SME Internationalisation

status & perspectivesMindaugas Danys

SME Envoy, Lithuania

We talk about out of EU exports – the terrain of 12 percent of EU SMEs

Virtually each country keeps hundreds of staff both abroad and at home for trade (export) & FDI promotion

EU offices operate in several target markets Mapping exercises prove abundance of

resources and lack of coordination as well as overlap in service provision

Overview

While everyone acknowledges this necessity to develop a coherent European strategy, putting this ambition into practise has proven to be challenging. Fragmentation of competence between different institutions, diverging interests between member states, different legal bases for financial instruments have all hampered the development of a single vision. (Eurochambres, 2011)

Objectives

According to the EU SMEs 3 most important barriers for doing business in markets outside the Single Market are: payment risks; difficult paperwork, i.e. bureaucratic procedures; lack of financing.Non-financial business support measures score just a bit lower: lack of adequate market information; laws and regulations in foreign markets; different national technical standards.Talking on 7 key markets, SMEs that are active on those markets feel that the most important barriers are: knowledge of foreign languages; transport costs; lack of adequate market information; difficult paperwork, bureaucratic procedures (administrative

costs); different business cultures in foreign markets.

Mapping exercise I

“Non-financial support measures in the EU Member States amounts to some € 3 billion.The study confirmed once more that very few support measures are properly evaluated.”

“3/4 (!) of all internationally active SMEs are not aware of existing support measures. From among the 27% that are aware, only about 26% - which is 7% of all internationalised SMEs - report using such support”

Observations

- There are clearly opportunities for SMEs in the main target markets, in spite of the difficulties in developing international activities.- There is a wide range of support offered to internationalising SMEs.- Those internationalised SMEs that use public support are in generalpositive about its effects.- For instance, an increase in turnover of nearly 30% is reported by users of public support.- However, only around 7% of all internationalised SMEs use public support and there are low levels of awareness of what is available.- There are specific gaps in provision, uneven coverage across large countries and lack of provision for enterprises from some Member States.

- Overall, however, the problem is more one of raising the profile of what exists already and making it more coherent and efficient.

Selected findings

- Assistance to identify human resources in some countries;- Information on the local business environment, in particular in countries with an unstable regulatory environment.- An on-line information portal with reliable, consistent and regularly updated information in English would be very helpful.- Information on market opportunities at regional level.- In some countries there is a lack of matchmaking events for EU SMEs.- Lack of coordination between organisers of trade missions.- Assistance in finding reliable business partners in some countries.- There are major differences in the provision of office facilities between countries.- In some countries the provision of information on technical standards is better developed than in others.- Interesting examples exist of providing coaching to EU SMEs, e.g. oncontract negotiation practices.

Support gaps

good business support should:- Adopt a perspective that begins with the actual needs of European SMEs, rather than concentrating simply on what agencies can currently provide.- Aim to make support comprehensive and coherent, accessible and affordable.- There is a variety of support offered, often responding to local circumstances, but frequently not provided on a sufficient scale or available to all EU SMEs.

Proposals I

- Avoid multiplying stand-alone initiatives that do not relate to other aspects of business support.- Aim to help enterprises build their general management capacity, as well as addressing the immediate problem.- Provide services that are adaptable to the differing needs of different kinds of SME (different stages of development, different sectors, different target markets etc.).

- Have built-in monitoring and evaluation mechanisms, to ensure a continuous improvement of provision.

Proposals II

The Member States have on average each 8 support service organisations, administering 27 services;

Concerning the kind of support services the top 3 most frequent types to assist SMEs with are: exporting, technical cooperation, becoming a subcontractor;

By service characteristic the top 3 of most frequent support services are for advice& consultancy, seminars and workshops, business cooperation and networking. The non-financial support services outnumber the financial support services;

The support services are mostly provided by special public agencies and government organisations.

Mapping exercise II

For the priority third countries it can be concluded that: These countries have on average each 5

support service organisations, which administer 18 support services;

About 70% of all support services in these countries are for firms of all sizes (as against 67% in the Member States).

189 out of 422 support services in third countries (45%) are open to SMEs from all EU countries

Plenty of players

The highest numbers of support services from EU countries are targeted to Ukraine (162), Turkey (152) and China (150). For these third countries Member States may have unne-cessarily duplicated support services.

The least support services targeted by EU Member States are Saudi Arabia, Morocco and Taiwan.

Targeting

In the EU about 64% of the support services are only open to business of the same country. No more than 25% of the support services in the EU are open to SMEs from all EU countries.

Austria, Malta, Poland, Denmark, Germany and Finland have a relatively high share of support services that are only provided to businesses in their country.

Cyprus, the Netherlands, Latvia, Estonia and Hungary have a relatively high percentage of services provided to all EU countries.

National vs. European

successful EU initiatives will be those that can build on the capacity of existing service providers, thus creating synergies and developing a shared ownership between member states and the EU.

Complementarity and Synergy

Let’s agree on the “criteria” for determining the “European value added”

European added value

full involvement of private sector representatives, both in the target markets and at home, on the basis of shared ownership and shared responsibility is key to success.

Public Private Partnership

SMEs have a chance dramatically increase their ability and access to services & information

Decrease in cost of information Possibility to specialise Possibility to increase scope of services

provided and number of SMEs serviced

Benefits of cooperation

National rivalry Discrimination Duplication

Challenges

Large countries can expand their services, capacity and reach

Small countries can become a niche players North – South & West – East dimensions,

e.g. Poland in Ukraine Traditional strongholds can be utilized and

services build up (e.g. Lithuania well connected in Belarus and Russia)

Who’s winning

Large countries are sceptical of Pan European/EU funded initiatives therefore we need to look into: Bilateral & multilateral agreements Jointly serviced trade offices Joint trade missions Utilization of EEN Multicountry export oriented clusters Proactive mediation of COM & European

business assoc. among stakeholders

Options

Enhanced EU economic diplomacy can contribute significantly to strengthen the competitive position of EU SMEs.

Member states need to revise their economic policies in coherence of other countries and the EU institutions

Compromises for joint actions and framework need to be concluded

It‘s benficial for each member state to cooperate on SME internationalization issues

Flexibility and effectiveness

Ideas for discussion

Mindaugas.danys@ukmin.lt

Lithuania

Thanks!