6.2 Why adopt an Internationalisation Strategy?

Strategy is an integral part of the future which will shape the goals of your company; therefore it is a very important decision as it concerns your long term activities. For many SMEs, internationalisation is not part of their strategy and most managers of newly established SMEs prefer to focus in the local market, until the company becomes strong enough with regards to its local competitors.1 This makes sense, since SMEs are running on a smaller scale than multinational companies and the risk factor is higher for them. High cost is definitely one of the most important barriers to internationalisation for SMEs as well as insufficient capital and the increased risk factor. However, we must take into account that the smaller scale of SMEs may also serve as an advantage because it makes them more flexible and efficient; efficiency not only serves as a good precondition for experiential learning due to internalisation but also as a remedy to overcome the lack of resources.2

Nonetheless, internationalisation as a result of a solid strategy can prove to be successful and offer your company a competitive advantage in the worldwide market. Below we summarize the main advantages that your firm is likely to gain from the adoption of an international strategy, based, of course, on the magnitude of your plans and projects:

  1. Access to new markets (through market diversification) and customers for existing products or services
  2. Capital derived from foreign market penetration
  3. Access to valuable production processes and minimisation of labour costs:3 Cheap labour, skilled labour, raw materials etc.
  4. Development of core competencies (technology, know how, for the more strategically oriented firms)4
  5. Corporate risk management 5
  6. Launching of new products by increased international competition on the domestic market 6 (the more complex the form of internationalisation, the greater the effect on competitiveness 7)
  7. Networking, which comes from interaction between companies and can lead to knowledge transfer and collaboration in research and development (this applies for more complex strategies and larger projects)

Hence, taking into account the aforementioned advantages, it is obvious that internationalisation is intertwined with a value chain perspective, i.e. maximising returns and minimising costs in purchasing, production and sales.8


EXERCISE: Take some time to think what options would apply best for your company and write down the potential advantages you could gain from expanding your business to a foreign market.

1 Jonas Onkelinx, Leo Sleuwaegen, Internationalization of SMEs, March 2008, p. 20.
2 EU Research of Social Sciences and Humanities, National Corporate Cultures and International Competitiveness Strategies ? the Challenge of Globalisation for European SMEs, p. 105.
3 European Commission, Observatory of European SMEs, 2003, no. 4, p. 27.
4 Jonas Onkelinx, Leo Sleuwaegen, INTERNATIONALIZATION of SMEs, March 2008, p. 21.
5 Jonas Onkelinx, Leo Sleuwaegen, INTERNATIONALIZATION of SMEs, March 2008, p. 21.
6 European Commission, Observatory of European SMEs, 2003, no. 4, p. 27.
7 European Commission, Observatory of European SMEs, 2003, no. 4, p. 42.
8 European Commission, Observatory of European SMEs, 2003, no. 4, p. 27.