International earnings set to outpace domestic in growing companies
The world’s fastest-growing companies’ international earnings are set to eclipse domestic revenue by 2030, according to new research from HSBC.
A survey of 1,143 global senior decision makers, in companies with a revenue of between £18m (£14.2m) and $5bn (£3.9bn), found overseas revenue represents less than half of their income at present.
However, this is expected to flip in the next five years, as business leaders prepare for global expansion to become a bigger priority.
In an interview with City PM, HSBC’s head of global trade solutions Vivek Ramachandran said if companies are not considering global expansion “you’re missing out on a huge opportunity”.
“If you’ve got a competitive product or service, you’re missing out on an opportunity by not defining your market more globally,” he added.
Ramachandran emphasised this switch was not due to a downfall in the domestic market and there was no sentiment of businesses fleeing their homeland.
“It’s rather we’re seeing additional opportunities grow,” he told City PM.
Domestic consumers to benefit
The study identified the top factors supporting international success was having the right network, capable local teams, favourable macroeconomic conditions and in-depth market knowledge.
Whereas regulatory and compliance issues made up nearly a third of the top challenges for businesses at 31 per cent.
Brand recognition ranked second at 25 per cent, with increased competition third at 24 per cent.
With the research indicating global competition is set to become more crowded, Ramachandran said this bodes well for domestic consumers.
“Competing in new markets increases your effectiveness in the whole market,” he added.
“So I actually think this is good news for domestic consumers.
“I don’t think this is at the expense of your home market.”
He advised companies heading for expansion to look beyond similar and geographically-close markets, urging companies to “think of the world in a much more expansive way”.
AI in international expansion
The research highlighted nearly two-thirds of businesses were using AI to drive their international expansion plans.
Ramachandran noted the efficiencies of AI tools, but advised companies heading for global expansion to not neglect “local presence”.
HSBC this week launched a Global Expansion Assessment tool, which will quiz executives on their business before revealing their strengths for expansion and areas in need of improvement.
Ramachandran described the tool as providing a “checklist” for companies ahead of expansion, tailoring their needs and requirements to the market they seek to enter.
He urged fast-growing businesses to “go in with your eyes open” when approaching international expansion.
Brown University lecturer Jason Talwar, who led the study, said: “Companies worldwide are pushing towards international expansion to diversify their revenues, manage risks, and access new talent.
“The global landscape is increasingly unpredictable, and the red tape around new markets can be daunting.
“Our research found that the key tool that companies can have in their playbook is access to a network that can open doors and reduce this uncertainty.”