How start-ups and small businesses are expanding their horizons

Moving into overseas markets may seem a growth option only suitable for big or established firms but there's a growing trend of smaller businesses with exporting in their DNAs. Professor Pavlos Dimitratos shares his insight into this phenomenon and what it means for UK businesses.

Lead of International Business and Enterprise, Adam Smith Business School, University of Glasgow

Professor Pavlos Dimitratos is the Lead of the International Business and Enterprise research cluster at the Adam Smith Business School, University of Glasgow. He is also the Chair of the Academy of International Business - UK & Ireland Chapter His expertise covers a number of international entrepreneurship and international business areas including small firm internationalisation and Multinational Enterprise Subsidiary.

There are two sides to this trend of entrepreneurial small businesses seeing the world as their marketplace.

There are those that are 'Born Global' - businesses that go abroad or export from day one. They are characterised by their inherent internationalness and the speed with which they reach into overseas markets and exploit new territories.

Then there are the Micro-multinational - enterprises (mMNEs) that are defined by their physical presence overseas, again from using more advanced ways to go international (alliances, subsidiaries). Some firms are both 'Born Global' and 'Micro-multinationals', maybe exporting their goods or services overseas quickly and also forming a joint venture in a new territory, for example.

The characteristics of Born Global firms

This is not necessarily a new trend - businesses like this have been around since the 80s and 90s, but the speed with which these types of businesses emerge has increased and will continue to do so.

What's driving the Born Global/mMNE trend?

There are a number of factors that have combined to create the ideal environment for these businesses to emerge.

  1. Technological advances - particularly in the communication and transmission of ideas. Social media and the internet are lowering costs and making it easier for entrepreneurial small firms to sell into new markets.
  2. Lowering of political barriers - the removal of the old trading and political blocs has seen huge opportunities for businesses to find and trade with new markets. Despite Brexit and Trumpism, global trade is re-defining the political landscape. Cross-border transactions are easier than ever, lowers the opportunity cost for smaller businesses.
  3. New markets - from the BRICS to the CIVETS there are new opportunities for UK businesses to reach beyond traditional markets. The rise of Asia as an economic force is also creating opportunities for collaboration and we've seen a number of early-stage UK businesses receiving direct investment from China, for example.
  4. Levelling effect - there's a realisation that the size of a firm is less of a risk factor than people have tended to think. It used to be the case that only when a firm grew to a reasonable size could it look overseas. Now, as long as you have something to sell into a potential market, size isn't an issue. The smallest firm can find a niche. Those small firms also tend to be more flexible and can react more quickly to changing market opportunities.

Seizing the opportunities of global trade

For small businesses and start-ups in the UK, the message is 'think global'. There are opportunities everywhere if you have a product or service that offers value to the global consumer. Of course, practical barriers do remain. It can, for example, be tough for smaller businesses to manage the tacit rules and trade barriers that exist in many countries - red tape, regulation and finance can seem insurmountable.

However, here in the UK, there's a vast amount of support to help businesses deal with many of these practicalities and to get ahead with exporting. The importance of networking here shouldn't be underestimated. In my mind, it's the number one vehicle for helping small or start-up businesses to go abroad fast.

Being competitive

Of course, it isn't just businesses in the UK that are born global. What this trend also does is to increase the amount of competition in the system overall. Your competitors aren't just the firm in the next town; competition comes from all over the world.

Born Global/mMNE offers significant opportunities for business growth. A common path for these entrepreneurial firms is that their success and profitability makes them a target for acquisition down the line. In an increasingly global marketplace, it may be that those that fail to adapt to this trend are left behind.

Your competitors aren't just the firm in the next town; competition comes from all over the world.

Defined by outlook not size

You have to look up, broaden your horizons and benchmark internationally against the best in the world. It requires a change of mindset, but it's also a risk factor that can be mitigated by central government policy inspiring a more cosmopolitan outlook amongst start-ups and small businesses, and a tax and tariff environment that strives to level the playing field on a global basis.

Ease of travel and communication is making the world more accessible, globalisation is opening up new markets and the opportunities for trade are now open to businesses of all sizes.

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