Here’s Why Expansion To Global Markets Is A Must To Cure MSME Dwarfism

MSMEs have a global reputation of being the underdogs driving economic growth. India has over 6.3 Crore MSMEs, contributing to nearly 23% of the Indian labor force. How many of them have grown to become large organizations in the last 10 years? Less than 16%. The remaining 85%? They ended up being the victims of MSME dwarfism.?

MSME dwarfism occurs when an organization operating for 10 years or more fails to employ over 100 people. In India, over 5.3 Crore MSMEs suffer from this phenomenon, remain stagnant in growth, and never graduate to become a large organization due to any or all of the below-mentioned reasons:

1. Cutthroat competition in a limited market.
2. Fear of losing size-based incentives from the government.
3. Increasing domestic regulatory restrictions with growth.
4. Lack of expansion awareness, strategy, and execution confidence.

Micro businesses usually escape scrutiny and experience multiple government incentives, while large firms manage their regulatory compliance well enough or have adequate finances to bear the unprecedented damages. Unlike either, mid-sized businesses face the same challenges as middle-class Indians — The risk of losing it all with just one calamity. This rare sight of mid-sized companies is why we don’t see many micro and small businesses trying to reach the next step, let alone become large organizations.

Surprisingly, the answer to these roadblocks is just one - Business Globalization.?

Many will treat this as a basic fundamental of scaling, but my experience has shown me insights many businesses might have overlooked or are unaware of. So, considering your product/service is top-quality for your existing resources, equipped technology, and finances, how does going international help?

• Expanding your target audience beyond current borders relieves local competitiveness stress. The longevity of brand loyalty is decreasing as new brands emerge with stronger USPs, which is a great opportunity to tap newer audiences for you too.
• When you approach new markets, you get an instant reality check of the quality vs. pricing structure. While Japanese businesses had to up the quality of services and products when they pushed global expansion, yours might not need to. Even if you do, it will help you provide better quality to your existing audience while matching international standards.
• The regulations across countries differ dramatically. Expanding your business to locations where growth for your business size is incentivized and regulations do not come with complexities may help scale sustainably.
• Connecting and collaborating with local partners in international locations also helps equip advanced technology and expand resources remotely. The remote culture has proven its mettle for over 5 years now, and a digital-first approach can become your key driver of expansion across borders.
• Establishing a strong and widespread global brand presence is easier for Indian MSMEs. Do not ignore the sheer amount of trust the leading developed countries have in the talent, cost efficiency, and creative problem-solving capability of Indian business owners.
• Diversifying markets reduces the risk of losing it all from one downfall. The recent economic slowdown in the USA and UK is one of the best examples of why diversification is critical for business expansion and sustenance. Businesses dependent on multiple international markets can mitigate risks, as when one market faces a downturn, you can ramp up the financial investment and resource efforts in others.

The Indian MSME landscape has more potential than China to become the leading contributor to the country’s economic growth. China's nearly 3.8 Crore million MSMEs contribute over 60% of the GDP. Compare it with India’s 6.4 Crore MSMEs, and you will understand the literal goldmine we are stagnantly sitting on. In the last 10 years, government regulations have become more accommodating, thanks to India’s digitalization boom. With this kind of supportive environment we have now, overcoming the stagnancy of dwarfism is easier than ever.

I understand that each business has different reasons for stopping scaling. This solution takes a neutral approach without taking them into consideration. However, gaining monetary strength for your business may help tackle certain individual exceptions. Let me know the roadblocks your business faces in the comments below, and we can discuss the potential ways to remove them.