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.
This is according to evidence from the Regus Global Survey, which polled opinion from more than 12 000 companies around the world, and indicates 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 emphasises 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, with 47% of firms saying the biggest obstacle to overseas expansion is the challenge of setting up a physical presence in a foreign country and 79% saying 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.
“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,” says Kirsten Morgendaal at Regus.
“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.”