Attention on small and medium-sized enterprises expanding overseas

In recent years, the number of companies that are considering expanding into overseas markets has been on the rise. Not only large companies but also small and medium-sized enterprises are actively expanding overseas. With demand only in Japan declining, it is rational to expand overseas to meet the needs of overseas customers.

Benefits of SMEs expanding overseas

There are many benefits for Japanese small and medium-sized enterprises to expand into overseas markets. Among them, here we have described three reasons why small and medium-sized enterprises should expand into overseas markets.

Emerging markets are expanding

 First, let us look at the expansion of emerging markets. Japan is experiencing an accelerating population decline and an unstoppable decline in domestic demand. Meanwhile, emerging Asian countries have very attractive demand. They account for 90% of the 2.4 billion new middle class people entering the global economy. And the GDP of the Asian region is growing rapidly.

Tax savings possible

One of the benefits is tax savings through preferential tax treatment for foreign capital. Each country has its own designated encouraged industries. For example, the currently encouraged industries in Malaysia are manufacturing, agriculture, tourism (including the hotel industry), R&D (research and development activities), vocational training businesses, businesses that contribute to environmental protection, principal hubs, and ICT businesses. Companies in these industries that advance into Malaysia have the benefit of being exempt from corporate tax. Each country has various conditions, so be sure to check them if you have decided where to advance into.

Cost reduction through the use of special economic zones

Expanding overseas can reduce costs such as labor costs, material costs, and transportation costs. It is necessary to determine which costs to incur or maintain and which costs to reduce. When expanding into emerging countries, it is possible to reduce production costs by expanding into special economic zones. In addition, you can receive tax benefits and cut taxes paid.

Issues facing small and medium-sized enterprises expanding overseas

On the other hand, there are challenges that arise when small and medium-sized enterprises expand overseas. Here we will introduce three such challenges.

Exchange rate fluctuation risk

First, there are disadvantages due to exchange rate fluctuations. In particular, in emerging countries such as China and Southeast Asia, there is a possibility of large exchange rate fluctuations due to social instability. Fluctuations in exchange rates can significantly affect sales. Exchange rates are volatile, and it is difficult to properly manage the risk.

Identifying healthy companies

Next, you need to secure sound local partners. It can be difficult to find reliable partners and advisors overseas. One way to start is to consult with a consulting firm that has specialized knowledge about the area you want to expand into.

Deciding sales destination

Another challenge is the difficulty of determining sales destinations that can ensure profits. When selling products, products must be localized to suit the culture and needs of the country into which they are being sold. Products and services must be offered in different formats when sold in Japan and overseas. Determine local sales destinations that can utilize your company's strengths.

If you want to start exporting, choose "DigiTrad"

This time, we explained the benefits and challenges of small and medium-sized enterprises expanding overseas.

STANDAGE uses its own trade cloud service to provide "Digitrad", a service that can "completely" handle trade for small and medium-sized enterprises. "Digitrad" allows you to develop overseas sales channels at low cost thanks to the application of IT introduction subsidies. We can also handle small-scale, low-value trade and domestic purchases that cannot be done by large trading companies, so please feel free to contact us.

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