There’s little doubt that expanding a business internationally can be an extremely daunting prospect. Look at this statement at a recent conference by Tim Griffiths, chief executive of the industry’s third biggest business, Williams Lea. Griffiths said the 2006 deal in which Deutsche Post World Net took a majority stake in Williams Lea was attractive because "we didn’t think we could manage a global platform with a balance sheet of £400m-£500m". On that basis, should SME print businesses with ambitions for international expansion stick with Taylor’s pub-based theorising and give up any notions of gaining an overseas outpost or two?

Well, no. The opportunities are out there for small and big businesses alike. In Griffiths’ case, his is a business that really does need to be global to service its global client base, and international expansion remains a serious ambition for companies up and down the country. The recent ‘Business Without Boundaries’ report from HSBC Commercial Banking surveyed more than 5,300 UK businesses, from start-ups to corporates, and found that of those expecting to grow, 46% believed they would need to trade internationally to make that a reality. Half of the businesses questioned were already trading overseas and a further 8% expected to start doing business internationally in the next six to 12 months. And of those businesses, six in 10 identified it as essential to ensure future growth.

Steve Bottomley, head of commercial banking at HSBC, says: "It is very encouraging that despite the negative sentiment around the current economy both in the UK and internationally, businesses still recognise that it is important to consider their growth potential. We know that more than half of the businesses that do trade overseas feel that it is having a very significant impact on their ability to remain successful. As markets in the UK become more challenging or the cost of supplies, services and skills become more expensive, an increasing number of businesses will consider overseas operations in order to run their own business in the most cost-effective and successful way possible."

The good news is that going global isn’t just for the big boys, and neither is size a guarantee of success. In fact, the bigger you are, the bigger the mistakes you can make. Quebecor World’s aggressive global expansion ultimately resulted in its painful fall into Chapter 11 bankruptcy protection early this year. American group Vertis (formerly Big Flower) made a number of UK acquisitions but just a few years later ended up withdrawing from the market. Schawk has also pulled back and reduced its UK footprint. Even the venerable RR Donnelley has had a mixed experience when it comes to growing globally.

As Pindar chairman Andrew Pindar points out, there are very few businesses operating in this sector that can be described as truly ‘global’. And the diverse nature of the worldwide print industry and its customer base, opens up opportunities for SME companies that are fleet of foot and can operate on a smaller scale in the sort of niches that are perhaps too specialist for the big players to achieve sufficient scale.

"That’s why it’s interesting looking at print franchise models, and why things work in one country but not another," notes Pindar. "For example, Snap is successful in Australia yet struggles in New Zealand. AlphaGraphics has just opened its 14th store in Brazil, yet struggled in Germany. What are the characteristics that define success and failure? Is it the market or getting the right people? I suspect it’s the latter. There isn’t a particular model that does or doesn’t work. I think success rates are few and far between unless you have something you are particularly good at."

Pindar describes the group’s AlphaGraphics international print franchise network as "effectively a chain of SMEs". A number of the UK franchisees – and indeed those in Russia, China, Brazil and Saudi Arabia – gain business specifically because they are part of an international network. "For example, AlphaGraphics Stockton does a lot of work for a very large US corporation that is used to dealing with AlphaGraphics in the States", he says. "For an SME, it’s tough to expand your horizons unless you are in a very bespoke area. Cost and risk is potentially very high, but it can be done."

International threat
Some types of print have been more vulnerable to overseas competition than others; colour books are the obvious example of an area where the UK sector has been decimated in the last 15 years by the impact of competition from low-cost producers, particularly in the Far East.

Intergraf’s report on the Competitiveness of the European Graphic Industry says: "Some of the graphic industry’s markets are definitely international and have to face a strong and diversified competition from countries having lower labour force costs. The Chinese printing industry is not a global threat for the European Graphic Industry but a real peril for specific products presenting special features: large part of manual operations, long delivery time, and weak customer relationships." The total value of books imported from China to the EU during 2003-2005 increased 58% to €351m (£277.6m), according to the report.

In short, if a business specialises in printed products that have a long lead time (certain books, calendars, diaries) or require lots of fiddly hand finishing (pop-up books, some greetings cards), the likelihood is it will need to review its long-term business plan if it hasn’t already done so.

But it’s not all one-way traffic, and a number of UK print businesses have expanded their footprint in the Far East and beyond. The Charlesworth Group, which specialises in services to academic publishers (see box), has been operating in China for almost a decade thanks to some pretty incredible foresight and determination on the part of chairman Neil Charlesworth. Sales director Marion Morrow says the group never stops looking for further expansion opportunities. "We’re always looking at what’s going on in the world and the different market forces in other countries. Vietnam, India, the Philippines… you have to keep an open mind. And of course, China is a big place and there’s still plenty of scope for expansion there."

Nottingham-based greetings card specialist Sherwood Press Group has had a Hong Kong operation for a number of years, and earlier this year set up a joint venture with Gdansk, Poland-based printer Solutions Polska. Longer lead-time work can be carried out in Hong Kong, while the Polish option provides a halfway house in terms of time and cost and also opens up potential new market opportunities in Eastern Europe. And this geographic spread and experience means the company can speak from a position of genuine knowledge when it talks to clients about the relative merits of different production options. "China and new Europe should be seen as complementary to UK production and not alternatives for everyday business," says managing director Jeremy Bacon. "We have a successful business – Sherwood Press Hong Kong – but discourage customers from placing everyday business in China unless they can accurately predict demand and finance additional stock holding costs."

