Clever UK companies have the world at their feet
Roger Trapp reveals how British firms stand to benefit from higher exports
Wednesday 20 April 2011
There was some surprise when last summer the Prime Minister, David Cameron, led a business delegation to India. Coming so soon after he had taken office, it was not the sort of trip usually associated with politicians seeking to establish themselves on the world stage. Yet, with Britain still struggling to emerge from a tough recession, the logic is clear.
Lord Green, the trade and investment minister and former banker, explains that the Government places building the UK-India relationship among its top priorities, because the expected growth of the Indian economy "means lots of business opportunities for UK companies". With a population of 1.2 billion, more than half of whom are under 24 years old, the country is seeing its GDP – put at $1.24tn (trillion) in 2009 – grow at more than 7.3 per cent a year, and is expected to become the world's fourth largest economy by 2020.
Just as many assume that exporting is the preserve of well-established large businesses, it is generally thought that expanding into such a vast and complex country as India is beyond all but the most sophisticated organisations. Yet Lord Green is keen that small and medium-sized enterprises (SMEs) should be among those seizing the opportunities in this rapidly developing market. Indeed, UK Trade and Investment (UKTI), the Government-backed body helping businesses to trade overseas, last year helped about 3,000 UK companies in India – and the vast majority of these were SMEs.
At the centre of the effort to ensure there are even more smaller businesses benefiting from this burgeoning market is the UK India Business Council, a business-led organisation that promotes trade and investment between the two countries and is backed by the Government through UKTI. Richard Heald, chief executive of the body, says that, while India might not suit all companies, the opportunities presented are too great to be ignored completely. Some SMEs might regard India as too difficult or too risky, but he argues that "the real risk, now, is not being aware of the opportunities presented by India and indeed by Indian capital".
The importance of the latter is illustrated by the recent announcement by the Indian electrical business Havells that it is basing its European lighting business in London. The company, which was drawn to Britain by the innovation offered in this increasingly technical field, provides various British companies with potential routes into not just India's rapidly expanding consumer markets, but also projects in the Middle East and other parts of the world where Havells and its Sylvania subsidiary are supplying goods.
But, as important as India and, of course, China are to potential exporters, they are not the only overseas markets opening up to British companies. UKTI, which has been rated the best trade promotion agency in the developed world, has a network covering nearly 100 overseas markets, and a presence in all the UK regions. Last year, it helped about 25,000 businesses generate £5bn for the UK economy. It works with all sorts of companies, from new exporters to those well-experienced in international trade, and offers such services as an export health check to assess company needs, help in developing an export action plan, local access to an international trade adviser and opportunities to participate in sector-based seminars and missions.
Among its initiatives is the "Gateway for Global Growth" programme. Companies that have made successful use of this include the Somerset-based luxury kitchen maker Chalon. The business established in 1978 has helped offset the effects of the recession in Britain by picking up work in such countries as Sweden and Kuwait with the assistance of services such as the Export Communications Review, which provides companies with advice on language and cultural issues to give them an edge in overseas markets.
Another to have benefited from this programme is the men's skincare company Bulldog. Having successfully introduced its products into Sweden with the help of UKTI, the company is now planning to build on a trial in the area around Boston to roll out an expansion programme in the United States.
Nor is all help for exporters provided by the Government. Among the businesses promoting exports is HSBC, which through its commercial banking arm runs an initiative that helps with networking and business development. The overall winner of last year's Business Thinking initiative was Midlands-based toy developer and manufacturer Wow! Stuff. It claims that the exchange trip organised by HSBC, which took in Turkey, has helped it double sales and profitability this year at least in part through trading in 15 countries.
In the end, however, a lot comes down to how businesses seize their opportunities once such initiatives have helped put them in the position to capitalise. Bulldog's co-founder, Simon Duffy, said recently that companies that are going to be successful exporters cannot rely on the Government to do the hard work for them. "They need to get on and figure things out for themselves," he said.
