Benefits of Exports for Small Businesses

Trade Guide

03 March 2023 • 8 min read

Benefits of Exports for Small Businesses

Raghav Sand

Small businesses also contribute to the growth of their local communities and economies by increasing the tax base and providing goods and services that meet the needs of residents.

Exporting can help small businesses to establish new partnerships and networks with other businesses in the global market.

Small businesses are often referred to as the "engines of growth" because they play a critical role in driving economic development and job creation. Small businesses can create jobs, spur innovation, and bring new products and services to market. They often provide unique and personalized offerings that are not available from larger corporations, which can help to differentiate a local economy and make it more attractive to visitors and potential new residents.

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Global value chains (GVCs), in which the various phases of the manufacturing process are distributed across many nations, are the frameworks within which international production, commerce, and investment are increasingly organised. Companies are motivated by globalisation to rearrange their operations abroad through activity offshore and outsourcing.

GVCs offer firms the opportunity to integrate into segments of global production rather than having to build entire processes of production from scratch. Multinational firms exploit differences in comparative advantages across countries and allocate production to where it is most efficient. As a result, GVCs have led to a redistribution of economic activity towards emerging countries offering new opportunities for economic development for both large and small firms.

Design, production, marketing, distribution, and other value chain activities have shown a strong tendency towards globalisation during the past few decades. Overall, small businesses are an important component of a healthy economy, and their success is crucial to the growth and prosperity of local communities and the broader society.

Exporting can provide several benefits for small businesses. Here are some of the key advantages:

1. Access to new markets: By exporting, small businesses can access new markets and tap into new customer bases. This can help to increase sales and revenue and can also provide a buffer against economic downturns in the domestic market.

2. Increased competitiveness: Exporting can help small businesses to become more competitive by exposing them to new technologies, processes, and business practices. This can help to improve efficiency and productivity and can also lead to innovation.

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3. Improved profitability: Exporting can be more profitable than selling domestically, as businesses can take advantage of economies of scale, favourable exchange rates, and higher prices in some markets.=

4. Brand recognition: Exporting can help to raise the profile of small businesses and build brand recognition. This can be especially valuable for businesses that are looking to expand and establish themselves in new markets.

5. Learning and development: Exporting can be a learning experience for small businesses, providing valuable insights into cultural differences, business practices, and legal requirements. This knowledge can be applied to other areas of the business and can also be used to improve future export strategies.

6. Increased production: Exporting can help small businesses to increase production to meet demand in new markets. This can result in economies of scale, which can reduce the cost per unit and increase profitability

7. Access to better resources: Exporting can help small businesses access better resources, such as raw materials or specialized equipment, which may not be available in the domestic market. This can help to improve the quality of the product or service and can also reduce costs.

8. Long-term growth: Exporting can provide a pathway to long-term growth for small businesses. By expanding into new markets, businesses can continue to grow and evolve, and can become more resilient to economic changes and other challenges.

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9. Access to government support: Governments often provide support and incentives for small businesses that export, such as trade missions, export financing, and tax breaks. This can help to reduce the risk of exporting and make it easier for small businesses to expand into new markets.

10. Networking and partnerships: Exporting can help small businesses to establish new partnerships and networks with other businesses in the global market. This can provide opportunities for collaboration, joint ventures, and other forms of cooperation that can help to grow the business.

Conclusion:

Overall, exporting can be a great way for small businesses to grow and expand and can provide a range of benefits that can help to increase competitiveness, profitability, and long-term success.

SMEs can participate in GVCs by directly exporting an intermediate good or service to a person or company abroad, but they can also do so by exporting indirectly, i.e., by supplying products to multinational or other local companies so that those products can be exported. But SMEs can also benefit from GVCs through greater access to competitively priced imports, or by receiving knowhow or technology spill overs from the larger (or “lead”) firms they supply.

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