• How to internationalize a SME?

    by  • April 29, 2013 • Innovation Series, Readings, strategy

    The initial questions to answer are what we should internationalize; whether it is a technology or a market roll-out. The main concerns are quite different in both the options, e.g. in technology roll-out developing partners/R&D are crucial whereas in market roll-out opening of sales offices/distributors are of major concern. Once defined, then the company should decide where should it go; This can be defined by market characteristics and firm’s motives (product-market match).

    There are several entry modes of internationalization, the ones which offer greater control across value chain and returns are of greater risks. The internationalization process can be conceptualized as follows:

    Figure: Internationalization entry strategy (Prof. Thomas Keil, Aalto University)

    Traditional view of internationalization is that the company should start with near-by geographies and then expand to far ones. The selection of entry modes should be simple at first e.g. exports/licensing and then as the firms internationalization capability matures, it should add more complex entry modes to its portfolio e.g. acquisition/greenfield.

    But then there are born global firms which begin their internationalization quite early and often in multiple geographies using complex entry modes. They seem to have enjoyed considerable success as well (e.g. Rovio Mobile, Dealdash, Supercell). Both early and late internationalization are learned to have their own benefits. Early internationalization establishes the international identity for the firm, provides faster learning and potential for non-linear growth. Whereas late internationalization enforces domestic identity of the firm, provides relatively secure and steady growth, and has higher survival rate. Therefore, timing is a key factor in the internationalization process.

    Reference:

    Lectures on Strategies for Growth and Renewal by Prof. Thomas Keil, Aalto University