Barclays Report: Analyzing International Market Opportunities for SMEs

This report analyzes the global business environment for small and medium-sized enterprises (SMEs), focusing on opportunities and threats within international markets. It examines the advantages of international trading blocs and agreements, as well as tariff and non-tariff barriers to trade. The report further explores the advantages and disadvantages of importing and exporting, differentiating between merchandise and service trade. Finally, it evaluates various methods through which SMEs can tap into international markets, providing insights into the advantages and disadvantages of each entry mode, concluding with a comprehensive overview of international market dynamics and strategic recommendations for business expansion.

TAPPING INTO NEW AND
INTERNATIONAL
MARKETS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
LO 1.................................................................................................................................................3
Global business environment in which small and entrepreneurial business operate...................3
Threats and opportunities faced by SME’s..................................................................................4
LO 2.................................................................................................................................................5
Advantages of international trading blocs and agreements.........................................................5
Tariff and Non- Tariff barriers in international trading...............................................................5
LO 3.................................................................................................................................................6
Advantages and disadvantages of importing and exporting........................................................6
Difference between merchandise and service imports and exports.............................................8
LO 4.................................................................................................................................................9
Different methods through which SMEs can tap into international markets...............................9
Advantages and disadvantages of the different modes of entry..................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Tapping into international market signifies the venture of a domestic business into an
international or global market. In the report that is been prepared for the Barclays’s the global
business environment and the threats or opportunities that it presents will be analysed. Further,
the tariff and non tariff barriers and the different modes of entry that are available to SME’s will
also be evaluated.
MAIN BODY
LO 1
Global business environment in which small and entrepreneurial business operate
The global business environment signifies the trade and business activities that are carried
out beyond the national boundaries of a country and exits between multiple countries at the same
time (Ibeh, Crick and Etemad, 2019). For smaller companies, the global market is usually the
platform where they try to gain as much competitive advantage as possible so that the customer
base as well as the market share both can be expanded. The technological advancement, the
wider options that his market provides and the strategic changes that an organisation needs to
make in order to operate in the global environment are some of the most prominent changes. The
small businesses can venture into the global markets and operate in them successfully if they
indulge in regular environmental scanning. Regular evaluation helps in ascertaining the volatility
that might arise in the global market and the trends can also be monitored regularly.
Another major factor that the small business need to keep in mind while operating in the
global market is, that, the International trading system is the major framework according to
which business takes place (Schreinemachers, Simmons and Wopereis, 2018). There are various
international regulatory bodies such as World trade organisation, etc. and the companies need to
develop actions that are in compliance with regulation and guidelines that have been developed
by such regulatory bodies. The major considerations that a small business should take also
involve analysis that whether the companies or businesses have adequate resources that are
required in order to venture into the global markets and this can be done effectively by analysing
the forms internal capacities. It should be acknowledged that after a business enters into the
global market, maintaining a successful business operation is very difficult due to the constant
threats that they face. Therefore, it is necessary for the small businesses to bear in mind that it is
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easy to enter into the international markets, but it is difficult to operate successfully in the global
context.
Threats and opportunities faced by SME’s
The global environment is highly competitive and the number of competing industries are
vast that can create threats for the small business at any time but there are vast number of
opportunities as well (Milner-Gulland and et.al., 2018). These can be analysed in following
manner:
Threats from the global environment: The most potential threat that the SME’s can face is that
the existence of socio- cultural differences in the global market is very wide because all the
economies and different cultural background companies are operating in the international
market. Therefore, identification of the products that can be used in the international market
which meets the identified market needs accordingly and helps in avoiding the rise of differences
as well. Apart from this, the major challenges also involve the time factor as well as the
geographical distance factor where the different locations and the delivery to such different
locations can prove to be a challenging task. Lastly, another major threat is that in the global
trading, ascertaining the reliable partners who can assist the business without committing any
frauds is a very challenging aspect because it is not easy to develop partners in the international
markets easily.