Among the things to be figured out is the form the expansion takes. And that can depend on the country or region being targeted. And on the type of business. An online business such as Boticca.com (see below) might not need a permanent presence in the country in which it is trading, while some companies such as Brompton (below) make great use of regional distributors. Others opt for joint ventures. Still others choose to set up their own operations. It is a question of taking advice, carefully considering the options and then acting with the right combination of caution and optimism.
'A lot of people are looking to express their own style'
Boticca.com is an online marketplace aimed at selling the wares of independent jewellery designers from around the world. Based in London, its nine employees represent seven different countries. More importantly, it deals with nearly 180 designers from more than 30 countries and attracts buyers split evenly between the US, Europe and the rest of the world.
The business came about after co-founder Kiyan Foroughi was travelling in Morocco in 2008 and came across a jewellery designer in Marrakech who, in his words, "really stood out". It transpired that Mariam came from the Atlas Mountains and, inspired by her success in selling to women in her village, started travelling to the city to sell to tourists. Foroughi, who was working for a private equity firm, decided to look into the possibility of bringing designers like her to a wider market. His researches told him that not only was there apparently no business already serving this market, but that the jewellery business was both huge ($200bn worldwide) and fragmented (with the top 10 companies representing just 10 per cent of the market). Perfect conditions for the budding entrepreneur.
He and fellow founder Avid Larizadeh, who had experience of internet companies in Silicon Valley, set about building a business that would do more than trade in exotic jewellery. In keeping with the trend for online activities to edit or curate what is available to internet users, Boticca is a marketplace rather than just a trading site. It employs specialists to seek out unusual items, puts effort into ensuring fashion magazines are aware of the product and creates a means whereby buyers can communicate with the designers, and so feel as if they know more about the products they are buying. "A lot of people are looking to express their own style. The last decade was fast fashion. Now, the consumer is savvy. People are looking for unique products," explains Larizadeh.
The pair realised that going online would enable them to go global quickly. But they have also sought to use the knowledge developed to ensure that they appear at the top of internet searches and improve their chances of achieving sales on behalf of the designers. In addition, they're using technology to provide designers with data on what sells best, so they can adapt in line with demand.
'Our product is unique. that's good for export'
When Will Butler-Adams joined Brompton Bicycle in 2002, the maker of folding cycles was, in his words, "pretty little". There were 24 staff and turnover was about £2m. But even then exports were substantial, with Germany, Holland and Japan the core markets.
The company, says Butler-Adams, has always been involved in export, with overseas sales growing as the business as a whole has developed. "We have taken on more territories. The Asian market has grown considerably," he adds, while claiming it hasn't really been planned.
The reason for this is that the West London-based operation has been in the enviable position for most of the past eight years of barely being able to make enough bicycles to meet demand. So, instead of the company trying to hawk its products around the world, exports have been driven by what Butler-Adams calls "enthusiastic distributors". The result is that Bromptons are now available in 38 markets across the globe. Exports account for about 70 per cent of sales of more than £10m and are heading for 80 per cent. Not bad for something that has not really been planned.
"It seems we have a product that's unique. That's good for export," explains Butler-Adams. As he acknowledges, it also helps him – as MD – to sleep at night. Thanks to having a diverse market, the company is better able to withstand trouble in the home market.
The company has certainly benefited from a greater interest in people cycling to work and Butler-Adams feels there may even be sales to people responding to the economic downturn and rising fuel costs by swapping a car for a bike. But with higher unemployment and rising prices continuing to hit incomes, he does not expect a big rise in UK sales of what is after all not a cheap product.
Butler-Adams believes that being patient and taking care to find the right shops and distributors have been key to the company's success, something that is easier to achieve for a small business that is not answerable to outside shareholders. It is very easy to diminish the product and so hurt the brand if you rush in too quickly, he explains.
Also of great importance is deciding at the outset how much investment in the new market you can afford, he says. That way, if things do not work out as planned there is only a quantifiable loss to the company rather than a more open-ended situation when there is only an optimistic business plan.
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