Download Born Global Firm Internationalisation

Chapter 11
Small and Medium
Size Enterprise
Internationalisation
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-1
Chapter Learning Objectives
• Patterns of SME internationalisation
• The characteristics of SMEs and how their
internationalisation differs from large firm
internationalisation
• The role of the Internet in SME
internationalisation
• Why SMEs internatinalise
• How ‘born global’ firms differ from
gradually globalising firms
• Factors driving the accelerated
internationalisation of born global firms
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-2
Global Perspective
There is No Single Pathway to Enter
the Global Market
• Incremental market knowledge gained through
international networks facilitates ‘gradual globalising’.
• ‘Born global’ firms and their accelerated market entry
are viewed as exemplar performers among SMEs.
• ‘Born again globals’
• Issues to be addressed include:
– What do we need to understand about small firms
attempts to internationalise.
– Do they differ from their large counterparts.
– How can small firms and their operational
characteristics be better managed.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-3
What is an SME?
• Criteria used to identify a small business include:
– Owner/manager operated.
– Has most capital supplied by owner.
– Is owned by one or a few persons often in
partnership structure.
– Is independent of external financial and managerial
control.
– Has a relatively small share of its particular market.
• There is a marked increase in the SME sector’s
importance from median low-income country to median
high-income country.
• To foster growth governments need to improve access
to financing, information infrastructure and international
markets.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-4
Firm Size and Employment / GDP
Share
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-5
What is an SME? (cont.)
• Regulations and institutionalised bureaucracy have
the effect of discouraging the establishment of
entrepreneurial small firms and impeding the growth
of established firms.
• The formation of ‘clusters’ can lead to low-cost
training, marketing and research as well as providing
information on new technology and markets.
• Governments provide a range of support activities
such as assistance with:
– Export insurance
– Participation in foreign exhibitions and trade fairs
– Preparation and circulation in foreign countries of
marketing tools in foreign language.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-6
The Internet and SME Exporting
• Internet provides a level playing ground for
SMEs by removing barriers for exporting.
• Investments needed to use the Internet as
an export marketing tool are:
– Financial resources for the development and
implementation of company websites.
– Ongoing investment to cover running costs,
maintenance and upgrading.
– Human resources to manage the integration of
the Internet.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-7
Marketing Functions Replaced by
the Internet (the e-business Model)
• Level 1: the brochure or publishing level (one-way
communication)
• Level 2: the manual or database level (simple
interaction)
• Level 3: the e-commerce and personalisation level
(complex interaction)
• It is not necessary to enter stage 3 to operate
successfully.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-8
Strategic Alliances and Income
Generation
• The Internet can be used in two ways:
– To construct or digitalise its own business.
– To take advantage of existing websites.
• Internet works for SMEs because of:
–
–
–
–
Cost savings for the business.
Meeting customer needs for service.
Searching and researching.
The ability to aggregate small segments and access
niches.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-9
Why Do SMEs Internationalise?
• Small economy small market effects
• Saturated local market effects
• To find a niche that can be exploited
Internationalisation is defined as the process by
which firms increase their awareness of the
direct and indirect influence of international
transactions on their future and conduct
transactions with other countries.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-10
Schematic Depictions of Push, Pull and
Mediating Forces in the Internationalisation
Process
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-11
The Stage Models of
Internationalisation
•
•
Four distinctive stages of entering an international
market:
– Stage 1: No regular export activities
– Stage 2: Export via independent representatives
(agents)
– Stage 3: Establishment of an overseas sales
subsidiary
– Stage 4: Overseas production/manufacturing units
Overseas markets expose firms to a new set of
challenges most important of which is the lack of
international knowledge
– Objective knowledge
– Experiential knowledge
– General knowledge
– Market-specific knowledge
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-12
Uppsala Model of Firm
Internationalisation
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-13
Born Global Firm
Internationalisation
•
•
•
Born global firms enter global markets with knowledge-intensive
cutting-edge products sometimes bypassing domestic markets.
Born globals typically begin exporting less than two years after
the foundation of the firm.
Key characteristics of born globals:
– Leading exemplars of successful international SMEs.
– Occur in most major trading countries and across industry
sectors.
– Pervasive innovation in all processes of business.
– Directly enter global markets with highly innovative products.
– Provide understanding of means to overcome resource
constraints.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-14
A Dynamic Capability Model of a
Born Global Firm
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-15
Born Global Firm Internationalisation
(cont.)
• Owner/manager profile is characterised by:
– International entrepreneurial orientation
– A geocentric or global mindset
– Significant prior international exposure
– A learning orientation
• Learning capabilities
– Market-focused learning capability
– Internally focused learning capability
– Networking capability
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-16
Born Global Firm Internationalisation
(cont.)
• Marketing capability captures the
firm’s capacity to formulate effective
marketing mix strategies that are
critical to identify and access
international opportunities.
• Knowledge-intensive and cuttingedge products.
• Accelerated internationalisation is
the most appropriate measure of
performance.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-17
Summary
• SME internationalisation has attracted attention as a
unique field of interest.
• Interest primarily driven by SMEs’ contribution to
national economies.
• Failure of SMEs in the early stage can be attributed to
‘resource poverty.’
• ‘Born global’ firms are exemplars that challenge the
conventional wisdom that firms internationalise in
incremental stages.
• A good understanding of factors driving born global
firms will help policy planners develop policies to
facilitate SME internationalisation.
Copyright  2009 McGraw-Hill Australia Pty Ltd
PPTs t/a International Marketing by Cateora
Slides prepared by Kate Mizerski, Edith Cowan University
11-18