In conferring with our International Trade Center director, the most common challenges are language differences, travel costs to establish business relationships, redesign of product/packaging for foreign markets, and potential import tariffs in the destination country.  Many times the barrier to export is the perception that the market is large enough within the homeland and there is no need or interest to explore export markets.

Consider the following example.

I am a small business. I want to export 1 million units per year. I have to research all aspects of doing business in the foreign country. I can divide these fixed costs across 1 million units. Say it costs $10,000 to do this research. That's a penny a unit, but the market price for the bolts I want to sell is precisely a penny a unit. No go.

A large business could aim to sell 100 million units per year. If costs are the same, then that's 0.01 cents per unit just to find out how to enter the second market. Now all I have to do is to keep all other costs (fixed plus non-fixed) under 0.99 cents per unit and I can earn profits selling bolts in the second market.

I.e., there are many fixed costs to entering a second market. SMEs cannot spread fixed costs so easily. So they must work through intermediaries who will capture much of the per unit gains by playing middle men.

Also, INFORMATION. If you have 1000 people on board, probably someone knows something relevant to many markets you may wish to export to. But if there are only 2 people, perhaps neither person knows anything.

Also, credibility. You want to get a letter of trade credit from a bank? Easy for a large company with a track record. The letter itself could cost half the accumulated capital of many SMEs in the developing world.

Also consider that, once a business is large, it has implicitly already jumped through many hoops. The management is able to run a smooth operation at a large volume of business. This is a prerequisite to being able to export.

Internet helps a lot with this, and things are different with the internet because there are a trillion niches that no one has found, many of which in diverse approaches to providing information and marketing products.

BUT, consider that in much of the developing world, a relevant share of people do not have an official birth record, let alone ID, let alone a bank account ... let alone know how to use a computer or have access to one.

Birth records --> ID --> bank account --> access to trade markets. If you fail at the first step, then the local market is the only option. You can sell to exporters, but you cannot export directly.

You may try institutional factors too. Procedures and cost of doing business entry ect

see my introductory paper attached

lack of international trade skills and knowledge

SMEs should not compete with large businesses by selling the same products the big companies are producing. Instead, they should concentrate in differentiated products.