Small is still beautiful when it comes to exporting abroad

18 September, 2006

Small is still beautiful…. when it comes to exporting, that is. That’s the word from the Australian Bureau of Statistics (ABS), whose survey of the Australian exporter community shows that over 86 per cent of Australian exporters are either small or medium sized enterprises (SMEs).

This confirms previous research by the Bureau which showed SMEs to be the ‘engine room’ of the Australian exporter community in terms of growth potential.

In fact, according to new research by Austrade and Sensis, Australian SMEs are now becoming a regular part of the exporter community. Around 13 per cent of SMEs export and this has remained pretty stable over the past couple of years.

The bottom line is that you will find Australian export potential in the grass roots of Australian business in the suburbs and in regional Australia as well as amongst the blue-chip corporates at the top end of town.

So who are our small players? Where do they live, what do they do and where do they sell to? 

First, let’s look at location, location, location. In terms of the states and territories, Australia is being led by New South Wales on 15 per cent, with 14 per cent for Victoria, 13 per cent for the Northern Territory, 12 per cent for the ACT, followed by 11 per cent for the resource rich states of WA and Queensland, Tasmania on 10 per cent and SA on 9 per cent. 

Second, what about industry? Wholesale trade leads the way with 39 per cent of all its SMEs involved in exporting. This is not surprising as wholesale trade typically has many exporters and importers involved in the distribution game. Wholesale trade was followed by manufacturing on 23 per cent and business services on 17 per cent.  Less prominent was retail, hospitality and building and construction.

So where do the small exporters go? Not surprisingly, proximity and language/business culture are important factors. Our nearest neighbour, New Zealand, is a destination for 40 per cent of all SMEs who export, followed by the UK on 29 per cent and the USA on 27 per cent, China on 20 per cent, Continental Europe on 18 per cent, Singapore on 16 per cent, Japan on 14 per cent, Hong Kong on 13 per cent, South Africa on 6 per cent and PNG on 5 per cent.

The USA’s rise up the ranks has coincided with the presence of Australia United States Free Trade Agreement (AUSFTA) providing better market access for Australian businesses, both large and small, although it is still early days in the agreement’s life. China’s rise – the proportion of Beijing-bound SMEs has doubled in the past two years - is also noticeable indicating that you don’t have to be a big fish like Rio Tinto or BHP Billiton to succeed in the Chinese market.

Broadly speaking, what do our SME exporters look like? For the most part, they are likely to be more medium than small, more metropolitan than regional and more likely to be run by a male born overseas. But before pointing to a ‘Godfather effect’, it should be noted that most SME exporters are not family businesses.

And whilst the blokes still outnumber the women, there are a growing number of female-run businesses in outer-metropolitan areas which suggest more of a ‘Kath and Kim’ effect if anything. This is consistent with a previous Australian Industry Group (AIG)/Commonwealth Bank study, which showed export intensity (export revenue as a share of total revenue), to be strong in outer metropolitan areas and in the regions. 

In terms of age-profiles, given that it takes a while to get established, SME exporters are also more likely to be ‘baby-boomers’ than generation Xers or gen Ys, and most have 15 to 20 plus years experience in the export game.

Do they make a buck? Previous research shows that exporting, on average, helps the bottom line. The survey results show that SME exporters, on average, are more likely to have an aggressive expansion strategy than other SMEs. They are also more confident than non-exporters and are more bullish on profits, wages and employment. 

However, there is still much more to do to get more SMEs in the export game. Despite the rewards on offer, there is still a low ‘intention to export’ in Australia amongst SMEs. What are the major barriers? It is not a matter of labour costs but labour shortages. A major reason cited by small business for not entering export markets is the lack of skilled staff with overseas sales experience.

They are willing to pay good wages, but are keen to have well trained and/or experienced export managers. This suggests that training programmes – like the new exporter development scheme are on the money in terms of small business needs. 

However, it is not all bad news. According to the research, there are some positives that have helped SMEs get into exporting. SME exporters say they have been helped by improved market access through tariff reductions and the new free trade agreements. In addition, improvements in technology (through recent developments in e-commerce) have made getting into export markets a lot easier for them.

So expect more action to come on the SME front. This is good news as more SME export action means not only more growth and more profits for the businesses concerned but also more jobs for Australian workers at higher rates of pay. The ‘small is beautiful’ phenomenon also forges stronger links with other nations right across the Australian community.