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International Business Methods INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES
June 2008

Justyna Dabrowska j.dabrowska@clusterstar.com

Profit Center Warsaw University of Szczecin

White Paper

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

TABLE OF CONTENTS 1. ABSTRACT

PAGE 1 1 2 2 3 3 4 4 5 6 6 6 7 7 8

2. INTERNATIONALIZATION OF SMES INTHE TIME OF GLOBALIZATION 3. INTERNATIONALIZATION REASONS 3.1. SMES’ MOTIVES FOR INTERNATIONALIZATION. 3.2. DOUBTS ABOUT INTERNATIONALIZATION. 4. DIFFERENT FORMS AND MODELS OF SMES INTERNATIONALIZATION 4.1. A DIFFERENTIATED INTERNATIONALIZATION PROFILES OF SMES. 4.2. INTERNATIONALIZATION OF SMES BASED ON COUNTRY SIZE. 4.3. INTERNATIONALIZATION IN STAGES TOWARDS AND COMPREHENSIVE VIEW. 5. DEALINGWITH INTERNATIONALIZATION BY SMES 5.1. PLANNING THE INTERNATIONALIZATION PROCESS. 5.2. INTERNAL AND EXTERNAL BARRIERS. 5.3. INTERNAL COMPETENCIES. 6. COMPETITIVENESS AS A RESULT OF INTERNATIONALIZATION 7. CONCLUSION

1. Abstract The purpose of this report is to describe internationalization of small and medium-sized enterprises. In this report I want to show how and why companies by theinternationalization process leave their domestic market and decide to go worldwide, even though they have to face plenty of obstacles and deal with great competition on the international market. I would like to concentrate on showing that small companies have the potential and capability to enter international markets successfully and are able to compete with large enterprises.

2. Internationalizationof SMEs in the time of globalization In the last few years the scene of global business and European market enhanced international competition in enterprises concentrated on export and as well as in those concentrated on domestic markets. Traditionally export was the way of making individual companies more present worldwide. It has been seen as a traditional way to internationalize. It is stillvery important but during a couple of years’ process internationalization started to become more complicated and other factors are also necessary to achieve competitiveness by the company. Foreign partnerships, foreign investments and cross border clustering represent viable ways to facilitate exchanges of knowledge and technology and to strengthen international business strategies of SMEs. Suchinternational activities cover both outward (e.g. sales/export) and inward (e.g. import or access to knowledge) activities along the value chain. Exporting firms are also often involved in a range of inward and related activities that interact with each other. Furthermore, there is evidence that the presence in the foreign outlet markets and the possibility to delocalize parts of the value chainallow SMEs to achieve more solidity and durability in production and, in general, in all their economic activities compared with other SMEs that develop a strategy which is purely based on exporting. Plenty of SMEs in all industries face incredible fast growth of competition because of internationalization. Nowadays they have to think about the strategies helping them to face the challenges which arewaiting for them. SMEs which want to be more competitive and which think about internationalization, have to pay attention on global differences between production conditions in different countries (e.g. labour costs), and have also to think about the ability to develop and absorb new technology. They have to have knowledge about the new markets on which they want to exist, as well as they needto have an idea about the access to capital. Because of this many factors which companies have to deal with, internationalization is one of the most complicated processes that any firm can undertake.

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3. Internationalization reasons The main reason for SMEs to act on a global scale is the ambition to improve the competitiveness of the enterprise based on economic parameters such as:...
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