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Multicultural networking events help small businesses grow. Find out at the Small Business Festival Victoria

Beer and biofuels—what do they have in common?

Ask Biofuel Innovations’ Dale Barnett. He figured that similar processes to brewing beer could be used to process waste cooking oil into biodiesel.

Co-founded by Barnett and Rebecca Yee, who met studying chemical engineering at Monash University where they discovered their shared passion for ‘integrating technology, Biofuel Innovations integrates local waste recycling with local fuel production.

As one of the faces of this year’s networking event at the Small Business Festival Victoria, Barnett and Yee say their plan is to see biodiesel integrated plants built locally in businesses, in the community and industry all around Australia.

It’s events like the festival that will help them and other small businesses in Victoria make valuable business and government connections to help them expand nationally and overseas.

The festival is an important part of the Victorian Government’s push to drive small business performance through networking and innovation.

Minister for Small Business, Innovation and Trade Philip Dalidakis says Victoria is leading the country in small business growth with the largest number of small businesses, at more than half a million, and the highest growth rate at nearly double the national average in the past year alone.

“Undoubtedly Victoria is the small business state—we grew by almost 9,000 new businesses last year alone, and our startup and small business community is growing faster than ever before,” he says.

Nearly half Victoria’s private sector jobs are provided by small businesses with 28 per cent of them located regionally as the lifeblood of many local communities.

For every 100 businesses 98 are small businesses, for every 100 private sector jobs, 47 are created by small businesses and for every $100 generated in Victoria $35.60 is by small businesses.

“The government is determined to keep growing our booming small business sector, which is why we are providing $24 million over four years to grow our large network of global trade and investment offices that will see local businesses have greater access to export to the world’s biggest markets,” adds Dalidakis.

“Since December 2014, hawse have delivered 32 outbound trade missions with more than 730 Victorian businesses reporting over $29 million in actual export sales, with anticipated total export sales of $690 million,” he says.

 

SMEs need to tap into Asia

By 2025, according to the PwC report “Passing us by”, Asia will produce half of the world’s total economic output, but only 9% of Australian businesses are operating in Asia and only 12 per cent have any experience of doing business in Asia at all.

The report says Australian companies have struggled to execute in Asia. The biggest issues seem to have at their core, problems in relation to culture, our willingness to deal with change and our ability to manage and operate in an Asian environment.

It states Australian companies need to significantly lift their engagement with Asia, up-skill themselves in doing business there and invest more in the region.

Victoria’s New China Strategy: Partnerships for Prosperity, announced earlier this year, sets a clear vision to do just that and make Victoria China’s trade and investment gateway to Australia.

To help achieve this, Victoria delivered a $66 million boost in the 2016/17 Victorian Budget to strengthen the global network of trade and investments offices. This network is the largest of any Australian state or territory, with 18 offices around the world including 11 in Asia.

The Budget also provided $4 million for the establishment of the Asia Gateway. The Gateway will assist businesses wanting to begin exporting to China by connecting them with Asia-focused services and organisations.

In March this year during the Victorian Invitation Program, the largest inbound trade mission led by the Victorian Government, Minister for Small Business and Trade Philip Dalidakis announced a first-of-a-kind partnership with Australia Post to help Victorian businesses tap into China’s multi-billion dollar eCommerce market by providing access to buyers through China’s leading online sales platform, Tmall.

Tmall, owned and operated by the Alibaba Group, is an online marketplace that allows businesses to sell their products directly to consumers in China without the expenses associated with international travel or having a regional retail presence.

Last financial year Tmall sales were up 68 per cent on the previous year, exceeding $170 billion dollars. The Chinese eCommerce market is the world’s largest, with an estimated 649 million internet users spending more than $250 billion dollars each year.

A memorandum of understanding was signed between the Government and Australia Post to explore options to help Victorian businesses maximise on the opportunities available in China through Tmall.

This deal will be a game-changer for Victorian businesses, allowing local business owners and operators to engage with China’s key buyers without worrying about supply chain logistics, translations and customer service.

The opportunity is right on our doorstep, but we need to make sure we act now.

Rohini Kappadath, chair of the Multicultural Ministerial Business Advisory Council, says if we want to grow—and defend our home markets—Australian companies need to significantly lift their engagement with Asia, up-skill themselves in doing business there and invest more in the region.

“Globalisation and increased regional economic integration have intensified competition in both domestic and international markets, and triggered new models of global business. The most substantive and pervasive of these models has been the development of global value chains or production networks,” says Kappadath.

 

How global value chains can help small business

“International trade has been transformed by global value chains in which goods and services are ‘made in the world’ and which encompass the cross-border flows of components, investment, skills, ideas, and people. Today, goods and services are no longer produced in one country, but are assembled from intermediate goods, services and intellectual property sourced from many countries, says Kappadath.

“As a result, more than half of the world’s manufactured imports are themselves inputs—primary goods, parts, components, and semi-finished products. More than 70 per cent of world services imports are intermediate services. Trade in intermediate goods and services now represents more than two-thirds of global trade,” she adds.

Kappadath says Asia is a leading region in the globalisation of production and the development of networks and value chains.

“The electronics and automobile production networks in east and southeast Asia are well known, as are the outsourcing (services) value chains of India, the Philippines, and other countries. This has led to an enormous increase in trade volume, complexity, and risk that poses major challenges for government policy and regulation,” she explains.

 

Challenges facing SMEs

Global value chains provide a chance for SMEs to upscale their business models and to grow across borders. However, the potential of SMEs is not often fully realised owing to a number of factors relating to their small size.

First there is the issue of a lack of resources whether that be in finance, technology, skilled labour, market access or market information.

Then they are hampered by a lack of economies of scale and scope, higher transaction costs, relative to larger enterprises, and poorer networks that hinder the know-how and experience of both domestic and international markets.

Another problem facing small businesses is increased market competition and concentration from multinationals and their greater capacity for R&D expenditure and innovation.

Geographical isolation is yet another factor that puts small business at a competitive disadvantage.

 

Four key strategies for global business

Kappadath says SMEs must focus on being successful at any one of four key strategies when conducting business at an international level: supply chain, R&D, manufacturing, or sales and marketing.

She says global value chains exist across all industry sectors, but that small businesses need a “solid understanding of the structure of these industry value chains, from design to production, and from marketing to distribution” if they hope to access these regional and global networks.

“SMEs need to have a clear understanding of their competitive advantage within the value chain. They need to understand the compliance costs and be able to foster a managerial culture that favours research and development, innovation and training,” she says.

Kappadath believes events like the Small Business Festival Victoria play a significant role towards building capacity, and enabling deeper understanding or respective strengths and creating the opportunity to form clusters to access global value chains.

“For SMEs wanting to internationalise, these home country networks within our multicultural business communities provide a valuable base and vantage point from which to build insight and capability to address the nuances of doing business across borders,” Kappadath says.

It is through business and government networks that we will see small enterprises like Biofuel Innovations being able to tap into the right global value chain, and expand.

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