Skip to content Skip to footer

The Hidden Toll of Overcapacity: A Personal Perspective on the Impact on Export-Ready SMEs

In the labyrinthine world of global trade, the discourse frequently gravitates towards multinationals’ strategic manoeuvres, the competitive edges of various nations, and the perpetual flux of international relations. Amidst this cacophony, one persistent issue often evades the scrutiny it warrants: the overcapacity of a certain Asian country and its pernicious impact on domestic firms, particularly those SMEs (Small and Medium-sized Enterprises) on the cusp of new market exploration.

Overcapacity, in essence, refers to a scenario where a nation’s production capabilities significantly surpass the demand for its products. This excess inevitably finds its way into both domestic and international markets, precipitating a cascade of economic repercussions. While ostensibly a localized economic concern, its effects ripple far and wide, inflicting considerable damage on small businesses poised to expand their global footprint.


The Domestic Quagmire

Consider the domestic ramifications first. When overcapacity results in a market deluge, prices nosedive. Consumers might initially welcome these lower prices, but the long-term consequences are severe. Local businesses, unable to compete with the artificially depressed prices of imported goods, find themselves in a precarious position. Profit margins erode, and viability becomes a mere mirage. Many teeter on the brink of insolvency, unable to endure the unrelenting pressure.

This scenario is not hypothetical but a recurring reality across numerous sectors, from steel and aluminum to electronics and textiles. The fallout is a hollowing out of the domestic market, where once-vibrant local enterprises are decimated, leaving a void often filled by the very entities perpetuating the overcapacity. This vicious cycle stifles innovation, curtails job opportunities, and frays the economic fabric of affected regions.


The Export Conundrum

Turning our attention to SMEs that are “finally ready to take the export plunge,” the picture is equally bleak. These businesses have meticulously prepared to compete on a global stage, navigating the labyrinth of international trade regulations, pinpointing potential markets, and steeling themselves for the rigors of exporting. Yet, their optimism frequently collides with the harsh reality of unfair competition from their overcapacity-plagued Asian peer.

When these SMEs venture into new markets, they are swiftly confronted with an economic behemoth capable of undercutting prices, buoyed by state subsidies and other advantages. This inequitable playing field makes it nearly impossible for smaller players to establish a foothold. Their pricing strategies, grounded in fair market value and sustainability, are rendered futile. The upshot? Disillusionment, frustration, and, in many instances, a strategic withdrawal from international markets they were so eager to penetrate.


My Observations

In my professional journey with Nueconomy, I’ve witnessed the tangible impact of this overcapacity dilemma. I’ve engaged with entrepreneurs brimming with passion and aspirations of seeing their products on global shelves, only to be thwarted by the stark reality of unequal competition. Their narratives are not merely business anecdotes but a testament to the broader, often overlooked, human dimension of global trade.


A Path Forward

What, then, is the remedy? A multi-pronged approach is imperative. At the national and international levels, concerted efforts are required to address overcapacity. Trade policies must be crafted to ensure equitable competition, with robust mechanisms to shield domestic industries from predatory pricing. Support for SMEs, through subsidies, grants, and enhanced market access, can fortify them against these pressures.

Innovation and adaptability are also crucial. Despite the formidable challenges, businesses that can distinguish themselves through unique value propositions, superior quality, and exemplary customer service will be better positioned to navigate the turbulent waters of global trade.

In conclusion, the clamor about overcapacity transcends mere economic discourse; it is intrinsically a human issue. It encompasses small business owners’ ambitions, their employees’ livelihoods, and local economies’ vitality. As we traverse the complexities of global trade, let us not lose sight of the imperative for fairness, sustainability, and robust support for those striving to carve out their niche on the world stage.

Our specialised trade consulting and market entry services can help export-ready SMEs navigate this intricate field of global trade. Reach out to Nueconomy today to enhance your game in trade and make the most of your business. 

Our specialised trade consulting and market entry services can help export-ready SMEs navigate this intricate field of global trade. Reach out to Nueconomy today to enhance your game in trade and make the most of your business.

(fdi lead generation, Impact of overcapacity on SMEs, Global trade challenges for small businesses,  Export Market Entry, Trade consulting, Export promotion)

Leave a comment


    Corporate Intelligence

    Nueconomy’s corporate intelligence team is dedicated to providing comprehensive analysis of potential companies looking to invest in new locations, and identifies the most promising companies that governments should pursue to create new capital expenditures and job opportunities in their communities.

