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The shipping forecast

The shipping forecast

Publicerat av Tony Harkén Sunday, 24 February 2013.

Businesses highlight most profitable areas for expansion and major challenges by Mark Dixon, Group Chief Executive

Exporting remains a vital part of the global economy, aiding growth and levels of productivity and thereby forming a key part of the fight to get out of the recession and kick start growth.

With access to a broader range of suppliers and a wider customer base, as well as less reliance on a single market, the UKTI points out that those businesses who are exporting gain advantages over their rivals by firming up their profits and achieving economies of scale not possible domestically.[1] Variations in currency value can also affect exporter's performance with, for example, the German automotive, the European chemicals, aerospace and luxury goods sectors benefitting from a weak Euro. [2]

The latest Regus survey, canvassing the opinions of over 20,000 professionals across more than 90 countries, has, for the second year in a row, confirmed that exporting companies are indeed more likely to see increasing revenue and profits than those who operate only domestically. While 59% of international businesses report a rise in revenue, only 47% of domestic focused businesses say the same. There is an even wider margin between the 50% of exporting businesses who experienced a rise in profits and the 38% of domestic firms.

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[1] http://www.ukti.gov.uk/uktihome/news/110615.html

[2] The Financial Times, Exporters reap the benefits of weak euro, 12th August 2012

 

Aside from their domestic market, almost half of businesses globally agree that China, with its growing middle class and increasing pro capita income, is the ideal region for expansion.

Europe – in spite of concerns over the Euro- follows as ideal destination, no doubt favoured by long-term existing export ties within the Eurozone and the presence of stronger economies such as Germany and the UK. North America (36%), India (31%) and South America (31%) are hot on their heels.

But despite its positive yields, a number of challenges face firms wishing to establish a presence abroad. 60% of businesses identified property and paper work as a major hindrance to their expansion into foreign countries and 44% rated risk management as a hurdle. Not only must businesses be protected against the prospect of natural disasters, but also the country specific challenges of political instability, weak legislation or enforcement and the threat of protectionist policies. Another hurdle for businesses wanting to set up shop abroad is the management of local taxation systems (43%) and 42% businesses believe that the difficulties of building an image abroad is a deterrent.

Some interesting differences appear between different company sizes and sectors. Smaller businesses are more closely aligned with 45% thinking that China or Europe are the most profitable areas for their export plans, and 39% favouring North America. Large businesses, on the other hand, are far more likely to opt for China (56%) with significantly fewer opting for Europe or North America. This suggests that larger businesses are better equipped to manage expansion into China than smaller firms.Small firms (63%) are also much more concerned about property and paperwork than large firms (55%).

On a sector by sector basis, the results show that China is particularly appealing to manufacturing and retail businesses thanks to its booming consumer spending power and low production costs. Businesses may also be wishing to move production closer to lower cost suppliers. Europe remains a very appealing destination for media (46%) and consultancy (44%) businesses. Building an image abroad is a major concern for consultancy businesses (48%) and media businesses (44%), and managing local taxation an regulations is of particular concern to banking and financial businesses that must perform meet national demands and those of different financial authorities, and retail firms whose production process, materials and licences must all be placed under new scrutiny.

In order to reap the benefits of exporting activity, business need access to support and options which enable them to face major challenges. Wherever they choose to expand, businesses will need to remain nimble in a volatile market and react rapidly to changing circumstances by downscaling or up-scaling operations. Flexible workspace is critical to achieving this agility as businesses that are intimidated by lengthy leases are enabled to enter foreign markets and withdraw if required without substantial losses.

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Tony Harkén

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