UK needs to take risks to escape domestic comfort zone

Wednesday, September 01, 2010 | Posted by: Stephen Weatherseed

UK companies’ reluctance to embrace challenging markets is compromising business and ‘Little Britain’ risks losing out on the emerging markets success story. But it’s not rocket science, says Stephen Weatherseed, Grant Thornton’s Head of China Group, it’s risk management.

The recent recessionary times have forced us all to look not only at saving costs but also at seeking out potential new products and services, and exploring new markets to sell into. The expectation is that UK plc will be exporting our way out of recession in 2010/2011.

When it comes to identifying overseas markets, this introduces a whole new range of risks, often making businesses confront issues never previously encountered – potential obstacles to dissuade businesses from moving outside their traditional comfort zone of the domestic market.

The key strategic question for business is: ‘Where is your growth going to come from?’

Clearly, there will always be pockets of growth in any economy, whatever the macro growth prospects. But it is reasonably well acknowledged that the emerging economies are where economic growth is expected to be strongest for the next few years, and that is where there are likely to be opportunities for many businesses.

China, India, elsewhere in Asia, Brazil and Latin America, Russia and emerging eastern Europe – all present potential new markets for the ‘right’ products and services. Wealth is being generated and spreading among the populations, albeit at varying rates.

So why is it that the statistics show such low levels of exports to the large and fast-growing markets of these emerging economies?

Surely the expectation should be that the entrepreneurial spirit and long history of trading would have the UK exporters beating others to the markets of China, India, Brazil and others?

Perhaps part of the answer lies in the UK economy’s trend towards services away from manufacturing, and these are more likely to be later entrants to the emerging markets. But the UK manufacturing sector is still the sixth largest in the world, and significant in global terms. I would argue that many of our manufacturers may these days be small-scale in terms of the numbers of people employed, but are operating at the top end of innovation and processes, and with very valuable know-how that is in great demand in these emerging economies.

The issue, I think, is one of risk and how to manage this, in the context of businesses that are relatively small and hence cautious about financial exposure in countries with different legal and business cultures.

The challenge to UK business is not to ignore these markets but how to identify and manage the risks.

The good news is that there are plenty of sources of information and advice, many of them free. Start with the UKTI here in the UK, consult other business organisations (eg the Chambers of Commerce, Trade Associations), and the CBI.

Don’t ignore the web, either. Try to talk with other businesses who have experience of trading overseas, especially in your target countries. Armed with this knowledge and experience, you should be well prepared to develop a sensible market entry strategy, with the risks identified and strategies to manage them.