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BLOG: The grass is greener on the other side

John Henderson | April 8, 2013
More and more businesses in mature economies are expanding overseas but four main challenges are emerging.

Increasing disposable incomes in developing countries coupled with stagnating markets in more mature economies are unsurprisingly leading more and more businesses to look at expanding overseas.

Such action is actively encouraged by governments. For example, US President Barack Obama has proposed a doubling of the country's exports between 2010 and 2015, while in Britain Prime Minister David Cameron has urged businesses of all sizes to export in order to boost growth. Singapore has also jumped on the bandwagon with the implementation of a Market Readiness Assistance Grant to help encourage more local SMEs to expand their business overseas.  For the second consecutive year, research by Regus indicates that businesses that trade internationally are more likely to be increasing profits or revenues or both than those just trading in their domestic markets.

In an effort to find out which territories were felt to offer the best prospects and to understand the challenges facing companies tempted to venture overseas, the survey questioned more than 20,000 senior business managers and owners in more than 90 countries.

Globally, the findings indicate that companies are particularly drawn to the growing consumer markets in China, India and South America, but that North America and Europe continue to be attractive. Indeed, while nearly half of companies identify China as a target, nearly as many (41 percent) have their sights on Europe, while the 36 percent aiming to sell to North America is still ahead of the 31 percent looking at each of India and South America.

Looking East

In keeping with its reputation as an exporting powerhouse, Germany is seen as a key seller to China, with 56 percent of the country's businesses believing that it would be the most profitable place into which to expand. However, a large proportion of Germany's overseas sales are much closer to home, in the Eurozone. And the problems there have led to falling orders, with the result that German industrial production has dropped sharply - by 2.6 percent in October 2012 alone. Long considered a beacon of stability, Europe's largest economy is proving itself not immune to the difficulties being experienced by its partners in the shared currency and the Bundesbank has slashed its growth forecast for 2013 from 1.6 percent to just 0.4 percent. It is, then, little wonder that so many German companies are looking longingly towards the Far East.

In contrast, Singaporean companies are looking at expanding into markets much closer to home. More than three-quarters (77 percent) have their sights on Southeast Asia, while 66 percent are keen on moving into China and India being third most favoured country for expansion at 36 percent. The high number of businesses looking to step into markets closer to home could be fuelled by a drop in demand, by more than 50 percent, in traditional key markets such as the European Union and the US as well as the cultural similarities with other Asian nations. Many Singaporean businesses are overlooking the opportunities present in economies such as Brazil and the UAE which only account for 0.03 percent and 1.13 percent of Singapore's total exports respectively.

 

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