At NorthStar Consulting UK, Internationalisation is a cornerstone of our approach to SME strategy.
In the current UK economic climate, expanding into global markets is more crucial than ever.
This article explores the latest developments in internationalisation for UK SMEs.
Before diving into what makes a successful internationalisation strategy, let’s examine the current landscape for UK SMEs.
The Funding Gap: A Persistent Challenge for UK SMEs
Despite this, they face a significant funding gap, estimated at £56 billion.
Traditional banks have tightened their lending criteria, particularly after financial crises and the pandemic, leaving many SMEs struggling to secure essential loans.
This funding gap has led to a shift towards alternative financing options. Peer-to-peer lending and fintech solutions have gained popularity as more accessible and flexible alternatives to traditional bank loans.
These innovative methods are increasingly seen as viable solutions, offering SMEs a lifeline in an increasingly cautious banking environment.
Emerging Trends: Sustainability and AI Integration in UK SMEs
Sustainability is no longer just a trend—it’s a fundamental business requirement.
UK SMEs are under growing pressure to adopt sustainable practices, driven by regulatory demands and shifting consumer expectations.
Aligning operations with environmental goals is now essential for maintaining competitiveness.
Simultaneously, the rise of AI, particularly generative AI, presents new opportunities for SMEs to streamline operations and enhance customer engagement.
However, these advancements require investment in technology and skills, adding complexity for businesses striving to remain competitive.
These trends highlight the dynamic challenges UK SMEs face, underscoring the need for strategic adaptation to thrive in 2024 and beyond. This is where internationalisation can be a game-changer.
Our SME Navigator has been actively analysing data, reports, and working with partners and customers across East Asia.
Here are some important updates and tips for SMEs looking to stay competitive globally.
Digital Platforms: A Gateway to Global Markets
Digital platforms like Alibaba and Amazon have made it easier for SMEs to reach international customers.
However, relying solely on these platforms can expose businesses to significant challenges.
A successful global strategy requires more than just an online presence; it demands careful planning and local partnerships to navigate logistical and regulatory complexities.
Why? There are multiple reasons which are all linked to three major pitfalls:
Pitfall 1: The Need for Reliable In-Situ Partners
Logistical challenges, particularly with shipping and customer service, often arise when using Digital Platforms that offer SMEs to simply open their account and ‘start selling’.
For example, international shipping can be expensive, and passing these costs onto customers may render your products less competitive.
Platform fees and the preference for local brands in markets like Asia further complicate matters.
Additionally, customers in regions like South Korea, certain U.S. states, and parts of the European Union may face steep customs duties and import taxes, leading to dissatisfaction and higher return rates.
In markets like China, unpredictable customs procedures can cause delays, unexpected fees, or even loss of goods during clearance.
Using local platforms like WeChat and having a trusted in-country partner can mitigate these risks.
A local partner can navigate market intricacies, ensuring smoother operations and more reliable delivery, which is crucial for maintaining customer satisfaction and trust.
Pitfall 2: Regulatory Compliance
Entering a new market requires adherence to a new set of rules. It’s a misconception that selling on an international platform exempts businesses from local legal compliance.
This couldn’t be further from the truth. From GDPR in Europe to diverse consumer protection laws in Asia, regulatory compliance is essential for building trust with customers and avoiding costly penalties.
SMEs must view compliance as a strategic advantage rather than a barrier. Ensuring adherence to local laws differentiates your business from competitors who might overlook these critical aspects and helps avoid formal issues with the platforms you choose to sell on.
For example, Amazon has specific requirements for alcohol resellers online, varying by product type, alcohol content, and country.
Non-compliance can lead to product invisibility on the platform, and failure to quickly adapt can result in hefty fines. These delays ultimately hinder profitability and revenue.
Pitfall 3: Platform-Specific Considerations
Understanding the nuances of each digital platform is essential for success.
Platform fees, competition levels, and customer demographics vary significantly between Amazon, Alibaba, and others.
Ensuring that your business systems integrate seamlessly with these platforms—whether it’s inventory management, CRM, or accounting software—is crucial to maintaining operational efficiency.
Moving beyond homemade websites and embracing comprehensive, agile platforms can help you stay competitive without inflating maintenance costs.
What Lies Ahead for SMEs that Adopt Internationalisation
International Financing:
International expansion often requires additional funding, and the options available to SMEs are more diverse than ever.
The UK government’s programmes such as Innovate UK, UK Export Academy Programme or the UK international programme funds are offering valuable funding opportunities and information that can truly support SMEs’ internationalisation efforts.
Additionally, while traditional bank loans remain a staple, many businesses are now exploring alternative financing options, such as venture capital, crowdfunding, and international grants. There are plenty of examples of crowdfunded projects.
At NorthStar Consulting we actively engage with funding opportunities, International and UK-focused grants applications to boost internationalisation efforts for micro and small companies and we have plenty of experience.
Technology Integration
Technology is a powerful enabler of internationalisation. We always talk about technology, innovation and digitalisation because these are becoming important assets.
Customers are changing, the concept of “experience” doesn’t end with a well-designed website but it has to remain consisted throughout the customer journey.
From AI-driven market analytics to blockchain for supply chain transparency, the right technology can give SMEs a competitive edge in global markets. Go ahead and read our very own “INSIGHTS HUB” to understand why technology and innovation must be embedded into a good internationalisation strategy.
What is left to say then?
Understanding the importance of local partnerships, navigating complex regulatory environments, and managing the logistical challenges of global shipping are critical to ensuring a smooth and profitable entry into new markets.
By proactively addressing these potential pitfalls, businesses can better position themselves for long-term success on the global stage.
Find out more about how we can elevate your business today!