Opportunities from the global business environment: The international exposure that a business
is able to gain from this venture into the international market is the biggest opportunity that can
be utilised by the small and medium businesses (Solheim, 2016). Apart from this, the boost to
the brand image is another major benefit where the company can promote their brands at
international level and if once successful, the business can soon become a global brand very
quickly through such global expansion. Additionally, the company can gain a lot of competitive
advantage by the venture into international markets as it can be the best method to launch the
small and medium businesses on an international platform and thus become a player at the global
level. Therefore, expansion in the global markets presents a lot of advantages as well for the
SME’s.
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LO 2
Advantages of international trading blocs and agreements
A trade bloc signifies the collective group of various countries that is formed with the sole
purpose of facilitating the trade between the member countires and reduces the tariffs as well as
other barriers thus entering into trade agreements. There are a number of advantages that can be
derived from such trade agreements and trade blocs effectively:
Competition: The development of trade blocs helps is bringing together a lot of business
companies together and this can help them in addressing the innovation and productivity aspect
(Longin and Würschum, 2016). The trade blocs promote healthier competition thus making
every company drive out for their best performance thus improving the overall productivity of all
the companies within the trade bloc agreements.
Market Efficiency: When the production of good increases, its demand that is high in the market
can automatically be satisfied due to this increased production. Therefore, the consumption also
increases consequently and therefore the market becomes an efficient market which is a
profitable situation for both the sellers and the buyers.
Economies of Scale: When a trade bloc is formulated, then the markets that have been developed
become much larger. Therefore, this increase in the demand that will be faced by the businesses,
the production scales is also bound to increase automatically. Therefore the increased production
leads to exercising of economies of scale where the excess production reduces the cost of
production for every item.
Trade effects: Often while developing trade balks the participating countries either reduce the
tariffs that have been imposed to a minimum amount or they tend to completely waive off the
tariffs between the trades occurring in such member countries (Izberk-Bilgin and Nakata, 2016).
This helps the companies thus operating in charging lower prices for their products that are of
high quality and this will ultimately improve the international presence and market of the
businesses operating in international trading.
Therefore, it can be said that there are multiple benefits that the companies can encounter
while operating in international markets through trade blocs and agreements.
Tariff and Non- Tariff barriers in international trading
Barriers are basically the restrictions that have been developed and imposed while the
exchange of goods takes place between various member countries. These barriers are normally
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can be incurred either on imports or on exports. There are broadly two categories of the barriers
such imposed i.e. tariff and non- tariff barriers:
Tariff Barriers: These are taxes that are imposed in the manner of custom, duty or taxes that are
imposed on the movement of products usually (Oh, Kim and Shin, 2019). These are generally in
the monetary formats and involves following different categories of tariff barriers:
 Import/ Export Tariffs: These taxes are informed in the form of duties that are charged
by the importing countries on the goods imported so that the revenue generation can
increase and the domestic industries can be protected further and is charged by exporting
countries in case of goods exported.
 Transit Duties: These are generally implemented on goods which are produced in one
country, cross a second country and are ultimately consigned to a third country. This is
levied by the countries through which the goods are passing i.e. are in transit.
 Other tariff Barriers: There are various tariff barriers such as specific duty which is
charged in the form of specific amount on physical characteristics of the goods, the ad
valorem duty where the taxes are charged on the basis of the value of the commodity etc.
Non Tariff Barriers: These are not imposed in forms of taxes or duties and are not charged
monetarily but exits in the form of government regulations, policies, procedures etc. (Xu and
Hitt, 2018). These are:
 Quotas: These signify the number of maximum goods that can be imported or exported
from the country in the duration of a specific time period. The higher import or export of
the goods than the specified quantity often leads to payment of venality of fines.
 Subsidies: These are generally given by the government to the domestic manufacturers so
that their products can compete with the international goods at a cheaper rate. These
subsidies can be given in any manner.
