Event Review: How to succeed in the global economy – tales from the frontline
How to achieve success in the international export market was the subject of a lively debate hosted by Russam GMS at their offices in London last week.
Ian Joseph, Managing Director, Russam GMS, Chaired the debate and started by taking a look at the prospects for exports in 2015.
Quoting Open to Exports, the government-backed online export community sponsored by HSBC, he said that small business exporters are confident about their immediate prospects. 78% of business owners and managers believe 2015 will be better than 2014.
He also said that the British Chamber of Commerce expects export growth to increase to 4.1% and 4.6% in 2015 and 2016 respectively and that businesses are more likely to survive if they export.
Ian then introduced the panel of speakers who had come to share their tales and experiences of working internationally.
The speakers were David Richardson, Interim CEO at Crown Agents, also a former CEO of LGC (the international market leader in laboratory services) and Mediterranean Airways. He was joined by Patrick Laredo, CEO of X-PM and Chairman of WIL Group, Ian Manzie, International Trade Advisor at UKTI and Chris Bell, Partner at private equity company, Bridgepoint, who leads the manufacturing division.
Hiring exceptional local people
Hiring local people who understand the local business culture is critical for success, the experts agreed.
David Richardson recalled dealing with a bombing incident at Beirut Airport in 2007 when he was CEO of Mediterranean Airways. He needed to evacuate a team of 17 stuck in Beirut and the local people stayed and helped get them out.
He stressed local people tend to be ‘capable, really committed and go way beyond the call of duty – so use them’. Crown Agents is currently working in Sierra Leone, helping a US Aid agency to handle the Ebola crisis, and in this situation they are highly reliant on the support of local people.
Bridgepoint’s Chris Bell said they discovered it was far better to use local people to run a business overseas, rather
than go down the joint venture route, giving away half the business.
When Bridgepoint set up in Beijing they engaged head hunters and went on a road trip to find the right person to run the operations. Each candidate was interviewed and was asked to introduce their contacts as part of the process.
This approach led them to find an outstanding manager who has made the business a huge success. Chris also stressed the importance of doing first hand market research like this rather than solely relying on analyst reports.
Ian Manzie said the UKTI is helping many British companies set up successfully in international markets and that its 100 plus offices are staffed with local people. They help build relationships for businesses and share their insight and knowledge.
Success is also dependent on forging good relationships with international teams on the ground. Good communication is vital which is made easier today by Skype and video conferencing.
However, there’s no substitute for face time and the experts agreed that regular visits from head office were vital as well as providing training and development for local teams.
One key question was how to retain good international recruits and prevent them from being poached if financial incentives aren’t an option.
X-PM’s Patrick Laredo said that his company has never overpaid people. He said people are happy at work when they have pride in their job, pride in their company and they have fun – if this balance isn’t right, they are vulnerable.
The opportunities for Interims in overseas markets
Patrick Laredo spoke of the growing demand for British interims to work overseas. He said British skills, professionalism and experience were prized highly.
He also introduced the WIL Group (Worldwide Interim Leadership Group) – a company set up in September 2014 to offer clients a truly global Interim Management service.
Comprised of international 13 members who are all leading Interim Management firms (including Russam GMS), WIL Group operates in 31 countries and helps clients source experienced people to lead complex transnational and multi-cultural assignments.
Clients can contact a local WIL Group firm and they will find local people to work in any country in the world. This unique approach is working. Patrick reported that demand has grown since the company launch and new members will join WIL Group soon. He also said the outlook for 2015 looks good.
The speakers agreed certain markets have great potential for 2015. These include Columbia, Mexico and China. Some markets in Eastern Europe, Africa and Brazil were considered most risky and difficult.
Finally, they advised delegates that when considering a market they have to see a real need for their products and services in the market or valuable resources they can tap into, make sure they get the right people on the ground and also innovate. All these factors are critical for success.
Exporting from the UK
What is the outlook for 2015? According to a report from Open to Export, the online export community backed by government and sponsored by HSBC, British small business exporters are confident about their immediate prospects and 78% of business owners and managers believe 2015 will be better than 2014. Open to Export polled over 400 British exporters, including over 270 business founders, at Export Week.
The British Chamber of Commerce expects export growth to increase to 4.1% and 4.6% in 2015 and 2016 respectively.
What are the government doing to encourage exports?
The Chancellor, George Osborne, revealed £45 million worth of export-friendly measures for small companies in his recent Autumn Statement.
The UK government has set a target of achieving exports of £1 trillion by 2020 – an ambitious target of more than double the current level of exports.
How many UK companies export?
Currently, one in five small businesses in the UK exports internationally, compared to a European average of one in four, according to figures from Forex comparison service Kwanji.
Businesses are 11% more likely to survive if they export according to the CBI.
