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STRATEGIES FOR SME INTERNATIONALISATION

Exporting International niche marketing Domestically delivered or developed niche services Direct marketing including electronic commerce Participation in the international supply chain. ch6_2. STRATEGIES FOR SME INTERNATIONALISATION. Reactive stimuli: adverse domestic market conditions

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STRATEGIES FOR SME INTERNATIONALISATION

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  1. Exporting International niche marketing Domestically delivered or developed niche services Direct marketing including electronic commerce Participation in the international supply chain ch6_2 STRATEGIES FOR SME INTERNATIONALISATION

  2. Reactive stimuli: adverse domestic market conditions opportunity to reduce inventories availability of production capacity favourable currency movements opportunity to increase the number of country markets and reduce market related risk unsolicited orders from overseas customers Proactive stimuli: attractive profit and growth opportunities ability to easily modify products for export markets public policy programmes for export promotion foreign country regulations possession of unique products economies resulting from additional orders Managerial elements: presence of export minded manager opportunity to better utilise management talent and skills management believes about the value of exporting ch6_3 KEY MOTIVATORS TO INTERNATIONAL MARKETING Source: Katsikeas (1996)

  3. ch6_6 THE DIFFERENCE BETWEEN EXPORTING & INTERNATIONAL NICHE MARKETING Exporting International Marketing Marketing strategy Financial objective Segmentation Pricing Management focus Distribution Market information Customer relationship Selling production capacity To amortise overheads Usually by country and customer characteristics Cost based Efficiency in operations Using existing agents or distributors Relying on agent or distributor feedback Working through intermediary Meeting customer needs To add value By identifying common international customer benefit Market or customer based Meeting market requirements Managing the supply chain Analysing the market situation and customer needs Building multiple level relationships

  4. ch6_7 FACTORS AFFECTING SME INTERNATIONALISATION Generic Strategy Segmentation, Targeting, Positioning Industry Competitive Structure Stage of Internationalisation SME Internationalisation Strategy Motivations Barriers Support Network Market Factors Company Factors Country Selection Owner’s ambition, capabilities and attitude to risk Customer Segment

  5. ch6_11 GEOGRAPHIC DEVELOPMENT OF SMEs Birth Domestic High tech firms, born globals, direct marketing, eCommerce Home market is trading bloc Piggybacking on OEM internationalisation Global Regional Supply Chain Contracts through family, friends, business & supply chains Concentration Expansion Network

  6. Advantages opportunities for learning from OEM (Original Equipment Manufacturer) security of reliable and predictable ordering able to focus on production and technical issues Disadvantages need for dependence on one/two major customers internationalisation driven by demands of OEM continual pressure to improve product and operations weakening external marketing ch6_14 OUTSOURCING FOR SMES

  7. Market access Market opportunities Industry standards Sourcing Products & services Technology Customer requirements Competition Co-operation Distribution Communication The company’s strategy, business programmes & processes ch7_2 MEANING OF ‘GLOBALISATION’

  8. ch7_7 WIDE STRATEGIES Multi-Domestic Regional Global Individual Country Strategy Region is One Market One Global Segment Transnational Strategy Standardised Identity & Values With Composite Strategies

  9. ch7_8 CONTINUUM OF STANDARDISATION Differentiation Pricing Distribution Sales Force Sales Promotion Product Image Objectives Strategy Standardisation

  10. ch7_9 GLOBALISATION PUSH & PULL FACTORS ‘Globalisation Pull’ Globalisation of Markets Homogenisation of demand Global market segments Globally active customers Source: Meffet and Bolz (1993) in Hallibuton and Hunerberg (eds) European Marketing Readings and Cases Addison Wesley 1993 Marketing Standardisation Programme standardisation Process standardisation Globalisation of Industries R&D expenses Reduced pay back cycles Experience curve effects Globalisation of Competitors Market interdependence Global competitors Cross subsidisation ‘Globalisation Push’