    At Nueconomy, we prioritise precision and quality over quantity by perfecting our shortlisting framework to provide our clients with the most accurate and relevant information possible- using which we assess each shortlisted company’s expansion potential by delving deep into the target investor’s investment capability, job creation history, and various leading indicators. We recognise that each community and investment promotion strategy differs, so we take the time to understand the location before engaging with any clients which ensures that only the most appropriate investing companies make it to the investor shortlist.

    We understand that every client has different investment promotion goals, which is why we offer customised client engagements.

    We help you achieve your Investment Promotion objectives, whether short-term, long-term, or strategic.

    Take your first step

    Careers
    Name
    Name
    First
    Last

    Maximum file size: 33.55MB

    Sector Intelligence

    Nueconomy’s Sector Intelligence service empowers businesses with comprehensive industry insights through deep sectoral studies that includes tracking trend lines and clusters. We also forecast potential economic development and investments, analyse talent pools and facilities, and track FDI and investment activities to build market maps around economic sectors.

    Our unique approach to market research focuses solely on specific industries, providing micro-level insights for businesses to understand the supply chain, investment activity, and market trends at a granular level.

    Partner with Nueconomy’s Sector Intelligence to unlock the full potential of your business!

    Country Insights

    Nueconomy boasts of exceptional capabilities in delivering comprehensive Country Field Guides that offer profound analysis and insights into both inward and outbound investment and trade prospects of nations. Our team of seasoned analysts and researchers strive to furnish our clients with the most recent and relevant information on a country’s investment policies, economic indicators, regulations, and market trends that could potentially impact their investment decisions. 

    Our extensive research helps you to navigate the complexities of global trade and investment and identify viable investment opportunities.

    Non-Equity Mode

    Non-Equity Modes of Investment (NEMs), are forms of foreign investment that do not involve the purchase of equity in the host country’s companies, and include contractual arrangements such as licensing, franchising, management contracts, and turnkey projects.

    NEMs can:

      • Transfer technology and management know-how from the foreign investor to the host country, and facilitate employment opportunities and skill building through training programs, improving the competency of local businesses and workers

         

      • Generate revenue in the host country through licensing fees, royalties, and service fees

         

      • Provide foreign investors access to new markets and reduce investment risk by enabling greater control over the operation and sharing costs and risk with local partners

    We leverage our expertise in NEMs and the partner ecosystem across diverse industries to provide customised solutions aligning with your economic development objectives.

    Greenfield Investments

    Greenfield investments drive economic growth and development, job creation, technology transfer, infrastructure development, and the promotion of diversification. As global competition for investment continues to intensify, it is crucial for countries and regions to be able to attract and retain these valuable investments. Our analysts have spent the last decade sourcing, analysing, and curating thousands of foreign and domestic investment projects from around the world. 

    Our research-based frameworks give us a deeper understanding of how economies have evolved and how the clustering of industries can influence a location’s future transformation and diversification. Thus, we are better equipped to help governments and businesses make informed decisions about where to invest and how to leverage the potential benefits of greenfield investments.

    By leveraging our expertise and insights, we can help drive sustainable and inclusive economic growth through the power of greenfield investments.

    Investment Incentives

    Incentives and subsidies are pivotal in driving economic growth and offer financial support and other benefits to businesses, investors, and individuals, aimed at stimulating job creation, promoting investment in specific industries, or encouraging innovation. 

    At Nueconomy, we provide comprehensive insights, valuable data, and expert advice to businesses and investors to identify the financial benefits offered by governments during the corporate location benchmarking process, and help leverage these incentives to drive growth and profitability. We also help economic development agencies with due diligence to stay competitive and keep abreast of the latest trends. We have meticulously tracked investment incentives offered by governments since 2012, with an impressive track record of monitoring

    75,469

    Investment projects with incentives

    309.15

    Billion USD

    Trust us to be your partner in navigating the complex landscape of incentives and subsidies to maximise your returns on investment.

    Distributor and Partner Search

    Nueconomy’s specialised Distributor and Partner Search service helps export development agencies identify suitable distribution or partnership opportunities in specific markets and guides businesses to navigate unfamiliar markets and identify potential partners that meet the client’s criteria. 

