The government's goal was to double exports to £1 Trillion by 2020. We are less than 60% of the way there.
One reason for this is that many businesses do not have the tools, processes and resource necessary to trade compliantly and ultimately profitably - some only see risks in exploring outside their home market. Every international order in a new or existing market with a customer requires compliance to customs requirements, export controls, anti-fraud measures, 3rd party screening, etc.
Doing it profitably requires a firm grasp of commercial processes such as customer due diligence, evaluating risk of delay, dealing with fluctuating exchange rates, getting finance or credit insurance and guarantees, or assessing working capital needs, agreeing pricing and payment terms, product market localisation. Traders, therefore, must organise themselves effectively.
According to a study by Maersk in 2014, about 30 people and organizations are involved in the shipment of a product using a shipping container, resulting in over 200 separate interactions, each requiring a new set of documents, and earlier communication to determine duties and tariffs, carry out certification and organise valuations. Involving financing and credit insurance adds a level of complexity that is often simply overwhelming.
Many small firms under £2m turnover rely on an owner-manager or one or two key individuals. We surveyed this group revealing that 55% rely just on the CEO/owner to run the entire export process and a further 10% still need the involvement of the CEO/owners themselves.
A typical medium to large enterprise organises themselves to better spread fixed costs across many transactions. As these organisations are often serving many countries, each full time employee can cover 4-5 countries according to industry benchmarks. These businesses get tailored support from banks and specialist service providers, and they have greater choice of available technology solutions. In this way larger entities are more able to withstand uncertainty in periods of change, such as now.
However, if well-prepared, smaller businesses can be more nimble than a badly organised large business. And in an environment like today, more nimble means more profitable.
This continues in the next post