According to the Guardian, most UK businesses with a turnover of between £25m and £750m are too conservative and reluctant to expand into fast-growing markets overseas, despite business confidence reaching a 22-year high.
Almost three out of five firms said they do not currently export, and less than one in 10 is considering exporting within the next five years.
Where do UK companies export to?
Britain’s biggest trading partners remain the developed economies of the USA, Germany, the Netherlands, France and Ireland. HSBC’s Trade Forecast expects Germany to overtake the US as the UK’s largest export partner by 2030.
The Open to Export survey found that the most popular new markets for exports are Europe (59%) and North America (44%). Other popular regions for export growth are: the Middle East (39%); Australasia (33%); and the Far East (31%).
The region that saw the biggest rise in export interest was South America, with 27% of SMEs planning to export there in 2015, with just 19% currently doing so.
Which UK industries export?
In terms of goods exports, the fastest-growing sectors will be industrial machinery and transport equipment, according to HSBC’s Trade Forecast, which expects those two areas to account for almost 50 per cent of the increase in the value of goods exported from the UK up to 2030.
The government has held up the automotive sector as a poster child for UK industry, as it seeks to rebalance the economy away from debt-fuelled spending and towards manufacturing and exports.
Almost eight out of 10 vehicles made in Britain are now destined overseas, with 5m cars exported since 2010, says industry body
Britain’s biggest export market for cars is the EU, but since 2010 China and Russia have overtaken the US for second and third spots in international sales.
What are the benefits of exporting?
Research by the UKTI has demonstrated that exporting (and trading) internationally helps businesses become more innovative, more competitive, more productive and more resilient.
Statistically companies that start exporting show a growth in productivity of 34% in their first year alone and companies with an export base grow 20% faster than those without. Companies tend to stall at the four year stage unless they are able to extend their sales base by exporting. Exporting can be transformative for businesses and companies are starting to trade abroad earlier in the lifetime of a company.
What are the barriers to exporting?
ECI Partners recent survey of 370 growth companies in the highlighted the following barriers to exporting more (in brackets is the % of respondents who cited this barrier):
UK regulation – 12%
Overseas regulation – 26%
Strength of Sterling – 24%
Foreign exchange costs – 11%
Lack of International expertise – 27%
Language barriers – 15%
Whilst some of these are more challenging to change (e.g. exchange rate) others can be addressed through more help/education from the government/CBI etc.
And, from the BCC:
Reflecting on their experience of exporting for the first time, service sector firms identify the biggest barriers to entering new markets:
- Excessive overseas regulation was the largest barrier to trading internationally identified by almost one third of service sector exporters (32%).
- One quarter of service sector exporters (26%) reported that language and cultural differences are a barrier to exporting
- Exporting firms also identified a lack of funding (24%) as a barrier towards exporting for the first time.
What are the challenges in exporting to India? (Government guide published April 2014)
India is a price competitive market. Government contracts are awarded to the lowest bidder who meets the technical specifications. Consumers often prefer lower prices to quality or durability.
- 7 major religions and many minor ones
- 6 main ethnic groups
As a result there are countless holidays which change depending on the year. Plan your visit carefully so it doesn’t fall within a holiday period.
Other challenges include:
- barriers to trade and investment in some sectors resulting from regulatory constraints, local sourcing requirements, and import tariffs
- protecting your Intellectual Property (IP)
- risk of bureaucratic delays
- land acquisition can be difficult
- risk of bribery and corruption
- access to the right skills in the local workforce
- poor infrastructure, including distribution and logistics as much of India remains rural
- weather extremes with extremely hot weather in summer and wet weather in the monsoon season can affect business
Trading between UK and US (Government guide published April 2014)
In 2012, UK trade in goods and services to the US was £135 billion, up 3.6% from the year before. Around 17% of all British exports went to the US in 2012. The US and the UK are each other’s largest foreign investors. This investment supports approximately one million jobs in each country. The TTIP could add as much as £10 billion annually to the UK economy in the long term. It could also add £100 billion for the EU and £80 billion for the US.
Top 10 UK exports to the US in 2012:
- machinery and transport equipment
- chemicals and related products
- mineral fuels, lubricants and related materials
- miscellaneous manufactured goods
- manufactured goods
- beverages and tobacco
- food and live animals
- crude materials
- animal and vegetable oils, fats and waxes
Videos from the Event
Ian Joseph – Russam GMS International Expansion Event, Monday 12th January 2015
Chris Bell – Russam GMS International Expansion Event Monday 12th January 2015
David Richardson – International Expansion Event 12.1.15
Patrick Laredo – International Expansion Event 12.1.15
Ian Manzie – Russam GMS International Expansion Event, Monday 12th January 2015
Audience Questions – International Expansion Event, Monday 12th January 2015