Much has been written in recent years about how SMPs are experiencing a growing number of commercial challenges that are disrupting the client services they have traditionally relied upon for revenue.
Equally, many have argued that more SMPs need to consider whether diversification into new advisory services could be the key towards the sector’s future success. However, such change can be difficult when talent flows in the sector are uncertain and competition is fierce.
Whilst not appropriate for everyone, ACCA was therefore interested to explore whether international trade is one area where SMPs’ unique experience and expertise might lead to the development of new service provision.
Our findings suggest that many SMPs are equipped with an excellent platform towards providing additional value-added support to clients. However, despite SMPs stating that most of their clients had been involved in some form of international activity over the last three years, their current provision of relevant support remains highly focused around a small number of limited areas.
The new report, Growing Globally – How SMPs can support international ambitions, also revealed the following about internationalisation and the relevant advice landscape for SMEs.
Although the research was global, specific findings from five key markets have also been extracted and presented. These markets are Ireland, Malaysia, Nigeria, Singapore and the UK. They were selected on the basis of their representation of markets in various stages of economic development, and their global and regional importance to international trade.
SME internationalisation today
- Just under half (45%) of SMEs said the main benefit of internationalisation was access to new customers in foreign markets. Increased profitability (35%), faster business growth (33%) and access to new business networks (30%) followed.
- Both SMEs and SMPs considered ease of doing business and high growth potential as the most important factors when choosing an export destination. Geography was seen as less important, which may be a result of new technologies reducing its significance as a perceived barrier.
- Both SMEs and SMPs recognised foreign regulations as the most significant barrier to internationalisation. For SMEs, the second most important was competition (27%) though for SMPs it was foreign customs duties.
- In terms of the future, SMEs’ international ambitions are focused on building the capacity of their business (45%), building networks in foreign markets (45%) and introducing or developing more products and services to market (44%).
The advice landscape
- A wide breadth of professional advice and support is used by internationalising SMEs, who tend to reach out to different sources as they move along their internationalisation journeys. Government or relevant public agencies (39%) are the most widely used source of professional advice, closely followed by lawyers (35%) and then banks (33%).
- Accountants are most likely to be used by SMEs when looking for support on international tax, regulatory compliance, foreign exchange and accessing external finance.
- Only 9% of SMPs said they had no clients who had been involved in any international trade activities over the last 3 years. Importing and exporting activities were the most common, as was participating in broader international supply chain networks.
- SMPs mainly rely on internal and informal resources when advising clients about internationalisation. However, this gradually shifts towards a reliance on more external and formalised resources as practices grow in employee size.
- Just under half (47%) were not members of any networking organisation, potentially missing out on valuable resources that could enable the development of more effective forms of international support.
Using these findings, ACCA conducted a series of interviews and roundtables with SMPs and SMEs globally. The subsequent insights were used to develop recommendations on how practices can look to develop their international advisory provision.
- Specialisation is key – For those developing their international advisory provision, it is vital to first identify an area of the market where you believe your practice has the opportunity to effectively develop its expertise, resources and intelligence to best suit the needs of your clients. SMEs’ demands for international advice vary according to sector and size of business. Building a market focus is more likely to make any future expansion of international support more achievable and successful.
- Adopt a strategic mindset – Identifying where you could best add value in terms of international support requires SMPs to think strategically and embark on initial planning and research. The best place to start is with existing clients rather than prospective ones, as they provide a readily accessible (and more approachable) evidence base to explore where demand is likely to be greatest. Making efforts to understand your clients’ internationalisation needs can then help you shape your wider international advisory offering.
- Expand your international network – Networks are integral for the development of new professional advisory services but particularly with regards to internationalisation. This is because global value chains often necessitate close and efficient coordination of activities between businesses. SMPs should therefore aspire to become the central referral point for clients looking to find the most appropriate source of professional advice.
- Invest in professional development – Practices must have highly skilled staff with the appropriate intellectual knowledge for clients to recognise the value in the services offered. Creating a structured programme of learning activities for staff around international trade could be useful for SMPs looking to upscale their international advisory provision. This could involve introducing formal learning activities across more technical areas of international trade (such as tax, compliance and foreign exchange) as well as working with other firms to develop knowledge networks where staff can learn, collaborate and access good practice.
