Exports are usually considered the domain of large companies with deep pockets. However, extensive data indicates that it is as beneficial for small businesses to engage in international trade as it is for large companies. The following are the top 10 reasons why small businesses should focus on exports:
1. Reduce dependence on domestic market:
Often, small businesses don’t have the wherewithal to cope with saturation in domestic markets. In such a scenario, having an export market enables them to remain in business and have a steady revenue stream.
2. Combat recession:
When a country goes through a recessionary phase, domestic purchases often show a decline. At such times, small businesses need to diversify their market base by exporting their goods and services. Having a ready line of export comes in handy to combat the negative impact of a recession.
3. Expand sales:
A diversified export market makes sense for small businesses, as it enables them to expand their sales. It is often easier and more remunerative to tap a completely fresh market than try to squeeze an existing one.
4. Tackle bigger companies:
Small businesses may find it difficult to compete with large companies in the domestic geography. One reason is the awareness of the difference in the brand equity of a large company and a small company among the local populace. Tapping an export market can overcome this issue, because overseas buyers would not make the kinds of comparisons that domestic buyers might.
5. Enjoy pricing flexibility:
Small companies often have more flexibility in the pricing of their goods and services in an export market than in the domestic market. This is because bigger companies can afford to lose margins in a crunch situation to consolidate a market. Rather than waste precious resources in competing with bigger companies, smaller businesses can find it more profitable to export.
6. Derive economies of scale:
If a small business has excess production capacity, it will be more profitable for it to produce more rather than less, and sell the excess in an export market. This way, a small business can derive economies of scale.
7. Extend product life cycle:
A product may become obsolete in one market, but still have relevance in another. It is very useful for small businesses to cash in on opportunities such as these and extend the life cycle of a product by selling it overseas.
8. Enjoy faster growth:
Surveys of global businesses have shown that companies that export tend to grow faster than those that don’t. This is true of smaller businesses, too.
9. Derive benefit of seasonality:
Small businesses involved in selling seasonal products benefit greatly by having an export market. By resorting to exports, a company can turn idle inventory into sales and generate year-long revenue.
10. Tackle competition:
If the domestic market is very competitive, it is always beneficial for small businesses to tap into an export market, rather than compete with the big guns.