• Changing attitudes
Internationalization and the Small Business
• Two models
– Small business stage model: process of following incremental stages of internationalization – Global start-up: company that begins as a multinational company – i.e. „Born Global‟
Born Globals
• To succeed BGs need:
- MNCs acting as systems integrators – e.g. outsourcing - MNCs distributing BG products/services - Networks - Internet - Clusters Or any combination of the above….
Thought for the day
Small Business Global Start-up
• Key elements favoring global start-ups – international sources of venture capital – the existence of global demand – the lack of a geographically protected market – the necessity of worldwide sales to support the venture – the potential to avoid later resistance to internationalization
Developing a Small-Business Global Culture
• Changing attitudes of key decision makers
– Being close in culture and geography – Overcome scepticism regarding international markets – Positive attitudes more necessary for global start-ups
Born Globals
• international or global approach from birth – or soon afterwards • large proportion of sales from exports
• accelerating internationalization process
Driver of SME internationalisation
• Degree of import competition • Competition from internationalised firms • Customer requirements • Large firm requirements • Alliances, JVs etc…
When should an SME internationalise?
• If the following questions are answered positively, a small business is ready. – Do we have a global product or service? – Do we have the managerial, organizational, and financial resources to internationalize? – Is there willingness to commit resources to face the risks of internationalization? – Is there a country in which the company feels comfortable doing business?
SMEs and International l Business?
• “Small” business – many definitions
– UN: less than 500 employees – the popular press: less than 100 employees – U.S. small business administration has more complex definitions
When should an SME internationalise? (cont.)
– Is there a profitable market for product or service? – Do we have a unique product/service that is not easily copied by multinationals or local entrepreneurs? – Do location advantages exist upstream in the value chain? – Can we afford not to be a multinational?
• International conventions and standards
These determine the salience of the following factors in globalising SMEs
Contributors
• Emergence of open markets
Small Business Advantage
• Speed becomes the small business advantage
– – – – faster innovation can change products and internal operations faster speed can overcome size disadvantages larger firms must often overcome bureaucratic procedures
Born Globals
• managers have strong global mindsets
– have a wider international experience – have a higher risk tolerance • many use networks as a platform for market access • tend to be small, technology companies
Size and Small Business Internationalization
• Size barrier to internationalization – Larger firms have more resources to support international operations • But size is only one issue in the internationalisation decision
Falling Barriers for Small Businesses
• Barriers are becoming easier to overcome
– government support programs for small businesses are increasing – trade agreements are making trade easier – increase in small businesses engaged in international operations also makes it easier
• Eventually, international sales intensity of small firms exceed that of big firms. – International sales intensity: amount of international sales divided by total sales of the company
• definitions vary by industry, sales revenue, and the number of people
Contribution of Small Businesses?
• “Small” businesses
– – – – over 98% of businesses in Europe, N. America, and Japan employ more than 50% of local populations produce nearly 50% of GNP in above create more than 2/3 of new jobs
• Increased globalisation of large firms • Increased resource mobility
• Increase currency movements
• Changing technology
• Increased opportunities to extend value chains across borders
• Traditionally domestic focus – some increasingly international
Patterns
• Most SME employment in service sector, especially retail, etc.