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Brexit & consequences for SME

Here the story of a Pakistani company selling Himalay salt. Worldwide the demand for salt is increasing and they want to jump the money train by expanding their markets. All they need is an action plan!

The company has 18 employees and a turnover of about 800 k€. They have a great offering in all kinds of different salt related products and want to grow their business by entering the European market. For an approach how to best handle this they turn to ENVISION.

Entering new markets

There are several models for entering new markets: Firstly, you can simply replicate your business model in other countries. Secondly, you can look for other key partners, like agents, distributors or shopping chains to get connected to new markets. A third option is to build a platform or a website targeted to an international market and offering a number of language alternatives. In our case the small Pakistani company relies on a contact person coming from their personal network. He represents the company in Europe, attends fairs, searches and finds agents and suitable distributors. For instance retailers specialized in natural health products,  furniture and home decoration retailers, pharmacies, spa-hotels, and restaurants, and supermarkets. Typically companies that act in a B2B market. Although this representative is based in Finland, the salt company focusses on the UK as their preferred market. So far so good with riding the train. And then the Brexit comes. Then what to do?

How to find a business solution for the changing market perspective  

Although the Brexit didn’t come as a surprise, the company really needed to consider what the impact of the Brexit for their business model would be. So, they turned to ENVISION for helping them evaluating their existing business strategies and creating alternative ones. For this they used the stress-test tool ENVISION developed on the buisnesmakeover.eu platform. This tool helped them understanding if their business model would be future proof. Changes in society, technology and markets can affect the future of any company and with this tool you can prepare and adapt to the future.

The new business solution. Work in progress!

They analysed the strong and the weak parts of their business and based on this, created a 2-phased plan that would make their business overall less vulnerable. They chose to keep focussing on the UK, by creating a strong foothold. At the same time, they realized they needed to push forward entry to other European markets. For this, their business model should be leaner and meaner. As mentioned earlier, the company relied on middlemen for entering the market. Of course, cutting out these middlemen would  improve their profitability substantially. So, the first phase of their Business Model involved partnering a new UK distributor and online sellers Ancient Wisdom and K-Living. The company is now working towards phase 2 of their Business Modelling: disintermediation of agents, partners, distributors when and where possible. They are planning to appoint one representative in the UK to get involved in operations with partners. From a direct oriented customer approach they are gradually moving over to a strong online customer approach. This will help them reducing costs and being there where the customers are looking for them.

The Brexit and consequences for SME’s from developing countries

As with our Salt companies, more companies focussing on the UK to enter the European Market. The Brexit and the expected ongoing trade debate from the UK with Europe, ask for an analysis of the trade restrictions and tariffs for developing economies. It will not be very likely that the UK trade policy will focus on the role the UK can play in the interest of developing economies to enter the European market. There are noteworthy concerns over whether the UK is willing and able to undertake such a role. The challenge of defining a new trade policy is substantial, and one for which the UK Government is not well prepared. Seeing scale of the tasks and the number of negotiations that the UK will face in the next year, there is a major risk that developing countries will be overlooked.