SME international experience shaped by United States and China
05 Oct 2018
In recent years, a debate around international trade and investment has
focused on which of our largest economic partners is the most important to
Two countries put forward regularly in this debate are the
has also understandably been included.
A strength of AIBS has been its ability to reflect firm level
decision-making of SME businesses - for our sample of internationally
active business respondents - and on this basis it offers an interesting
perspective on a debate that has traditionally focused on aggregate trade
and investment measures.
Over the past five years AIBS has shown that for our respondents, a group
of relatively experienced SMEs, both the United States and China are generally equally significant
markets. A selection of links to previous AIBS analysis shows that these
two markets dominate AIBS respondents’ market experiences when it comes to
for respondents, ‘
top revenue markets’
First markets – the rationale for starting with China is different
This year’s survey sheds additional light on drivers for selecting China as
a first market that distinguish it from other popular ‘starter’
destinations. After ‘demand for product’, the top 3 reasons for choosing
the United States, New Zealand, United Kingdom and Singapore as a first
market were 1) English-speaking 2) transparent business practices and 3)
common language whereas key reasons for entering China marked it out from
other leading first markets.
Outside ‘demand for product’ the top reasons nominated for China were 1)
efficient transportation and infrastructure 2) FTA with Australia and 3)
China and the US are important SME revenue sources
Respondent firms’ top three markets for international revenue were the
United States, China and New Zealand, respectively.
At a firm level, China and the US are leading revenue sources for a
combined one-third of survey respondents, with the US the largest source of
revenue for 17 percent of respondents and China the leading source for 14
percent. There is slightly more variation when we look at the top two
revenue sources - with the United States a two top revenue source for 26
percent of respondents followed by China (19 percent) and New Zealand (14
On average, the share of respondent’s international revenue that top
markets accounted showed a mean of 42% and a median of 41%, indicating that
while top revenue markets are significant to firms in our sample, there is
evidence of market diversification on average across internationally-active
However the United States and China account for larger shares of firms’
international revenue than do other leading markets. A significant majority
of firms for whom these two countries are top revenue sources (60 percent
of firms with the US as a leading revenue source and 70 percent of firms
with China as a leading revenue source) have indicated that over half their
total international revenue is sourced from that respective top market.
This graphic provides further detail on top markets and international revenue profiles.
Note: International revenue and financial outlook relates to all international business activities of the firm, not just business conducted in the top revenue market.
Target markets – US and China expansion plans underpin business optimism about international growth
Finally, 442 or just over 70 per cent of companies surveyed aim to expand
over the next two years to new target markets.
Forty-five per cent of respondents planned to do business in at least four
new markets over the next two years: 24 per cent planned to do business in
4-5 new countries, 12 per cent planned to business in 6-10 new countries,
and nine per cent planned to do business in more than 10 new countries over
the next two years.
The top five target markets for Australia’s international businesses have
stayed the same on each occasion that this question has been asked to
survey participants (United States, China, United Kingdom, Indonesia and
India), although the rankings have moved around over the period. This year
the United States is the most popular market for anticipated generation of
new international revenue with 20 per cent of survey respondents planning
to expand there. Nineteen per cent have nominated China for expansion and
eighteen per cent have nominated the United Kingdom.
The graphic below highlights new target markets for respondents.