SMEs are the lifeline and backbone of the Indian economy and play a crucial role in supporting large organizations and promoting industrialization in rural India. It has now become increasingly important for SMEs to scale up as they are an important driver of employment growth in the country. Stronger involvement of SMEs in global markets creates opportunities to enhance productivity by accelerating innovation, broadening the skillset, facilitating spill-overs of technology and managerial know-how. A financially inclusive India needs a vibrant SME sector.
The use of technology like social media, artificial intelligence, remote working is allowing for more integrated supply chains and better access to global suppliers and partners. It is estimated that post covid, 43% more SMEs have been using various technology platforms to sell and promote their products/services.
Following are some of the most common methods for SMEs to access international markets 1. Exporting - It is possibly the best-known method of entering a foreign market. It is cost-effective since the business doesn’t need to invest in resources in the target market 2. Licensing - Licensing allows another company in the foreign country to use your property. The property is normally intangible – for example,trademarks, production techniques or patents. The licensee will pay a fee in order to be allowed the right to use the property. Licensing requires very littleinvestment and can provide a high return on investment. The licensee usually takes care of the production and marketing costs in the foreign market 3. Franchising - Franchising is an arrangement wherein the franchisor (the brand) authorizes the franchisee to sell their products and services and rights to use their brand name in exchange of a royalty in the form one time fee, sales commission or a recurring annual fee 4. Joint venture - A joint venture consists of two companies establishing a jointly-owned business entity. One of the owners will be a local business (local to the foreign market). The two companies would then provide the new entity with a management team and share control of the joint venture 5. Piggybacking - Piggybacking involves two non-competing companies working together to cross-sell the other’s products or services in their home country. Although it is a low-risk method involving little capital, some companies may not be comfortable with this method as it involves a high degree of trust as well as allowing the partner company to take a large degree of control over how your product is marketed abroad 6. Online Selling - E-commerce / Marketplaces are taking major strides to connect small businesses to the international marketplace.
The Indian government, through the Make in India initiative is inviting global firms to set up manufacturing units in the country. This will give a solid boost to SMEs in sectors such as automobiles, aviation, defence manufacturing, construction, chemicals and food processing among others.
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