LO 3
Advantages and disadvantages of importing and exporting
Importing and exporting are two of the most critical activities that can be adopted in order to
conduct international business by the business. There are various advantages and disadvantages
that are associated with the activities of importing and exporting:
Importing: The practice of buying goods from other countries is referred as importing.
Following are the advantages and disadvantages:
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Advantages Disadvantages
 The most prominent advantages is that
the higher quality of goods and raw
materials can be brought at
comparatively cheaper rates.
 The trade blocs and agreements can be
used to generate benefits by importing
the product without any significant
costs.
 The transaction risks also minimises if
the government is involves because the
care taken of the goods is greater.
 Those goods which cannot be produce
in the country due to lack of resources
or skills can be easily imported thus
utilising the available resources in a
more productive manner.
 Threat to the domestic
market and industries is the
major disadvantage that can
arise due to importing
(Panhans and Kaufmann,
2017).
 The price war that emerges is
also very challenging for the
domestic traders.
Exporting: Exporting is basically the sales of goods and services to other countries. Its
advantages and disadvantages are:
Advantages Disadvantages
The investments that an exporter is able
to garner in terms of financial manner
and the reputation of the company is
invaluable (Zhang and Zhong, 2016).
The risk involved in this manner of
international trading is least and thus
increases the chances of profits as well.
For SME’s this type of international
trading is difficult because they are
normally operating at the lower level
and therefore this can become
challenging.
Lack of adequate knowledge can also
prove to be worrisome aspect of
exports.
Risk involved is also very high for the
export practices as the exporters do nit
know who the ultimate consumer is and
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therefore might not be able to garner
adequate feedback.
Difference between merchandise and service imports and exports
Merchandise and service are two different things that can be mainly differentiated on the
basis of their tangibility i.e. the merchandise is usually tangible goods that are imported or
exported and the services involve intangible assistance that is taken from or given to the people
who requires assistance of such skills or service (Ibeh, Crick and Etemad, 2019). The two can
however be further differentiated on some critical points in following manner:
Merchandise Services
The import or export of a particular
commodity that is incurred by the country
is referred to as the trading of
merchandise. Only the goods that are
having physical presence and appearance
can be categorise as Merchandise. The
difference between the imports and
exports that have occurred through such
import or export is referred to as balance
of trades because this trade in
merchandise is included in the overall
import and export activities that are
undertaken by the countries. Due to the
fact that the balance of trades also
includes movement of only physical
goods, therefore this is considered as trade
of real goods.
Services on the other hand solely
comprise of the intangible services that
are provided or are demanded from other
countries. These are basically
international earnings that can be earned.
These are not included in the balance of
trades as these do not have a physical
existence of the goods (Schreinemachers,
Simmons and Wopereis, 2018).
Therefore, these are usually demanded in
the form of experts or professionals who
have skilled knowledge that the
importing countries lack and do not
possess. Further, such skills can only be
taught and cannot be transferred which is
the main component of the services
import and exports.
Therefore, it can be concluded that the merchandise and services are two different aspects that
can be used in order to differentiate between the exports and imports of goods that take place in a
country.
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LO 4
Different methods through which SMEs can tap into international markets
Venturing into international markets is always an extremely critical task that needs to done
carefully after evaluating different expansion options that are available to the SME’s that are
operating in different countries:
Direct Export: This is the easiest method of entering into the international markets where the
seller directly sells their products to the companies that are operating in the international market
(Milner-Gulland and et.al., 2018). This is generally done in the form of simple contract
fulfilment basis where the seller receives the orders from the agent or company that wants to
import the gods and then as per the specification of the client, goods are exported to them
directly. In return the exporter directly gets the payment for the goods that are sold to them.
Licensing and Franchising agreements: Licensing and franchising can also be used where the
owner or exporter of the products gives right to either duplicate the products that they are
producing thus known as franchising or they give license to the other person where they can sell
the products that are manufactured by the company.
