities, exporting being something that is being perceived as ‘too difficult to do’.

Such businesses miss out on the significant benefits exporting can deliver, such as increase in sales and increased lifespan for products and services (due to access to new markets), decreased production costs and increased productivity (from economies of scale and better use of resources), decreased vulnerability to fluctuations on the Irish market, as well as increased expertise/experience and differentiation from competitors.

'Made in ireland' is such a valuable brand with strong international reputation, more small businesses should use this to their advantage and give exporting a go.

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