At the time of the mid-year findings, many of our experts argued that, although understandable, the sales shift to domestic markets would be fairly short-lived, and it has proven so. Rodger Flynn, APAC regional head, network capabilities at Grant Thornton International, tellingly predicted that the inherent limitations of local markets will lead mid-market business to look regionally and then to the global market for growth opportunities.
The re-embracing of the international – both in sales and supply chains – is likely to be very significant in positioning the mid-market for growth during and beyond the pandemic and is a reminder of a key characteristic of these businesses. This shows how entrepreneurial the mid-market in the UK really is. They are able to see the trends and opportunities in the marketplace and then adapt quickly to take advantage of them.
This international-bound group is made up of a mix of companies. Many of them were active internationally before coronavirus and have either speeded up or slowed down plans as a direct result of the pandemic. Interestingly, however, 23% say that they only started to increase their focus on international markets during it. It’s this last segment that perhaps best demonstrates the entrepreneurialism of the group.
To understand what’s driving this shift and how coronavirus has altered international markets, we asked the internationalising companies in the UK how they’ve been impacted by the pandemic. The results reveal for the first time the abundant opportunities coronavirus has created in global markets.
Below, we show how coronavirus has impacted the companies increasing their international sales focus. Competitive changes are a key theme here, with 43% mentioning the opportunity to form new international relationships due to the departure or failure of competitors. Another 40% mention the lower levels of competition in international markets, underscoring the competitive disruptions and shake-out from coronavirus.
The other major incentive is customer demand, with 45% seeing stimulation of international sales due to coronavirus and 37% mentioning the positive benefits of government stimulus programmes. With positive indications on both the customer and competitor side, it’s easy to see why another 38% say it is now easier to take products and services international. Although other factors like the rise of digital communication will also be at work here.
Research into new market opportunities doesn’t come much more positive than that, and it’s worth speculating how long these opportunities will last. On the competitor side, much will inevitably depend on how long it takes for other companies to follow in the footsteps of the front-runners. From what we know of the mid-market, it won’t be very long. On the customer side, demand is likely to be propped up for some time yet by government stimulus programmes, though inevitably the more costly support will be reduced and initiatives refocused over time.
The list of companies where coronavirus has impacted international supply-chain focus is dominated by opportunities. A key factor is the availability of better prices and contract terms from international suppliers and outsourcers, mentioned by 46% of this group. This will be music to the ears of many mid-market executives fighting rising costs during the pandemic.
Then there is another 41% who identify better government support during coronavirus for international suppliers and outsourcers. Scott Wilson, advisory director at Grant Thornton International Ltd, suggests this factor may be partly linked to the findings on better prices and contract terms, with government funds helping to prop up the cost bases of businesses, and allowing them more flexibility with customer terms.
It’s probably safest to assume that this preferential pricing won’t last very long. But prices will certainly continue to benefit from government stimulus, and Rodger notes that companies willing to widen the number of countries in their supply chains can enjoy real cost benefits.
All of this data points to what we think is a once in a generation opportunity to grow business internationally, and one that all mid-market leaders should be aware of. Those companies wanting to exploit these opportunities will need to be both growth ready and agile. Agility comes from listening to customers and understanding how their thinking is changing, watching competitors and seeing what they are doing, keeping up to date generally and then being willing to take some chances. You can find out more about operational agility in our insight on retuning your business.
As in any gold rush, it pays to think before joining the rush. You need to prioritise what actions to take. Out of the many things you could do, which are the two or three that will really make the most impact, or are such amazing opportunities you cannot ignore them? And whatever your action plans, scenario planning is vital to support resilience in a time when uncertainty is set to continue for the foreseeable future.
In upcoming insights, we’ll offer guidance to companies looking to internationalise, helping them navigate the immediate coronavirus challenges and opportunities and identify enduring changes to trade.
For bespoke guidance in realising your international ambitions, contact Andrew Howie.