Pindar’s business has also been built on a long history of innovation and entrepreneurial zip, and it can probably lay claim to the title ‘most international privately owned UK print group’. Joint ventures and acquisitions have fuelled its international growth. The group has a business in India that provides data capture and data processing services for cataloguers in the US and Europe. This began as a partnership five years ago with publisher Macmillan, with Pindar buying itself out as the business grew. Pindar anticipates the Indian operation will double in size in the next 12 months.

Pindar’s 2007 acquisition of the then relatively small specialist New Zealand-based typesetter Egan Reid also opened the door to a huge amount of export typesetting. "It was a small business when we bought it and it has doubled in size. It now finds it easier to sell to UK publishers thanks to the Pindar association," says Pindar. "e are also finding in these recessionary times that people are looking closely at headcount and overtime payments. It’s common for a client to start off co-sourcing with us, rather than outsourcing, and then it’s easy for them to evolve to the point where we do the whole thing. We are getting enquiries at the moment from people who are clearly under pressure."

How to succeed
Advice from those who have successfully taken their business overseas include these five top tips from Charlesworth’s Morrow: "Do your research very thoroughly – you can’t do too much. Be very, very careful and get it as right as you can first time around. Don’t rely on anyone else – do it yourself. Do your homework and learn the local ways. Don’t rail against it – you have to respect local laws and cultures."

HSBC’s Bottomley also recommends taking expert advice: "It is clear that there is an encouraging level of interest in overseas trading for businesses of all sizes. But there are pitfalls that need to be considered before settling on expansion plans. Information, expertise, language, currency, payment terms, etiquette, technology – all alter significantly depending on where and what you are deciding to trade in."

Many nations now have trade promotion agencies that will introduce businesses to local service providers, helping to facilitate a smooth entry into a new market. And overseas governments may have inward investment initiatives that offer a diverse range of help for foreign firms, including tax breaks. The UK Trade & Investment organisation offers expertise and contacts through its national and global networks, and also has an Aid Funded Business Team that can advise on dealing with multilateral agencies such as the UN and World Bank. There is also a wealth of information available online, such as that offered by cross cultural communications specialist Kwintessential (www.kwintessential.co.uk), which has a series of online guides on etiquette, customs and protocol including such fascinating snippets as Bahasa Indonesian having 12 ways of saying "no" and several other ways of saying "yes" when the actual meaning is "no".

Success overseas takes time and needs work. But the rewards are there for those companies that are prepared to embrace the world stage.

CASE STUDY: THE CHARLESWORTH GROUP
The Charlesworth Group, headquartered in Wakefield, is a specialist supplier of typesetting and print services to the learned publishing industry.

Chairman Neil Charlesworth identified China as a potential area for expansion more than a decade ago. When the group moved into the country in 1999, companies going offshore were mostly choosing India. Charlesworth also looked at India but decided China was the best option. The firm likes to own its own businesses, and at the time it wasn’t possible to wholly own in India but it was in China. Conversely, says sales director Marion Morrow, the opposite now applies.

Morrow explains the background: "We went out there a number of times and met and got to know people. Scientific, technical and medical publishing is our world and we needed staff with excellent English. Charlesworth China started with six people, and we now have 180. It’s a sizeable chunk of the group’s business and a lot of things stem from it, because so many people want to be in China now. Other companies that want to get a business going there come to us for help."

The group has developed a significant academic database. "There are 5,000 libraries in China but only 200 that work in a way Western publishers would recognise. So we can help publishers with their products."

In China, Charlesworth is producing work for Western publishers and also locally because many firms are setting up offices in China. "The advantage for UK clients is the time difference," Morrow explains. "They are seven hours ahead in Beijing [this will be eight when the clocks go back] which works wonderfully for UK publishers. They can send documents through as they are going home and have an answer back in the morning."

The Charlesworth facility in China operates 24 hours a day, five days a week, which is also beneficial for its US clients.

OVERSEAS EXPANSION: HIGH-GROWTH MARKETS
The 17 markets prioritised by UK Trade & Invest-ment’s High Growth Markets Programme are:
• Brazil
• China
• India
• Indonesia
• Malaysia
• Mexico
• Qatar
• Russia
• Saudi Arabia
• Singapore
• South Africa
• South Korea
• Taiwan
• Thailand
• Turkey
• United Arab Emirates (UAE)
• Vietnam
• China is the world’s fastest-growing economy and the second largest trading nation, with a population of 1.3bn and a wealth of unique opportunities for overseas organisations
• India is the second fastest-growing economy in the world, with accelerating growth of 9.4% and economic liberalisation providing a wealth of potential for UK companies
• Private consumption in Russia increased by 30% in 2006, leading to a 26% increase in imports of goods and services
• The economy of the UAE is growing at an exceptional speed – its GDP rose 35% in 2006 – and its programme of investment and privatisation is opening up an exceptionally broad range of business opportunities

Source: UKTI. For further information, visit www.uktradeinvest.gov.uk