2. 312MKT International Marketing
Lecture Thirteen

3. Learning objectives
Understand challenges for SMEs in global environment
Identify motives and barriers of internationalization
Discuss approaches to international niche marketing

4. SME Sector Are those firms employing less than 250 staff.
These characteristics, however, include 99% of all firms in Europe and account for roughly 50% of employment and it includes sole operators as well as quite sophisticated business
Firms that have the mindset to think and act like small and medium-sized enterprises.
It is a sector that has been increasingly recognized as a creator of wealth and employment
(Doole & Lowe, 2012)

5. SME Sector
Less than 5% of SMEs grow significantly and even a smaller percentage have the ambition to become international traders.
However, they still help put money in people's pockets, increase domestic demand, generate tax revenues and produce dependency on international aid.
SMEs are seen as route to economic growth and future prosperity particularly for emerging markets.
(Doole & Lowe, 2012)

6. SME contribution to global economy
In virtually every country SMEs make up more than 90% of the businesses
Significant and growing
Emerging in both manufacturing but more so in the service industries
Create new jobs
Creative business ideas
New marketing solutions
Flexibility & adaptability to changes in the market and to customer requirements
(Doole & Lowe, 2012)

7. Challenges for SMEs
Aggressive multinational retailers who ruthlessly use the global competition among small organizations
Infrastructure weaknesses (e.g. poor qualities of supplies of utilities, energy, water and power)
The informal economy is huge in less developed countries (LDCs) and, in addition bribery and corruption are rife at all levels
(Doole & Lowe, 2012)

8. Alternative strategies for SMEs
Exporting is primarily concerned with selling abroad domestically developed and produced goods and services
Internationall niche marketing is concerned with marketing a differentiated product or service overseas, usually to a single customer segment using the full range of market entry and marketing mix options
Domestically delivered or developed niche services
(Doole & Lowe, 2012)

9. Alternative strategies for SMEs
Domestically delivered or developed niche services
(e.g. network of dependent providers of accommodation, catering, leisure activities and experiences).
Direct marketing including electronic commerce allows firms to market products and services globally from a domestic location.
Participation in the international supply chain of an MNE can lead to SMEs Piggypacking on the MNEs international development
(Doole & Lowe, 2012)

10. Examples
EasyJet's Success in European Business Travel: A Case Study in Partnership with Amadeus
Weblink:

11. The Single Biggest Reason Why Startups Succeed
By: Bill Gross
Weblink:

12. Key motivators for internationalization
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/growth opportunities
ability to easily modify products for export markets
public policy programmes for export promotion
foreign country regulations
possession of unique products
economies from additional orders
Managerial elements:
presence of export minded manager
opportunity to better utilise management talent and skills
management belief in value of exporting
Source: Katsikeas (1996)

13. Barriers to SME internationalisation
Other factors:
Payment defaults
Language barriers
Unfavourable conditions overseas
Slow payments by buyers
Lack of competitive products
Too much ‘red tape’:
Trade barriers
Transportation difficulties
Lack of trained personnel
Lack of export incentives
Lack of coordinated assistance

14. International Niche Marketing
International Niche marketing occurs when firms become strong force in a narrow specialized market of one two segments across a number of country market.
For international niche to be successful the product or service must be distinctive (highly differentiated), to be recognized by consumers and other participants in the international supply chain and have a clear positioning.
Doole & Lowe, 2012

15. International Niche Marketing
Nich marketing of domestically delivered services
Have a clear understanding of the important segmentation criteria
Understand the value of the product niche to the targeted segment(s)
Provide high level of service
carry out small scale innovations
Doole & Lowe, 2012

16. Alternative Strategies for SME Internationalisation
Segmentation Targeting and Positioning
Competitive Strategies
Growth strategies
Doole & Lowe, 2012

17. Factors which Affect the Choice of an SME’s International Marketing Strategy
Market Factors
Company Factors
Country Selection
Organization Structure
Doole & Lowe, 2012

18. Factors affecting SME internationalisation
SME generic strategy
Segmentation, targeting
and positioning
Competitive advantage
Growth options
SME internationalisation
strategy
SME generic
Customer
base
Industry structure
and competition
Supply chain
Market
factors
Company
Stage of
internationalisation
Ambition, capabilities
and attitudes to risk
Motivations
and barriers
Country and
market entry
selection

19. Stages of SME Internationalisation
Passive exporter
Reactive exporter
Experimental exporter
Proactive exporter
Well-established exporter
Learning organisation, effective relationships and clear competitive focus

20. Stages of SME internationalisation

21. Reasons for failure Lack of market intelligence:
Failure to effectively scan the international environment – lack of market intelligence
Failure to respond to worldwide changes in customer needs
Lack of effective planning:
Over dependence on one product – lack of effective R&D
Failure to plan financial resources and not planning for fluctuation in currency values
Lack of protection:
Ease with which larger, more powerful competitors or a number of smaller local competitors can copy the idea
Prohibitive cost of enforcing patents and trademarks in foreign courts which may favour local firms
Lack of resources:
Failure to manage and resource both market and operations expansion

22. The Future of SME internationalization
Future of SMEs: Europe’s economic powerhouses - Real Economy

23. Readings:
Doole & Lowe: Chapter 5