Leading expert Hisham Farouk, Managing Partner, Grant Thornton UAE shares his view on international expansion, growth strategies and diminishing trade barriers.

For local businesses, which are looking to expand overseas, what are key factors to bear in mind?
The first consideration for any company expanding overseas is to ensure they identify the right market to suit their product, capacity, service delivery and target audience. These elements need to be considered at the preliminary stage given that doing business varies across borders. Barriers to entry are easing across the world given new markets are much more accessible, with the availability of logistics and technology, local businesses must choose wisely as to which is the right market for them in order to meet their growth strategy. 

There is an opportunity cost in every transaction and therefore they should analyze what suits them, their target audience and business the most. Research from the International Business Report, highlighted that Singapore (88 per cent) and the UAE (66 per cent) are two countries most interested in growing through cross border transactions, therefore these factors must be considered when entering new markets and expanding overseas, which provide differing challenges and opportunities.

What countries and products, according to you, have potential for trade with Dubai in the coming years?
This is dependent upon the product and service that the entrant would be marketing in response to local market need and demand. The economy in the UAE has continued to grow throughout the years and has overcome the economic downturn rapidly. It has increased by more than six fold over the past 26 years to become the fourth largest economy in the Arab world.

There are many options open to international companies seeking to establish a business in the UAE. Countries from the Far East, Africa, India and Western markets all have opportunities to trade with Dubai in the coming years, as the population continues to diversify so does the need and want for different products and services. It is a competitive market, which will continue to present opportunities in the years to come, however how you approach this market and target the audience for your specific business will be the reason for success or failure.

What role do you envision the Expo 2020 playing in facilitating international trade?
Expo 2020 is a six month trading event that will allow global companies to interact under one roof. It also provides a great opportunity to identify other businesses and understand the global dynamics in your chose market. It will allow companies to showcase innovation in their sector and align their business on a global platform. It is estimated that this win will create innumerable opportunities due to the increased demand in various sectors namely leisure and tourism (with an estimated 25 million visitors expected to arrive), construction and logistics. This win will see the emergence of entrepreneurial businesses and dynamic SMEs who will work collectively to deliver the ambition that the UAE has, which will inevitably facilitate international trade and truly position the UAE as a regional business hub.

What advice would you give to exporters from the UAE looking to expand overseas?
Ensure your house is in order first. Overseas expansion is a very consuming project both in time and resources. Also ensure that you have studied your chosen market carefully. Understand rules and regulations, tax regime, ownership rights and expatriation of funds. You can also consider whether certain markets may be advisable to have a local partner to support your initiative. Always seek the right advice and ensure you do your due diligence and conduct a feasibility study before taking any expansion action, as without this it could be a costly mistake.

What are some of the biggest trade barriers local businesses face when expanding overseas?
This is dependent on the goods or services but regulations on manufacturing and taxes are two key points of consideration. Some jurisdictions require local materials to be used or impose high custom duty. As Dubai is a non-tax enforced environment, it is critical to understand the tax implications for trading overseas and impact on margins you have achieved previously in Dubai.

Are SMEs in the GCC at a disadvantage when it comes to pricing, as compared to businesses in dominant markets, such as the USA?
The SME eco-system is still at is primacy in the region and therefore the support they require is still very much developing as we speak. This support mainly comes from three key aspects, availability of finance, which is more expensive if accessible, supplier payment support and access to position themselves in the market. However, we must also consider that the UAE in particular along with other GCC countries provides a fluid market for SMEs, as opposed to the USA where there is no mid-market between the larger conglomerates and the start-ups who enter the market. Therefore, the GCC does present more opportunities for dynamic SMEs who have a distinct USP.

How can a business trading online ensure that it has a true USP, when it might have thousands of global competitors, whom anyone can access?
Online trading is about identifying a gap and providing services or goods that fulfil it. Since there are thousands of online companies, and searching/marketing your product is fairly cost effective, businesses must position themselves effectively in the online space to ensure they are easily accessible (via SEO etc.). What is very true to any business is also true for online, which is consistency and quality of service which are the key ingredients to success. When a consumer/ customer shops online, they expect the same level of service and  efficiency as with any transaction.

What kind of support/services does Grant Thornton offer to businesses looking to do international trade?
Grant Thornton is one of the world’s leading organisations of independently owned and managed accounting and consulting firms. These firms provide assurance, tax and specialist advisory services to privately held businesses and public interest entities. Clients of member and correspondent firms can access the knowledge and experience of more than 38,500 staff in over 160 countries and consistently receive a distinctive, high quality and personalized service wherever they choose to do business. As a global professional services firm, we can advise on markets, assist with setting up, and introduce our potentials to stakeholders in chosen markets through our network. We are known as the advisors of choice for dynamic organisations.

How can local businesses ensure adherence to global standards and best practices?
As stated earlier, due diligence is critical for this and local businesses should seek assistance from a qualified advisor to ensure adherence to all rules and regulations.

Is arbitrage another opportunity for businesses working in international markets?
It may be, but it isn’t an immediate viable consideration in regional markets given the limitation of realtimeliness of information.

Trade finance and trade credit insurance are two crucial financial instruments that could help companies when doing business overseas. What are key trends you see in this sector? Do you think these areas have been utilised to their full potential?

I believe there is great opportunity to expand in these sectors and provide more structured products which will inevitably increase and support trade.

Finally, what influence do you think social media and other technology solutions have on the world of international trade?
It’s one of main reasons borders and barriers to entry are diminishing. If we take a simple example of Amazon and how it revolutionized online sale - today, you can practically order anything in almost any part of the world. Social media and technological solutions enable you to market and reach a significantly larger audience at a fraction of the price. With crowd funding and open source developments, you can effectively raise funds, R&D your product, find a manufacturer to lease a production line and sell your product all from your laptop in a coffee shop somewhere. Rules of engagement have completely changed with current and rapidly advancing technology and the use of social media which allows you to promote your product on a one to many basis as opposed to one to few - all at the touch of a button.

As featured in SME Advisor Magazine - August 2014