Internationalization of Small Businesses: Lessons from Europe

SME — Internationalization

In an increasingly competitive world, small and medium-sized enterprises (SMEs) need to find ways to remain competitive with well-established multinational corporations. SMEs approach to market research and marketing often appears chaotic and non-methodical when compared with large corporations. SMEs often depend on personal networks and even word of mouth to develop a presence in a new market. While it is relatively easy to establish personal networks in a domestic market, it may be more difficult and cost prohibitive for SMEs to establish themselves in overseas markets. The importance of localization, digital marketing, and branding may not be well understood by SMEs, and they may not have considered these aspects in detail. Despite SMEs not having the capital and resource pools that are available to bigger organizations, it is still vital for their sustained growth that they internationalize from an early stage. But how can an SME internationalize?

Internationalization of European SMEs

European SMEs are more internationally active when compared with their US and Japanese counterparts. However, their international activities are mostly directed at other EU countries, while only 13% of European SMEs are active in markets outside the EU.

A European Union funded study that looks at the internationalization of European SMEs, found that there is a direct correlation between an SMEs internationalization and increased growth, enhanced competitiveness, and long-term financial stability. The study points out that public support for SMEs internationalization plays a pivotal role, and brings economic benefits to the company and the locale. Public support mechanisms can help address perceived barriers to internationalization (i.e. providing better access to information and access to financial support). The study points out that, despite its evident benefits, only 16% of SMEs know of public support programs for internationalization and a smaller number of those that do make use of it. Larger SMEs, the study finds, are generally more aware of public support programs, and financial support is generally more accessible for larger enterprise.

The report notes that public support should target areas where there is a market failure and it must set the right goals and targets, while establishing monitoring mechanisms and successfully assessing the results. The study concludes that innovation is both necessary to enter foreign markets and a consequence of foreign market activities. This is reinforced by the fact that competition from foreign enterprises on home markets is a main driver for innovation.

The Enterprise Europe Network aims to provide entrepreneurs with the necessary tools to identify business partners across Europe, as well as gaining access to market information and the legal obstacles to entering a new market. The network is comprised of 600 partners in 44 countries, and its focus is innovation support and transnational technology transfer services. It provides a forum for SMEs to share research results, participate in research programs and apply for funding.

Conclusion: Recommendations

While it may be more challenging and costly for SMEs to establish a presence in overseas markets, the importance of localization from an early stage is vital for SMEs sustained growth. The SME should start early to study market internationalization and access to public support for SMEs contemplating internationalization movements. The type of support given should be adapted according to the stage of international development of the firm. Nonetheless, SMEs considering international expansion could benefit immensely from better access to information and financial support.

This article is written by a professional writer, Ilaria Ghelardoni, associated with Ulatus.

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