| Plexus Consulting Group | Articles by Plexus Authors | ||
|
Bigger May Not Be Better for Associations
Planning to Go Global |
|||
|
Author
|
|
Cross-border investments and sales are booming and all evidence indicates this activity is growing fastest among small and medium size enterprises companies that have obscure names that also make up the bulk of the membership of most associations. Whereas the international business scene used to be the reserve of an exclusive group of giant companies, for the past 5 years the bulk of new entrants into the international arena have been smaller, middle market companies. For example, a recent international survey of middle market companies (those with annual sales or assets of less than $500-million) showed that 86% had sales outside their own country. And another survey of the small and medium size businesses of the American Business Conference indicated that 24% of their total revenue was derived internationally. This same group projected an average compound growth in international sales of nearly 20% - twice the rate of most large multinational corporations. There are many reasons for this development Capital markets, for example, have been increasingly open to all types and sizes of investors. Today, success is less a fur-on of size. The most successful companies have a quality product good marketing instincts, and an adaptive and client-focused management structure. Given the pace of these changes, "big" may even be a handicap. The priority for most big companies today is to find ways to become as fast and flexible as their smaller competitors. Clearly there are many opportunities in the international arena for your smaller business members. There are also a good number of risks; and since small businesses do not have the cushion to absorb the shocks that are inevitable in a trial-and-error method, the key question nagging most of these players is how to minimize risk. The first method of reducing risk is by doing business primarily in developed markets of North America, Western Europe, Japan, and parts of the Pacific Rim. Although not growing as fast as Latin America and other regions, these markets are more stable and predictable. Although trade agreements such as GATT and NAFTA have minimized international trade barriers, linguistic and cultural differences and the effects of sheer distance still represent obstacles to business transactions throughout the world. In a recent multinational survey small businesses engaged in international trade were asked to list their concerns or needs The first 3 were: uncertain legislative and business environment; obtaining market information; and finding and obtaining financing. When asked how they dealt with these concerns, the first 3 responses given were: they got on the plane, went to the target market and did whatever they needed to do themselves; they relied on outside advisors; and they relied on govt resources. The second reveals some interesting client-service opportunities for trade associations. Law and accounting firms have traditionally provided the legal and financial advice and market intelligence that international businesses have required over the years. These professional service firms witnessed events such as signing of GATT and realized what these developments would mean to international trade and investment. Few of these firms, however, have known how to capitalize on the growth opportunities of that market sector represented by middle level and smaller companies. Part of the reason has to do with return on investment. Most large law and accounting firms are not willing to spend the time or money to serve a "small" client. The question is: from whom do these fast-growing, smaller companies obtain their professional services, advice and information? The answers differ from country to country. In Europe and parts of Asia (especially Japan and Korea), if these small companies venture abroad at all they generally do so under the guidance of their govt or national business promotion body. In the US, this is usually not the case. For a host of reasons that are not likely to change anytime soon, US businesses consider their govt a hindrance rather than a help. Neither do US businesses have anything like the powerful Keidanren or a CNPF (respectively the Japanese and French natl employers organizations) to help them compete internationally. Lack of information about financing opportunities, market information and regulatory and legislative issues is clearly a problem for small and medium sized business venture abroad -and as such, these represent potentially valuable new service opportunities for US trade associations to be providing their membership. Your association has no interest in business outside the US? Take a closer look. The chances are good that your association's members are not only interested in international trade and investment opportunities, they are probably already engaged in them! Look especially at your smaller members, since these are the most likely to engage in these practices. It is also the area where your association can make the most difference. As a trade association manager, the more important question is what should these services your association provides be and how can you association best provide them. Concerned that building an international service operation takes more time and money than they have, associations may be tempted to give up before they begin. But as small and medium size businesses have proven, one does not have to be big and wealthy to succeed in the international business marketplace. Take your cue from these small companies and discover the array of resources that are available to anyone with a desktop computer and modem, and start developing your international networking skills. |
|
Reprinted by Permission