South African companies operating in international markets are reporting better results (revenue trends, or profit trends, or both) than those concentrating on their domestic market, according to evidence from the Regus Global Survey, which polled opinion from over 12,000 companies around the world. These findings indicate that foreign expansion is good for business and should be considered urgently by domestically-focused companies who do not want to be left behind in fiercely competitive markets.
Evidence from the survey emphasizes the need for a shake-up in attitudes at domestically-focused firms. There is a gulf between the outlook of South African companies already operating internationally – where 80% intend to expand still further – and those solely operating in home markets – where only 55% intend to expand abroad over the next few years.
‘Property’ and ‘People’ are key perceived obstacles to international expansion:-
· 47% of firms say the biggest obstacle to overseas expansion is the challenge of setting up a physical presence in a foreign country.
· 79% of companies also say that property commitments have to be very short term when setting up a foreign operation, as they do not know how quickly or slowly they will grow.
· Opinion is split over where senior management for overseas operations should hail from, with 46% favoring a mother country manager, and 54% opting for a local manager.
· A division also occurs over management language skills, with 41% of respondents demanding local language fluency.
Tina Mason, Area Sales Director Sub-Saharan Africa at Regus notes, “This report provides hard evidence that, in the current economic climate, South African firms which have diversified overseas are faring better than those which have stayed with their home markets. This applies to companies both large and small and should act as a wake-up call for those still solely focused on domestic markets to find effective and cost-efficient ways of moving cross-border in order to enhance their earnings and spread their risk. China has become the top destination for South Africa’s exports since mid-2009, although the EU is still South Africa’s topmost regional export destination. South African companies will need to nurture these partners while also diversifying its export destinations if it is to keep pace with the other BRICS countries, a group which it joined in December 2010.”
“While ‘property’ and ‘people’ are perceived as potentially major challenges, the wide availability of flexible workspace options around the globe make the ‘property’ element more perception than reality. However, the ‘people’ issues do require very considerable judgement. Decisions about whether to install a local manager or install one from the mother country are critical and, we believe, rest heavily on whether sales are mainly being handled through a few major distributors, or whether direct contact with a wide range of customers is required.”
“Interestingly, the only exception amongst the major economies of the world is China. Here, state-sponsored infrastructure investment and development is providing disproportionate domestic market opportunity for Chinese firms. Nevertheless, such infrastructure development will ultimately turn out to be finite, and we suspect that into the next decade, Chinese firms will once again be looking for export-led growth.”