As SMEs continue to seek new ways of engaging in international trade, partly brought about by developments in technology, practices are being presented with opportunities to develop and widen their international advisory provision.
For some SMPs providing additional support to clients involved in international markets will not be feasible or practical. Nonetheless it is important for all practices to continue recognising the changing realities of how SMEs are operating globally.
The key challenge in taking advantage of such opportunities is centred on the risks that inevitably come with the business model optimisation required to provide new and relevant client services.
How To Leverage Partnerships, Industry Associations & Endorsements
Nobody can succeed in business entirely on their own without personal as well as professional support. ‘Signing up’ can be a deciding factor in the growth of a company, says the Proudly SA CEO.
Leverage by association can be a great business tool. Hitching your wagon to an industry associated body, joining a local chamber of commerce, or seeking a respected contemporary’s endorsement can change your brand recognition struggle to an opportunity. Becoming part of a whole new entity can be one of the best decisions you will ever make.
How to choose your partner or affiliation?
You know the expression ‘Two heads are better than one’ so you should choose a partner or affiliation that exposes you to twice as big an audience as you can reach alone, preferably with a different customer base. Find an association that fits with your own business ethos and has the same goals as you, otherwise you will find you are working against each other rather than complementing each other.
What do you stand to gain?
By association you will appear in listings, on websites, you will be invited to related events where you can network your socks off, and in some cases, doors will automatically be opened for you. Visibly aligning yourself with an organisation that can propel your brand and/or product into the market place should be grabbed with both hands.
What does the partner stand to gain?
Your relationship with a partner should be symbiotic, benefitting from each other’s contacts as well as a platform for sharing ideas.
What are my responsibilities towards the other party in the relationship?
Perhaps you will have to add a logo to your marketing collateral or packaging, perhaps you will have to comply to standards even higher than those you set for yourself. Perhaps you will have to pay subs or a small joining fee, or even a large joining fee, so you need to decide what you can afford and when.
But you must view the relationship in a positive light even if it involves redesigning artwork or re jigging your material. There is no point in ‘signing up’ if you’re not prepared to share your brand affiliation with your customers and suppliers. It’s like getting married and refusing to wear a ring.
How long should I sign up for?
You really should take a long-term view of any marketing relationship. Your hook up may take time to filter down into the market place, you may have a lot of pre- relationship stock that doesn’t have the logo of your new partner on it, so you will need to give a fair chance to the whole exercise.
What happens if one party brings the other company into disrepute by association?
No one wants to be brought down if someone or something with which you are closely associated is found not to be quite as ethical or honest as you. Don’t forget this isn’t a JV, it’s a brand partnership, and so as long as you are operating separately, you will always be able to distance yourself from any scandal should the need arise. (But hopefully you chose your brand affiliation well!) , but by and large, being the single part of a whole can only be beneficial when you’re starting to build your brand.
How does using the Proudly South African ‘tick’ logo fit in?
The Proudly SA logo is the mark of an authentically locally grown, manufactured or produced item or service that is of proven high quality. It can be leveraged in the same way as any other brand affiliation and can assist in providing access to market and building trust with your buyers and suppliers.
The Differences Between A Supplier Relationship, Agency And Distributor
To a large extent I suppose it depends on industry, the vision of the business and how quickly you wish to scale.
Many businesses reach the point where they have to consider in which way to best expand its market share and reach. In many industries, a customer and supplier arrangement are sufficient, but in others different arrangements such as agency or distribution are preferred.
So, the question is – what is best and when?
Well, to a large extent I suppose it depends on industry, the vision of the business and how quickly you wish to scale.
1. Supplier / Customer
This is a typical arrangement of a willing buyer willing seller. In most instances this is the typical way in which business is run or at the very least to a large degree this is the starting point. Clients or customers are typically engaged by agreement usually a form of terms and conditions or perhaps even an agreement detailing credit.
An agency agreement could either relate to an individual or an organisation. This means an individual or a business could represent the supplier of the goods or services and earn a commission or remuneration for their efforts to sell the goods or services.
In this context an individual is often referred to as a “rep”, which is a typical arrangement for wholesalers marketing products to retailers. In many instances these agreements do not constitute employment contracts and further, the agent does not buy and on-sell the products.