Developing international outlets: This is the riskiest step that can be adopted by an exporter
where they set up a physical outlet in the country where there goods have higher demand and
include the target markets of the companies. This generally requires a lot of investment by the
company where they identify and analyse that whether this option is feasible or not and then
open the physical stores in such analysed target markets (Solheim, 2016). This helps in earning
direct profits without any sharing or division that can occur through mediators.
Joint Ventures: When the exporter decides to enter into a joint venture i.e. into partnership with
a company that is already operating in the importing country then this is referred as joint venture.
This can be done by either investing in the business that is operating overseas or in the manner of
combining two different business units to form one under the same name. This method is
profitable because the risk involved is lesser and the returns can be generated higher.
Advantages and disadvantages of the different modes of entry
There are various advantages and disadvantages that are associated with each mode of entry into
the international market:
Direct Export:
Advantages Disadvantages
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 This is the most cost effective
market and easiest to operate
for the exporters.
 The profit margin solely lies
with the exporter without any
middle men.
 There is a higher risk related to
non- payment.
 Since there is no physical
contact with the customer, the
feedback cannot be easily
obtained (Longin and
Würschum, 2016).
 Extra services such as after
sales services etc. cannot be
easily given.
Licensing and Franchising agreements:
Advantages Disadvantages
 This can be used to generate
revenues without any
significant investment to be
made.
 This helps in expansion the
brand and its firm establishment
in the international market.
 This is highly cost effective and
extremely non risky.
 The identity of the products
can get lost due to the
activities of licensing and
franchising.
 The products can be easily
copied by the competitors if
the manufacturing strategy or
technique gets leaked.
Developing international outlets:
Advantages Disadvantages
 Helps in increasing the local
contact that can increase the
reach of the product in
international market.
 There is direct control over the
quality as well as the customer
 The costs and investment that
need to be made are significant
and often irreversible.
 The risk involved of failure of
the business and thus incurring
losses is too high.
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service.
Joint Ventures:
Advantages Disadvantages
 This is the most popular way of
tapping international market
(Izberk-Bilgin and Nakata,
2016).
 The risk is reduced due to
partnership with the local
manufacturer.
 Helps in capturing the existing
market share easily.
 The exit options that are
available in such ventures is
very difficult and long.
 The risk of entering into
venture with an unsuccessful
business is very high.
The best strategy for SME’s is to adopt the direct export strategy or the joint venture strategy as
this is the most profitable without any significant investment requirement.
CONCLUSION
The research conducted in the report above helps in concluding that the journey of the
SME’s into the international markets is not very easy and complacent where there are a number
of barriers that have to be encountered. The different modes of entry were also evaluated and it
was concluded that the best strategy for SME is direct exporting or joint ventures.
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REFERENCES
Books and Journals
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market. Business horizons. 59(3). pp.285-292.
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diversity. Trends in plant science. 21(9). pp.731-737.
Milner-Gulland, E.J., and et.al., 2018. Evidence to Action: Research to Address Illegal Wildlife
Trade.
Oh, C.H., Kim, M. and Shin, J., 2019. Paths and geographic scope of international expansion
across industries. International Business Review. 28(3). pp.560-574.
Panhans, D. and Kaufmann, L., 2017. International expansion strategies: A novel framework and
its application to the ten new EU countries. In Industries and Markets in Central and
Eastern Europe (pp. 21-45). Routledge.
Schreinemachers, P., Simmons, E.B. and Wopereis, M.C., 2018. Tapping the economic and
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markets in core, intermediate and peripheral regions. Regional Studies, Regional
Science. 3(1). pp.491-505.
Xu, K. and Hitt, M.A., 2018. The international expansion of family firms: The moderating role
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Management, pp.1-27.
Zhang, M. and Zhong, S., 2016. Discussion on the Development of Enterprise Marketing based
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