Challenges businesses face when expanding in international markets

4 min read

Globalization of markets and economic crises require a turning point in the evolution of SMEs activities.

Today, companies find themselves operating in an extremely competitive and integrated environment which allows them to easily transfer some or even all company functions abroad.

It is no coincidence that the big industrial groups have not only diversified their activities abroad but have also transferred – where convenient – some phases of the production process, for example, to the “paradises” of low-cost labour.

Increased competition

Participation in what is defined as “the global village” generates an irrefutable increase in competitiveness which normally translates into greater investments in technologies, research of new materials, attention to product quality, and rationalization of production processes.

It is for this reason that SMEs must operate in a very difficult competitive market that needs to develop their own production capacities in terms of better quality and specificity of the product lines, rather than reducing the cost of labor or their profits.

It is therefore evident that we need to intervene with strategic choices that reverse the downward spiral triggered in recent years. There is no single recipe to reverse the trend, but many solutions depend on the companies and their capabilities. 

Vying for buying power

Certainly, the aggregation of companies in the sector should be encouraged to undertake common initiatives and reduce costs. I am referring, for example, to consortia or groups of companies that could manage the purchase of raw materials, develop a common or an area brand, open showrooms and sales points abroad.


At the same time, they should produce a superior quality than the competitors from countries with low labor costs. There is a huge market for excellence and many consumers are continuously searching for original, special and high-quality products.

There are niche products that have no crisis of demand and there is no better price to be purchased. Let’s look at fashion, supercars, design or jewelry, and many other sectors. All products of excellence can be made solely by SMEs and not by big industrial companies. 

Such unique and often bespoke products require a special commitment, with the use of expert hands and long experience, something that no mass industrial process can guarantee. Most of them are “tailor-made”, which means “unique”, without any standard price.

Unstable consumption

At a time like the one we are living in, with the winds of war and domestic consumption declining or stagnating, it is clear that the best solution would be to offer SMEs production directly to foreign consumers, a certain target of high-end consumers, skipping a series of steps which raise the price of products and strangle the producers but, still guaranteeing the extreme quality of the products and their uniqueness.

In any case, it would be possible to offer a good quality product at competitive prices and with higher profit margins than the current ones.

All these would have extremely positive implications in terms of economic growth of the area with implications of a social nature: think of the increase in specialized professional figures, the development of training schools, and the greater visibility of the area itself.


Therefore, developing activities directly on foreign markets could be a turning point for SMEs. But as we talk about internationalization, it must be taken into account that not all SMEs are structurally capable of facing international markets and coping with a complex competitive system. 

In this regard, requirements of economic solidity and integrity, efficiency, quality, as well as the provision of adequate marketing tools are needed. Last but not least, you need to know and evaluate the risks and markets in which you want to operate. 

Due diligence

A fact-finding investigation in this sense is extremely necessary and it is advisable to be supported by real professionals in the sector. Nowadays, in such an advanced and sophisticated system, it is much easier to make mistakes than to do business.

This is why it is important to create “aggregations” of SMEs that can face the new challenges of the markets.

There are financial aids for those wishing to move in this direction. Each country has put resources into the field of commercial penetration projects abroad.

Of course, in order to benefit from these aids, it is necessary to submit well-articulated projects that include all the expenditure items and the initiatives to be undertaken.

Piermichele Guerrieri

Piermichele Guerrieri is a highly accomplished Doctor of Political Science and Master of EU Law who has helped over 500 companies and public institutions expand their business internationally. He is the Founder and Director of PMG & Partners Ltd (UK) and the Mediterranean Center of Geopolitical and Strategic Studies, which collaborates with University of Bari and Luiss Guido Carli.

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