Survey: American Businesses Missing Global Opportunities

, October 09, 2007

Critical Sector Still Chained to U.S. Economy

Most of America's small- and mid-sized businesses have failed to explore the significant growth opportunities offered by an increasingly global economy. Indeed, a new survey conducted for UPS (NYSE:UPS) shows 67 percent of the nation's small-to-mid-sized enterprises (SMEs) are still chaining themselves to the U.S. economy.

The inaugural UPS Business Monitor United States, a survey of 600 business decision-makers conducted by the marketing insight firm TNS, found that only 33 percent reported participating in any cross-border trade. Of those, 15 percent are importers and nine percent exporters. Nine percent do both.

"The survey shows that many American SMEs haven't gone global yet," said David Abney, chief operating officer of UPS. "And if they don't take part in trade, they stand to lose their competitive edge in a business environment that continues to transcend international borders. For example, McKinsey** estimates that nearly 1 billion new consumers are expected to enter the global marketplace over the next decade as a result of economic growth in emerging markets, creating a significant opportunity for American small businesses."

Survey respondents cite many reasons for not engaging in international trade, including a perception that it is too risky, a lack of knowledge about international markets, unfamiliarity with customs regulations and disinterest in expanding business beyond U.S. borders.

Among businesses that either import or export, 45 percent perceive global trade as a benefit while 18 percent see it as a disadvantage. Slightly more than half - 52 percent - say global expansion will help them remain competitive or create an opportunity to increase profits. One out of every four believes that global expansion could lead to competition that will cut into profits.

Export potential for small businesses "enormous"
According to the Commerce Department's U.S. Commercial Service, the export potential of SMEs is "enormous." Small-and medium-sized companies account for almost 97 percent of U.S. exporters but still represent only about 30 percent of the total export value of U.S. goods.** Because nearly two-thirds of SME exporters only sell to one foreign market, many of these firms could boost exports by selling products in more countries.

American SMEs aren't the only ones that may be missing out. The UPS Business Monitor Canada, released in August 2007, reveals similar findings. Slightly more than one quarter - 28 percent - of Canadian respondents said they source products outside Canada and 21 percent sell products internationally.

"Until small businesses make going global an integral part of their business, they will continue to lose out on 95 percent of the world's customers that reside outside the U.S.A.," said Laurel Delaney, president and founder of Global TradeSource, Ltd.

The results regarding global trade represent the initial findings of a survey that will be released in full later this fall. Other highlights from the initial findings include:

• Of SMEs that import, 88 percent say they expect the amount of their imports will either increase or stay the same over the next year (32 percent say it will increase and 56 percent say it will remain consistent).
• Of SMEs that export, 95 percent say they expect the amount of their exports will either increase or stay the same over the next year (44 percent say it will increase and 51 percent say it will remain consistent).
• Canada and Mexico are seen as offering the best opportunities, especially by SMEs that both import and export.

Sources:
** The McKinsey Quarterly, Jan. 2006 "Ten trends to watch in 2006" by Ian Davis, Elizabeth Stephenson
** http://www.buyusa.gov/philadelphia/whyexport.html

Notes about the research:

• Research was conducted by TNS, a world leader in market insight and information, using the TNS 6th Dimension Panel.
• A total of 600 telephone interviews with small business establishments in the U.S. were conducted between May and June 2007.
• Respondents had to be extremely or very knowledgeable about their company's overall economic position.
• All businesses have an average annual revenue between $250K and $50M
• • 418 have average annual revenues of $250K to $5M
  • 126 have average annual revenues of $5M to $20M
  • 56 have average annual revenues of $20M to $50M
  • Annual revenue based on last full operating year's results that respondent was aware of.
• UPS was not identified as the sponsor of the survey.
• More than two-thirds of exporters have fewer than 20 employees.