export-Switzerland-SMEs-want-to-go-abroad-despite-the-hurdles

Successfully Exporting Despite Trade Hurdles

The Swiss market is, in international terms, small. Therefore, if Swiss SMEs want to grow, they often strive to export. Despite a good economic situation, this step should be well prepared.

Strong Swiss Foreign Trade

Last year, according to foreign trade statistics from the Swiss Federal Customs Administration, Swiss companies exported goods in the amount of 220 billion francs – a new record. The exports are high so far this year, too. In the first quarter, Swiss exports increased by 4.2 percent. Sascha Jucker, an economist at Credit Suisse, expects an overall increase in exports of 4 percent for 2018.

The solid growth also shows in the Credit Suisse export barometer. It reflects the foreign demand for Swiss products. In the second quarter of 2018, the export barometer is the highest it's been since 2011. "Furthermore, with the MEM and chemical industries, the sectors with the strongest growth are the ones who suffered most from the strong franc over the past few years," says Sascha Jucker.

credit-suisse-export-barometer-SME-2018

Credit Suisse Export Barometer

In standard deviations, growth threshold = 0
Source: Bloomberg, Datastream, PMIPremium, Credit Suisse/IDC

SMEs Face Protectionist Tendencies in Export

However, these figures somewhat mask the fact that exporting is a challenge for companies. Additionally, the trading hurdles have been on the increase in recent years. This does not leave Swiss SMEs unscathed. For instance, in a Switzerland Global Enterprise survey, half of the surveyed SMEs indicated that it is now harder to grow internationally. Unstable exchange rates, protectionist tendencies in many countries, complicated tariffs, and the increasing variety of product norms and standards are regarded as challenges.

Many SMEs therefore think long and hard before attempting to enter a new market. 28 percent of the surveyed companies have even already abandoned a market entry at least once due to significant trade hurdles. This shows that an export project must be well prepared. Not every business model or every marketing strategy is suitable for each country.

The Most Important Export Markets for Swiss SMEs

Germany is by far the most important country for Swiss exporters. Goods worth over 41 billion francs were exported to the neighboring country in 2017. The Swiss foreign trade statistics show this. The second most important export country is the US, to which goods in the amount of 33.7 billion francs are exported.

It is interesting to see which export markets are enjoying particularly strong growth. Here too, compared to the previous year, Germany (+ CHF 1.6 bn / + 4 percent) and the US (+ CHF 2.2 bn / + 7 percent) are the most important markets. China, however, is catching up. The Swiss export volume to the Middle Kingdom already amounts to 11.4 billion francs. Compared to 2016, this is a plus of 1.5 billion francs, or an increase by 15.6 percent.

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Exports by country

Change (nominal) compared to 2016
Source: Swiss Federal Customs Administration

Export Strategy Differs from Country to Country

For Swiss SMEs, however, there is a world of difference between exporting to Germany, the US, or China. Cultural specificities, customs regulations, sales platforms, marketing tools, as well as data protection and laws, are very different. Accordingly, companies are faced with different challenges.

"Time and again it strikes us how insufficiently prepared some companies go to another country without having studied local conditions in detail," says Stefan Gerig, Head of Export Finance at Credit Suisse. Tapping into a new export country can, in some cases, be a long process. Credit Suisse supports companies with corresponding financial products and loans.

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