Assisting companies for internationalization at crossroads

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  • Posted in Internationalization
  • March 23, 2015
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Assisting companies for internationalization at crossroads

It is generally considered that companies which follow the path of internationalization are stronger and able to overcome crisis or other constraints. However, only a part of the entrepreneurs who are interested in the field of internationalization are able to take this advantage because they need to possess the ability to think globally and to have a correct understanding of market access obstacles. By understanding and evaluating different rules, conditions, beliefs, values, behaviors and business strategies of a variety of companies within other countries, local entrepreneurs will be able to internationalize better.

Internationalization may be defined as an entrepreneurial process of increasing involvement of enterprises in international markets through activities comprising export or imports, sourcing, outsourcing and de-localization of production or direct FDIs.

Barriers to internationalization of SMEs exist, and can include factors like insufficient financial means, lack of information on new market customer bases, foreign business practices and legislation, and access to distribution and networks. SMEs especially face difficulties in adapting their products to tastes and preferences in foreign markets, as well as in identifying business contacts and partners abroad.

Cautious financial institutions, new restrictive credit rules and banking regulations mean that SMEs must change their behavior in order to expand into foreign markets, which requires innovations. Focus on branding, reputation, management and new business contacts are valuable assets for SMEs looking to export, alongside developing understandings of country and region specific legislation and comprehensive knowledge of these new business environments.

The present business climate also requires SMEs to increase capacity for innovation and cooperation, which can be achieved, for instance, through clusters or sustainable insertion into international value chains in order to develop sustainable competitive advantages. The emergence of new trade powers and the growing importance of non-EU markets have caused structural changes into the global trading flows redirecting an important part of the trade flows towards Middle East and Asian economies.

Internationalization can also provide a lifeline for companies in times of turmoil on the domestic markets or for companies that produce things that are not sufficient demand on the domestic market. Companies that are surviving the crisis are mainly those that export their goods, either directly or indirectly.

To do so, many SMEs need support from marketing and export experts, as well as from public authorities to gain the know¬how to adapt for

export readiness.

Support given to companies in order to internationalize has to be given through specific specialized services in at least the following areas:

  • Trade facilitation, in order to reduce costs of transaction, not only related to customs and trade barriers but also related to access to IT infrastructure;
  • Trade financing, access to loans, guarantees, risk capital etc;
  • Trade information, related to many aspects like market information, possible deals, contacts, competition, etc.
  • Competencies at company level to identify and define the product or service through training, consulting and coaching
  • Competencies in promotion, international marketing, branding at company level or groups of companies;
  • Abilities to work in networks and clusters;
  • Managerial skills in supply chain and value chain management, in R&D and innovation

When addressing these needs, it is important to notice that, based on their abilities for internationalization, companies are in different positions, as follows:

  • Global, well established innovative players, highly specialized SMEs or big companies. Their needs are mainly focused on lobby and reputation management
  • Potential born global small companies with a highly innovative product based on exclusive R&D or market advantage. They may need not only lobby but also coaching or consulting to get access to the market
  • Internationally developed and branded companies active only on one or few international markets which may need assistance to become global;
  • Companies active international but only as subcontractors for low value components without any international market function in place. Helping them to move on the international chains and to brand with value addition products is essential.
  • Companies aspiring to go international, having certain readiness to act like that but do not have the necessary experience. Coaching them to find a first partner or to promote on web or to an exhibition can make the difference;
  • Companies with a potential to go to export but unwilling to try. They need first building awareness to go international.

In the present context building packages of support for each type of the above mentioned enterprise is not an easy job. Even more, companies from above are working on specific sectors with specific market requirements which make assistance even more difficult to be delivered. That requires changes in the management of trade support institutions – ¬ Trade Promotion Organizations – to identify and apply solutions to support efforts of export companies so they may create competitive advantages on foreign markets but few countries are able to deliver integrated services to support in an integrated manner.

But, the recent explosion of international business activity on the World Wide Web may give alternative solution for internationalization. Internet will have a profound impact on the study and practice of international marketing and in assisting the companies. The mainstream literature on international marketing argues that the rapid promotion or commercialization on Internet put into question many of the fundamental assumption developed by the internationalization consultants and promotion practitioners.

The Internet presents a fundamentally different environment for international marketing and new paradigms will have to be developed to take account of internationalization processes in an electronic age. This will require the launch of a major new research initiative to improve our understanding of Internet-enabled international marketing, especially the extent to which the “Net” provides a low cost “gateway” to global markets for small and medium-sized enterprises. In the absence of such an initiative, the mainstream academic literature will no longer accurately describe the reality of international business.

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