  11. Industry standards remain diverse Customers continue to demand locally Being an insider remains critically important Global organisations are difficult to manage Management myopia ch7_10 FORCES DRIVINGA MULTI-DOMESTIC APPROACH

  12. customers cannot be classified into simple, stable segments the customer in not monodimensional desires guide consumption functional and techonolgoical attributes of products or services are balanced by its aesthetics and cultural attributes quality is now more subjective a wide permanent variety of products is required the quest for authenticity orientates consumption ch7_13 DEMAND FOR CUSTOMISED SOLUTIONS Source: Halliburton (1994)

  13. ch8_2 MARKET ENTRY METHODS & THE LEVELS OF INVOLVEMENT IN INTERNATIONAL MARKETS Wholly-owned subsidiary Company acquisition Assembly operations Joint venture Strategic alliance Licensing Contract manufacture Direct marketing Franchising Distributors and agents Sales force Trading companies Export management companies Piggyback operations Domestic purchasing Levels of involvement

  14. Criteria for Selecting Appropriate Market Entry Method The company objectives and expectations relating to the size and value of anticipated business The size and financial resources of the company Existing foreign market involvement The skills, abilities and attitudes of the company management towards international marketing The nature and power of the competition with the market ch8_3 SUCCESSFUL MARKET ENTRY #1

  15. Criteria for Selecting Appropriate Market Entry Method The nature of existing and anticipated tariff and non-tariff barriers The nature of the product itself, particularly any areas of competitive advantage, such as trademark or patent protection The timing of the move in relation to the market and competitive situation ch8_4 SUCCESSFUL MARKET ENTRY #2

  16. Domestic Purchasing Foreign organisation purchases the product for export to another country Gives access to and limited knowledge of the international market Little control over choice of markets entered For longer term, need a more proactive approach Export Management Companies (EMCs) Specialist companies act as the export department for a range of companies Help SMEs to initiate/develop/maintain international sales Deal with documentation, government regulation ch8_6 INDIRECT EXPORTING #1

  17. Trading Houses Their extensive operations and controls enable operation in more difficult trading areas Manage countertrade activities Piggy Backing An established international distribution network of one manufacturer used to carry products of a second Particularly good for firms from developing countries Often poorly considered terms and conditions ch8_7 INDIRECT EXPORTING #2

  18. commitment of the firm’s management exporting approach reliant on strong skills base good marketing and information communication system production capacity & capability, product superiority, competitive pricing effective market research effective national export policy ch8_10 IMPORTANT FACTORS FOR SUCCESSFUL EXPORTING Source: Katsikeas et al (1996)

  19. Selection Criteria for Finding a Suitable Agent Financial strength of the agent Their contacts with potential customers The nature and extent of their responsibilities to other organisations Their premises, equipment and resources (including sales representatives) ch8_11 AGENTS #1

  20. Achieving Satisfactory Manufacturer-agent Relationship Allocate time and resources to find a suitable agent Ensure that both understand what each expects of the other Ensure that the agent is motivated to improve performance Provide adequate support on a continuing basis Ensure that there is sufficient advice and information transfer in both directions ch8_12 AGENTS # 2

  21. Nature of product e.g. perishable Costs of transporting and warehousing Barriers to trade e.g. tariffs and quotas Government regulations e.g. local investment Local manufacture viewed favourable by market Contributions to local economy Market information feedback International culture in firm Faster response and just-in-time delivery Lower labour cost ch8_13 REASONS FOR SETTING UP OVERSEAS MANUFACTURE

  22. Reasons for investment in local operations To gain new business: local production demonstrates strong commitment To defend existing business To move with an established customer To save costs: e.g. labour, raw materials and transport To avoid government restrictions ch8_16 FOREIGN MANUFACTURING STRATEGIES WITH DIRECT INVESTMENT

  23. Insufficient resources Pace of innovation and market diffusion High research and development costs Concentration of firms in mature industries Government co-operation Self protection Market access ch8_18 DRIVING FORCES FOR THE FORMATION & OPERATION OF STRATEGIC ALLIANCES

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