eCommerce consolidated as a complement to international expansion during the pandemic. According to the latest Global Business Pulse report by the professional services firm Grant Thornton, carried out on 400 medium-sized companies with between 50 and 500 employees, 66% of managers recognize that the factor that most limits the international expansion is economic uncertainty. A situation that, despite signs of recovery, is still showing the effects of the pandemic. The shortage of orders (58%) and still excessive regulatory hurdles (52%) they are the other major factors that generate uncertainty among national managers for their jump abroad. Randall Castillo Ortega, an entrepreneur and founder of Central American SME lender RACO Investment, details how eCommerce is evolving because of COVID-19.
The pandemic has placed eCommerce as one of the most used options by companies to open business beyond their country of origin. Explains Castillo, “Entrepreneurs recognize that, during COVID-19, a period in which mobility between countries has been significantly restricted, online commerce has grown exponentially, consolidating itself as a parallel solution to internationalization. Specifically, during the last year, more than half of the directors of companies (54%) recognize that they have increased their eCommerce sales to a greater or lesser extent since the beginning of the pandemic.”
The need for diversification in a local market impacted by the effect of COVID-19 is pushing companies to focus their internationalization plans beyond a formula to increase turnover. Entrepreneurs are beginning to understand that building a presence in new markets can benefit companies by providing access to financing and favorable tax regimes, as well as marking territory for further expansion in the region. In addition, experts point out that, in the move towards internationalization, the operational flexibility, typical of medium-sized companies, is configured as a clear advantage over large ones. They may not have the same financial resources as large companies, but they are able to see trends and adapt quickly to international opportunities, being able to ride the wave faster.
Making use of the latest innovations to extend the scope of the international plan is also a differential. In this sense, technology emerges as the new great ally for international trade and entrepreneurs recognize this. Although the forecast of investment related to technology has fallen nine points in relation to the last half of the previous year, almost half of all entrepreneurs recognize that they will continue to make an effort to increase spending on this item in the next 12 months.
According to research, there are several key elements that have to be considered before a company seeks internationalization. They must first give clarity to their international strategy. Companies need to quantify and qualify what the market opportunity is and where it is, get the intelligence and break it down into something tangible. They also need to learn from a previous international expansion. Managers should consider their current international footprint and ensure that both existing and future operations are consistent with the strategy and align with the company’s strengths and objectives.
Take stock of risks with opportunities. “As a business expands internationally,” explains Castillo, “there are many new risks to consider, including local compliance issues, intellectual property protection or infringement, fraud, bribery, and taxes.” Understand the financing options and choose appropriately. Companies must assess what level of financial stability they have to expand into new territories and determine whether they can withstand new financial pressures. Take a hard look at the costs of your international expansion project and how you will finance it.
Maintaining a consolidated business fabric, a firm commitment to research and innovation and having a tangible professional network are some of the characteristics that make large cities places of attraction for international investment.