Small Businesses, Big Ambitions

Small businesses play an important role in building a nation’s economy. According to a survey by the India Brand Equity Foundation, small and medium enterprises account for almost 45% of total industrial output and around 40% of total exports of India. The next step in any small business’s journey is to go global and work towards internationalism. However, many barriers are opposed to these small businesses, resulting in failed internationalism attempts. According to the latest business statistics, 50% of small businesses don’t survive more than five years. This is because they cannot expand and grow due to a lack of investment or managerial shortcomings. 

One of the most common and important barriers is financial barriers. As many as 80% of small businesses fail due to a shortage of finances. These include financial difficulties, lack of resources, and operating costs in a foreign country. Every country has a different set of regulations it places on businesses. To adhere to those regulations, small businesses need ample resources. 

Lack of managerial knowledge was seen as one of the top barriers for small businesses struggling to achieve internationalisation. According to a survey conducted in the US and Canada, lack of managerial risk perception and the inability to understand the international market were the top barriers for around 45% of small businesses worldwide. A study also revealed that 70% of deals between American and Indian small businesses failed because of differences in the managerial perception of executives from both sides. 

When a company enters a new market, it thoroughly researches the market, including the price of products and services, market size, potential, and regulations. However, a lack of understanding of international markets can result in hefty losses. In a study conducted by Australian firm EFIC, inadequate knowledge of the international market was one of the top barriers to small business internationalisation. According to EFIC, almost 30% of small businesses could not go global because of inadequate market research. 

Communication is very important in businesses. Lack of communication can result in losses and reduced market size. Recent surveys done in many countries also reinforce the importance of this barrier to small business internationalisation. A study conducted in the UK by Crick, Barnes and Colleagues stated that obtaining the perfect representation in the international market is very tough, and small businesses should aim to partner with a local firm to gain confidence in the international market. 

Indian small businesses are growing daily, and every small business aims for internationalism. However, the owners and other entrepreneurs do not understand the barriers these businesses face. Understanding the barriers that can come your way is the first step in devising a game plan to fight these barriers.

Leave a Reply