The importance of global connectedness for SMEs

Frank-Uwe Ungerer, country manager, DHL Express, UAE, explains why the region’s SMEs need to have a broad outlook
The importance of global connectedness for SMEs
By Frank-Uwe Ungerer
Tue 06 Jan 2015 01:44 PM

SME landscape in the Middle East

The Middle East business landscape has long been characterised by small to medium enterprises (SMEs). SMEs are the lifeblood of regional commerce and the backbone economic activity in the United Arab Emirates (UAE).

With SMEs currently accounting for approximately 90 percent of the UAE’s business landscape the sector is a vital driver of the country’s economic growth and development and international trade plays a vital role for their survival despite the risks and cost associated with expansion.

Trading across borders can be a time-consuming, complex and risky business. Researching market opportunities, finding partners and distribution channels, negotiating licenses and permits, navigating customs, establishing production and building a customer base in an overseas market usually require considerable financial firepower, resources and political connections, all factors that favour heavyweight businesses.

Internationalisation

In a recent DHL study, produced in conjunction with IHS, the leading global source of information and analytics, it was discovered that those SMEs that trade internationally are likely to perform better than their single market counterparts.

SMEs typically employ nearly half of a given national work force (around 35-45 percent); contributing 30 percent to 40 percent of national value add, according to the IHS research. In spite of this contribution to national economies, they remain relatively poorly understood.

The study also discovered a growing trend towards internationalisation among SMEs. The research revealed an increasing pace of globalisation and a sharper international focus among smaller businesses.

Of the SMEs surveyed, 26 percent of companies trading internationally significantly outperformed their market, in contrast to only 13 percent of those with operations only in their home country.

Research shows us that advanced economies have not kept up with the big shift of economic activity compared to emerging economies, this has therefore resulted in declining breadth of global connectedness and there is now a reliance on emerging economies for survival.

Emerging economies are the ones to watch as they are reshaping global connectedness and are the ones most involved in current international trade interactions. SMEs in this region have an advantage as they are situated between the East and the West and can tap into global connectedness in both developed and emerging markets for future growth.

By clearly demonstrating how those forward-looking SMEs which adopt internationalisation as a driver for business performance we hope the study may inspire other SMEs to expand operations overseas.

Growth opportunities and obstacles

According to findings of an in-depth study conducted by the Economist Intelligence Unit (EIU) on behalf of DHL Express, the majority of SMEs see growth opportunities internationally and expect to derive up to 50 percent of their revenues internationally in five years’ time.

The study also reveals that severe obstacles remain for smaller businesses with global aspirations, these challenges include political instability, cultural factors, different market environments and inadequate infrastructures.

DHL Express

DHL was a brash, upstart small business once. Thanks to aggressive international expansion in the 1970s and 1980s and a ‘first mover’ philosophy, we have grown into one of the world’s most international companies. That was a different time, and we’re a very different (and heavyweight) company today, but we still have a keen eye for the opportunities of international trade.

SMEs may have to learn to compete in different ways and to make best use of all resources available to them in order to hold their own on the world stage. However, with good planning, a well-designed supply chain, a clear understanding of their competitive strengths and the right mindset, even the most lightweight of businesses can outperform the global heavyweights.

As a leading logistics provider, DHL has a number of products and services designed to support the region’s growing SME sector enabling them to meet the challenges of globalisation head on. These products include Webship; shipping online using a credit card without the need to open an account and MyDHL; an online portal which has many functionalities such as sending, managing and tracking shipments to name a few.

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