Export consortia can transform exporting for SMEs

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Bikky Khosla | 21 Feb, 2012
Small is beautiful â¦ but when it comes to exporting, that's hardly true. These days, although Indian small and medium enterprises (SMEs) are increasingly becoming a regular part of the exporter community, still many small players dare not head into global trade. They find themselves lacking in required funds, knowledge and skills, and as a result, prefer to continue competing only in our corner of the world -- at the domestic level.

However, while it is a reality of life in today's business world that our SMEs can no longer afford to ignore the distinct advantages of going global, it is not easy for them to compete in a global environment, given the constant problems they are beset with -- most importantly, resource constraints and shortage of trained manpower to deal with the challenges, risks and complexities involved in exporting.

In the light of these challenges and also the fact that there is no such possibility that our government would be able to do much to get millions of our SMEs in the export game, I think what is important for our SME owners is to help themselves while remaining within their characteristic limitations. They need to be innovative -- and when it comes to exporting, I think development of export consortia can be an effective way to overcome the hurdles of costs and lack of skills.

So, what is an export consortium! Primarily, it is a voluntary grouping of enterprises, which combine their knowledge, expertise, resources and contacts without giving up their legal, financial and managerial autonomy. The participating firms are usually from a similar line of business, and their objective is to improve the export readiness of each of the participants.

Such a grouping helps the members increase their export volumes while reducing cost and spreading risks, which, needless to say, can prove highly beneficial for small and inexperienced exporters. Among other benefits, the participants can go for for joint bidding, and thus respond to big overseas orders that are beyond the capacity of an individual member. In addition, volume discounts can be negotiated with carriers and the same overseas agents can be used to reduce costs.

Thus, the benefits abound, but there are some stumbling blocks as well. Successful partnering requires time, effort and long-term commitment. In addition, searching appropriate partners can be very difficult and the negotiation process can be extremely lengthy. But yet, I think that the benefits of such an alliance can easily outnumber the disadvantages, and if the participating SMEs can work harmoniously and efficiently, export consortia will break down some big barriers faced by them to exporting.