The Internationalization Process Of A Medium Sized Enterprise ( Smes )

The internationalisation process of the firm has been a subject, which has been motive of study for a number of

The business internationalise means a company’s production and business activity are not only confined to one country, but also integrate the different countries’ raw material and labour and technologies to

Institutional theory is one the most renowned theoretical approaches to internationalization process of firms. From the 70s, there have been publications supporting and developing this theory by researchers such as Di Maggio, Powell, Scott, Meyer or Rowan. Nonetheless, some other alternative theories, such as OLI paradigm or TCE model, have also proven themselves quite significant. Shortell and Kalunzy (2000, p. 24) state that organizations must face certain external factors such “external or societal norms, rules, and requirements that an organization must conform to, in order to receive legitimacy and support”; which are two basic factors for a successful internationalization process. Nowadays, it is essential to determine the accuracy

Stages of company Internationalization (Uppsala Model) 1. International Marketing – Ethnocentric Orientation 2. Multinational Marketing – Poly centric Orientation 3. Global marketing – Geocentric Orientation 4. Transnational Marketing – Glocal

Dunnings Eclectic Paradigm model best describes what had attracted Tesco’s internalisation entering the American and Japanese markets. The Eclectic Paradigm consists of three factors that explains where, how and why the internationalization of a firm entering a new market. Ownership, location and internalization are the three dynamics which makes up the OLI (Dunning, 2001).ownership advantages can be either asset-based or transaction-based, in relation to Tesco the ownership advantage in which the firm had acquired was the lean supply

Firms internationalize for couple of reasons. Philips expands their overseas market because home market is limited and Matsushita expanded as efficient operation did not guarantee growth anymore. Basic strategies adopted by these two companies evolved during their process of internationalization. As competitions become brutal, firms need to change strategies to cope with T high pressure for cost reduction and strong pressure of local responsiveness. Transnational strategy is now a feasible approach. Companies reduce cost to be competitive and the same time modify products to satisfy local customer preferences. However, firms’ structures are very different. Philips has a decentralized structure as Matsushita’s operations are highly centralized. Strategic human resources are also vital so both companies send expatriate experts to offshore subsidiaries. Philips and Matsushita also form strategic alliance relationship with each other. Companies’ strategy is highly correlated to their basic strategy and the fit between strategies is vital to company’s

Uppsala Model considers two types of knowledge objective and experience based knowledge. (UPPSALA MODEL) After first entrance firms understands how to work in foreign country, and later they step by step increase level of internationalization to physically distant countries.

“The Performance of business activities that direct the flow of goods and services to customers and users in more than one country”

Swedish researchers Johanson & Vahlne developed a model based on a research of foreign dedication by observing patterns in the establishment chain, psychic distance and product diversification and identifying that knowledge and learning have a profound impact on how the firm is seen to approach foreign markets.

In 1977 Swedish researchers at Uppsala University came up with a model/theory how businesses should grow their activities in foreign market, this model explains that companies should select an entry mode by taking into consideration their own resources and exploring costs, and risks based on market nature. (Johanson and Vahnle, 2009) Researchers at Uppsala University in their empirical study found that Swedish firms mostly started their process of internationalization by exporting, initially companies had agents that represented them in foreign market, but these firms exported in countries that had little differentiation in culture, language and political systems from their home country, this was labeled in their model as physically close countries. Uppsala Model considers two types of knowledge objective and experience based knowledge, the model describes that after first entrance in foreign market businesses understands how to work in external country, and later they step by step increase level of internationalization to physically distant countries. (Johanson and Vahnle, 2009) But, can Uppsala model be applied to services? This model was mainly reliable for manufacturing industries; a paper with contrary arguments was published in 2008, providing two variables; environment-related and service specific, to question whether Uppsala model can be used for service

The practical studies focus on identifying that internationalization was regular or incremental process .The internationalization process is study focusing on attitudes and behaviors of firms in market that are in the process of internationalization. The practical studies focus on identifying that internationalization was regular or incremental process. Some observations are also made on de-internationalization that point towards the flexibility seen in the duration of the internationalization process.

The OLI framework suggests that a location advantage or an ownership advantage separately cannot provide sufficient justification for the selection of different internationalization strategies. Thus, these advantages are interconnected and only when all three of them are present international expansion activities may occur (Dunning, 1980; Galán and González-Benito, 2001). Although this model has been widely used in numerous research studies, it contains some evident weaknesses. Some scholars criticize it, arguing that there is no significant difference between ownership advantages and internalization advantages (Buckley, 1988). Pinho (2007) includes that the framework overlooks the importance of managerial-specific characteristics and Ekeledo and Sivakumar (2004) even claim that the OLI theory cannot provide an adequate prediction of entry mode choices since it cannot explain why firms with a similar set of advantages do not follow the same expansion strategy in the same target

A popular method when internationalising is to use an alliance or joint venture. Critically evaluate the opportunities and challenges facing small and medium sized enterprises

By definition, SMEs are “small and medium-sized” enterprises. The most standard classification of SMEs is by number of employees although sometimes revenues are also used. Many SMEs are of a stable size and are content to remain small. Firms in this category include many family businesses, most sole proprietorships and many other micro, small and medium sized firms. While SMEs are clearly a large and critical part of most economies around the world, SMEs differ greatly in their growth orientation. The term “SME”, which describes a firm’s size, is therefore not adequate for measuring entrepreneurship or anticipating internationalization of firms. Growth orientation as well as both the inclination and ability to internationalize are important characteristics in SME internationalization. Entrepreneurs can actively compete in the international market through five avenues: exporting, importing, joint ventures, direct foreign investment, and licensing. Further I will analyse all the options.

This section analyses the internationalisation process the case firm “Beta. Beta is one of the Nigerian “new generation banks”. The Nigerian new generation banks are banks that were established in the 1990’s and grew rapidly to become top banks in the country. “Beta” evolved and expanded rapidly in the 1990’s and in the early 2000s to become one of the largest banks in Nigeria with a strong present in the West African region and a subsidiary in the UK. This case firm is chosen because of the following reasons, (a) Beta is one of the top banks in Nigeria (b) the bank have internationalised with subsidiaries in several countries outside Nigeria (c) the bank is one of the pioneer of foreign expansion of the Nigerian firms (d) the bank