The agent usually refers orders to the supplier and therefore is cost effective for both parties and further limits risk. This also means that the supplier benefits from a relatively low input cost and commitment but increased sale. An important portion of an agreement such as this is that the agent has certain powers in representing the supplier. It is therefore of crucial importance that the agent’s powers are constructed in such a way as to serve the needs and best interests of both parties.
A crucial difference between agency agreements and distribution is twofold – one: that the distributor does not have any power of representation as an agent would typically have. Secondly, that the distributor usually purchases the goods / products from the supplier and then stores, transports and sells, as the case may be. In most cases these agreements are confined to goods.
It is therefore important for the business to assess what would sell the most products or services in the shortest space of time. Then to seek professional advice to construct the most suitable agreement.
Are You A Commodity Or A Brand?
Have a look at your business and consider whether you could be classified as a commodity or a brand.
As access to technology continually improves and evolves, innovation becomes an everyday occurrence for the consumer who has an almost endless array of products, services and solutions to choose from. At the same time, competition among vendors increases exponentially and the ability to differentiate products or services based purely on features or customer service alone is a near impossibility.
There is a slim margin of success for companies that offer feature rich products combined with outstanding customer service, that does retain a degree of competitive prowess but eventually due to incessant pressure even the most fortunate of organisations can be tempted to default to competing based on price alone which is without question an unsustainable race to the bottom.
Consumers today are also more brand-aware than ever before and have evolved into critical, thinking buyers who want to spend their money with a company that inspires an emotional connection with them and their values, while solving a real problem for them.
This emotional intelligence takes precedence over flashy advertising and even lower prices. A study analysing shopper habits (The Meaningfully Different Framework, Millward Brown, 2013), found that strong brands were commanding a 13% price premium over weak brands, and a 6% premium over average brands.
The same analysis found that strong brands can also capture, on average, three times the sales volume of weak brands.
“This means that competing on price is a fool’s game and a no-win situation,” says Kyle Rolfe, brand engineer and founder of creative agency, Idea Power.
“When you compete on price you exist only for the lifespan of the product. A brand, however, spans product life cycles and lasts for years.”
“The only reliable way to stand out today, no matter what the industry, is to develop a brand that resonates with customers and makes an emotional connection as an authentic and trustworthy brand.”
But what is a brand?
“A brand is the emotions you inspire,” says Rolfe. “If you have a good reputation and people enjoy their experience dealing with you; if they trust that you are true to your values and an authentic participant in their society, your brand has value to them.”
A brand, at its heart, is based on trust and this is a rare commodity that has become eroded in the minds of consumers. Because it is so rare, it is an important asset for companies large and small.
Trust is linked to corporate reputation, which is a company’s most valuable commercial asset. By 2015, around 84% of the value of all businesses was intangible value, of which brand value is a key component, according to Ocean Tomo LLC.
How do you develop a brand?
Brand building is all about trust and authenticity. Rolfe believes there are two aspects to a brand. The first is the internal brand that defines what the company believes and stands for, in other words, who you are. This is more than a bland company vision that is plastered on the walls of the company. It is the essence of the company, the authentic values and principles your whole company buys into.
“If your employees believe in the company and what it does, if they identify with your internal brand, you will automatically have more motivated employees, a positive company culture staffed by motivated people who take better care of customers,” Rolfe adds.
“In addition, if your employees trust and believe in the brand, the will naturally take that brand message with them when they leave the office and broadcast it far and wide to family and friends, as well as to their extended circle of friends on social media, which is a powerful and authentic voice in society today.”
Related: Bring Your Brand to Life
When this happens, your customers and potential customers will see, feel and experience the brand and its effect. This will expand your internal brand outwards to your customers and the market in general, supported by the most valuable marketing there is – word of mouth.
It’s worth noting that, according to Effectiveness in the Digital Era (2016) by Les Binet and Peter Field, brand-building activity drives much stronger sales growth over periods of 6 months than the temporary boosts driven by short-term sales activity.
Rolfe concludes: “Does your brand have that emotional connection to the market? Is it authentic and does it automatically command trust? If it does, you can outpace your competitors in terms of sales and price.”
The truth of the market today is that trust and authenticity are the biggest deal makers or breakers. If you create and maintain that emotional brand connection, you create and maintain a lifetime customer who stays with the brand for the long haul.
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