A third of family businesses seeks to internationalise, study finds

Nearly one in three of Malta’s family businesses expects to internationalise by 2017, a study has found.

An average one-fifth of local family businesses currently exports to various countries. Increased internationalisation efforts will mainly target Africa and Europe.

These are the findings of the Malta edition of PwC’s global survey of family businesses. The Qormi-based firm interviewed 100 family businesses by phone last month. Internationally, the global survey sought the views and outlook of nearly 2,000 family firms in more than 30 countries between June and September.

Maltese sales in international markets are significantly lower than the global average, which currently stands at 25 per cent and is expected to rise to 30 per cent in five years’ time. Almost half of the islands’ family firms (48 per cent) are examining the potential of Africa and 37 per cent of Europe, with Italy and the UK the preferred countries. The Middle East and the Gulf hold interesting prospects for 16 per cent of firms.

Several challenges have to be overcome for businesses to fulfil their ambitions overseas: 47 per cent cite competition, 28 per cent cost containment, and 17 per cent the identification of appropriate local suppliers and partners.

“Competition is an issue for nearly half of family businesses planning to make overseas sales in the next five years – significantly higher than the global average of 19 per cent,” PwC explains. “The challenge is in fact to provide a competitive product or service away from the local market. Our insularity contributes to unavoidable increased costs.”

Interestingly, few Maltese family businesses are daunted by regulatory compliance (13 per cent compared to the global 19 per cent) and culture (12 per cent compared to the global 20 per cent). Our firms are doubly concerned with delivering high quality products and services and with logistics issues than their international counterparts.

Asked about the three major challenges of operating in an increasingly international environment, one respondent replied: “The price war. We compete when it comes to ship repair as the Third World countries like China and India which have very low wages can offer low prices. As we are based on an island, everything, including raw materials, is imported, making us less competitive.”

“It all depends on price,” another agreed. “Certain prices quoted are going to be higher than other countries so we are not in a strong position to export competitively enough.”