International business

Building resilience in international business

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Internationally focused companies need to be resilient to ensure continued growth and development. Mid-market businesses have the unique advantage over their larger competitors of being much more flexible when it comes to reacting to change. Grant Thornton's latest International Business Report (IBR) showcases how the mid-market plans to build this resiliency amid ongoing global uncertainty – with a particular focus on evolving supply chains and trade patterns.
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If you want to know more about how the global ambitions of the mid-market are impacting key supply chain choices amidst the challenges of an uncertain global climate, read our latest International Business article – ‘Quality knows no borders’ – where we explore how businesses are improving their overall offer to customers through strategic decision making around global business.

International business ambitions: Mid-market growth and expansion
International business
International business ambitions: Mid-market growth and expansion
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The need for resilience in international business

The global mid-market has managed to remain optimistic about the future. However, despite an easing in inflationary pressure that many are hoping will stabilise costs, there is still a lot of uncertainty in international markets. The World Economic Forum’s (WEF) Global Risks Report[i] has highlighted a generally negative world outlook, with instability and continued risk expected over the next two years. This trend is anticipated to continue across the next decade.

These risks bring with them a level of uncertainty that businesses simply can’t plan for. This was particularly evident during the COVID-19 pandemic but has also been seen to other extents in recent years. Global conflicts, macro-economic shocks and the impact of climate change have also led to significant challenges, in particular across global trade routes and supply chains.[ii]

Globally, the mid-market is focused on quality, with 37% of firms looking to improve quality through carrying out international business. 20% are also looking to international business to develop the resilience of their supply chain.

These two areas, when considered together, show how important a resilient and quality-focused supply chain is. The mid-market has placed a clear emphasis on building quality into every level of business, and resilience will naturally be developed as part of this.

How globalised supply chains can build better resilience

As the mid-market continues to become more globalised, supply chains have grown increasingly complex. While globalisation offers many opportunities to internationally minded businesses, this increased complexity also exposes organisations to more risk. Ultimately, the supply chain is only as strong as the weakest link and therefore mid-market leaders are keen to both identify and rectify where this poses a threat.

In addition, there is pressure from both a regulatory and an ethical standpoint for developing more sustainable supply chains. In fact, sustainability (39%) is second only to cost-effectiveness (54%) in what the mid-market is considering when making international supply chain decisions. This pressure, coupled with an uncertain global business environment, has prompted the mid-market to re-think and de-risk its supply chains.

Dave Munton, Global head, International capabilities and support, Grant Thornton International, explains that:

“There is no doubt that supply chains have become more complex and more fragile. Those businesses that both de-risk their supply chain whilst at the same time embracing the sustainability agenda will be those that will drive success. Finding the optimum balance between effective environmental sustainability and an acceptable level of risk in supply chains is a key requisite for mid-market growth.

Optionality within supply chains offers the mid-market a route to better resilience. By actively diversifying, if one part of the chain becomes negatively impacted, the entire chain doesn’t fail due to one compromised link.”

Resilient trade routes promoting international growth

Global uncertainty has prompted a rethink for how many mid-market organisations conduct international business. Risk reduction has now become a key concern, and one method for achieving this has seen trade routes shift towards more resilient and trusted models. Globally, mid-market businesses see supply chains and complex procurement systems (45%) and quality of transport infrastructure (42%) as business growth constraints.

Two popular methods that have emerged to combat this risk are nearshoring and friendshoring. Such close relationships allow for greater knowledge of local markets, reducing the overall risk of expansion. With 42% of global mid-market firms looking to increase the number of countries they sell to over the next 12 months, building on strong relationships between close neighbours and/or allies will be vital in ensuring sustainable growth.

“Businesses need to make sure that they have solid relationships that support entry into new markets. Everything is underpinned by strong relationships. Having strong local relationships that understand the nuances of the cultures that you're moving into is critical.”

 

Jorge Tarancón, Financial Advisory Partner - Transactional Advisory Services

The mid-market’s use of nearshoring and friendshoring can offer a very effective use of available capital. Considering that access to finance has been difficult in the recent global monetary environment, and that 40% of global mid-market firms still see a shortage of finance as a key business constraint, this is a way some firms have been able to continue to grow.

Michelle Alphonso, Partner, National transaction advisory services and Private equity leader, Grant Thornton Canada, gives an example:

“From a Canadian perspective our closest neighbour is the US. It's a huge economy with a tremendous amount of potential. It offers Canada the highest and best use of capital. It offers a low-cost entry point, with a high amount of stability and potentially high returns. I think that balance of cost, quality, risk mitigation, knowledge and familiarity – all of those factors are playing into why nearshoring is becoming more of a trend.”

Resilience of the mid-market driving quality

Despite the current uncertainty around the world and the threat of further geopolitical upheaval, the mid-market continues to display remarkable resilience. Our IBR research from 2023 showed that many mid-market firms reshaped their international supply chains in the wake of COVID-19 as they looked to reduce risk and deliver further value.

The flexibility and adaptability of the mid-market remain key traits that allow organisations to continue to grow and develop internationally. Despite the general level of global uncertainty, 92% of mid-market firms believe that they are prepared for future unforeseen circumstances based on past geopolitical and economic experiences.

“Mid-market businesses are of a size where they can respond quickly – the decision-making process between issue and change is quite short. For a number of years, the mid-market, and certainly the upper mid-market, has been predicted as the fastest growing part of the economy globally. That agility, that responsiveness, that confidence all feeds into the level of ongoing optimism.” – Dave Munton, Global head, International capabilities and support, Grant Thornton International 

Investment in people, in brand positioning, and attempting to mitigate business constraints all have parts to play in ensuring that the mid-market is prepared to survive and thrive internationally regardless of geopolitical or economic headwinds. Building resilience allows for a higher quality supply chain, leading to better customer and stakeholder outcomes. This focus on quality, supported by continuing resilience, continues to grow and is highlighted in the mid-market's willingness to continue to develop international business.

Investing in international growth

The global mid-market has shown remarkable economic resilience over a trying few years. The willingness and drive to continue to invest in international growth are testament to this. With more than half of mid-market firms (52%) planning to increase their strategic focus on international business over the next 12 months, it’s clear that opportunities for global expansion exist despite an uncertain geopolitical environment.

If you want to learn more about the mid-market’s focus on international quality, our latest report, ‘Quality knows no borders’ explores how businesses are looking to further leverage their supply chains to improve their offers to customers. Access it now and discover what our latest IBR data has revealed about the mid-market’s international business plans.

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i. weforum.org - These are the biggest global risks we face in 2024 and beyond - 10.01.24
ii. imf.org - Climate Change is Disrupting Global Trade - 15.11.23