    By closely working with clients to understand their business needs, goals, and requirements, and conduct a comprehensive analysis of their products and services, we carefully shortlist potential distributors and partners, ensuring they have a proven track record of success in their respective markets and their financial history aligns with the client’s business goals.


    To facilitate the process, Nueconomy practitioners arrange in-person meetings between clients and shortlisted candidates, allowing both parties to discuss potential growth opportunities in the market. The service is highly transactional, focusing on finding the right partner for the client’s business without any ongoing relationship. 

    Nueconomy remains available throughout the process to provide support and advice if needed.

    Export Market Strategy

    Nueconomy provides professional and personalised export market strategy services to exporters, economic development organisations, and export promotion agencies to help them increase exports and expand their global reach. Our team of seasoned experts possesses extensive knowledge of the complex landscape of international trade to guide companies through every aspect of the export process.

    By conducting a detailed analysis of your company’s current export performance, target markets, and export goals and provide actionable steps and recommendations on how to penetrate new markets, which products to promote, and how to best position your brand by offering strategic guidance on important export-related concerns like whether your company should consider export, whether to start small or go big, and how to mitigate the risks and challenges of each export market and the entire process. We also give continual ongoing support throughout your export process.

    With our Export Market Strategy services, your company can achieve significant growth and success in the global marketplace.

    Investor lead generation and representation

    Nueconomy offers a comprehensive Investor Lead Generation and Representation service to governments seeking inward investments that align with their economic development aspirations. With over 60 years in Investment Attraction, we have engaged investors on behalf of over 80 leading investment promotion agencies across the globe.

    Our approach to Investment Attraction is what sets us apart from our peers. We go beyond just identifying and facilitating investment leads; we focus on building actionable intelligence through our Corporate Intelligence team, who gather and disseminate primary intelligence, develop strategies for every client location management, and manage relationships with active investors and companies. Working closely with this team are our client partners, who are highly experienced in how companies from each sub-sector approach new business activity in the greenfield investment landscape.

    We prioritise capacity building for governments, ensuring that all communications and intelligence gathered during client engagements are fully documented and transferred to our clients and represent our clients with integrity and professionalism, building strong relationships and creating lasting trust.

    We aim to convert potential interest into tangible Investments, achieving optimal outcomes for you.

    Strategic Sourcing

    Nueconomy’s Strategic Sourcing service offers tailored solutions for governments seeking to enhance the economic development prospects of their location. We aim to assist our clients in achieving their job creation objectives by identifying and engaging potential partners that can add value to existing industry clusters, creating new opportunities through strategic collaborations or by non-equity mode partnerships.

    We build long-term, resilient partnerships that drive innovation and growth for communities. Although some of these strategic initiatives may not produce immediate financial returns, they have the potential to deliver significant long-term benefits for all stakeholders.

    In addition to comprehensively understanding our clients’ economic development goals, challenges, and opportunities, we leverage our deep industry expertise, cutting-edge economic development research capabilities, and proprietary methodologies to deliver results that kickstart a net-positive economic development cycle. 

    By partnering with us, governments can unlock the full potential of their location and achieve sustainable Economic Growth.

    Contact Us

    Contact Us
    Name
    Name
    First
    Last

    Corporate Intelligence

    Nueconomy’s corporate intelligence team is dedicated to providing comprehensive analysis of potential companies looking to invest in new locations, and identifies the most promising companies that governments should pursue to create new capital expenditures and job opportunities in their communities.

    At Nueconomy, we prioritise precision and quality over quantity by perfecting our shortlisting framework to provide our clients with the most accurate and relevant information possible- using which we assess each shortlisted company’s expansion potential by delving deep into the target investor’s investment capability, job creation history, and various leading indicators. We recognise that each community and investment promotion strategy differs, so we take the time to understand the location before engaging with any clients which ensures that only the most appropriate investing companies make it to the investor shortlist.

    We understand that every client has different investment promotion goals, which is why we offer customised client engagements.

    We help you achieve your Investment Promotion objectives, whether short-term, long-term, or strategic.

    Nueconomy’s specialised services are focused on providing our clients with a comprehensive and strategic approach to investment promotion and span building investor pipelines, in-market representation, on-ground support for investor roadshows, precision marketing & events, and building strategic partnerships.