How to Succeed in Foreign Markets: Tools and Methods for SMEs
ExportPlanning's Approach: integrated phases in a single process
Published by Marcello Antonioni. .Planning Bestpractice Internationalisation SME International marketing Internationalisation tools
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Internationalisation is frequently the most complex challenge to face a company.
Viewed from the perspective of management theory and practice, internationalisation is not so very different from many other challenges facing companies on their growth and development path, such as organisation, innovation or competition.
However, one aspect dintiguishes internationalisation1 as a special challenge which, at least in part, is different from all others: namely, the extensive knowledge required to make the best strategic decisions. We can confidently say that what characterises the successful internationalisation of a company is not its current behaviour model but the adoption of a specific approach to foreign markets.
As our consultants regularly observe in Italy, few companies confront the challenge of internationalisation in the structured way advised above. This is clearly evidenced by the low percentage of companies that implement active strategies for foreign markets. Furthermore, this already low number of companies with active strategies reduces even further for SMEs, leading many industry analysts to conclude that realistically, internationalisation is only within the reach of large and medium-sized companies.
Doubtless the size of a company is an advantage, but it is impossible to imagine internationalisation as a challenge that can only be confronted when a company has grown to a certain dimension. The strong globalisation trend of markets over the past 20 years has greatly expanded opportunities for growth on one hand, and on the other, it has increased the level of business risk faced by SMEs regardless of their degree of internationalisation.
A business strategy of not going international means subjecting a company to all the risks of a domestic market without the advantages of the new opportunities created through globalisation.
In goods markets, internationalisation has increasingly become a necessity - even for SMEs. Partly this is because the domestic market of most developed countries will continue to be weak for many years ahead, but above all internationalisation acts to mitigate the emergence of increased risks by granting access to a world of greater opportunities.
An SME can address these challenges by following two guidelines:
- Share the export challenge with other companies, in the form of agreements, partnerships or business networks
- Adopt the most effective tools and methods for success in international markets
Tools and methods for success in foreign markets: International Business Plan, SWOT Analysis, Data-Driven Decision Making, Controlling.
These two guidelines are complementary and can be followed in parallel. This article will focus on the latter guideline, in accordance with the ExportPlanning framework.
International Business Plan
The drafting of a well constructed International Business Plan has been advocated by many authors, to the extent that it is routinely taken for granted. Therefore, we will focus on emhasising its importance from the point of view of communication.
A typical SME has limited skills to assist with internationalisation, but it gains an advantage by using professionals from outside its organisation to help with activities that require specialised skills. Professionals can do their job much better if they have a clear idea of the path to be followed by a company. An International Business Plan enhances the transfer of knowledge to the various experts involved with such a project.
A SWOT analysis is a strategic planning tool that requires the simultaneous assessment of four different aspects:
- Company Strenghts
- Company Weaknesses
- Opportunities associated with different foreign markets
- Threats implicit in the different options.
These four aspects must be considered together because potential market opportunities may "disappear" if the company does not have sufficient resources and the skills necessary to exploit them.
Similarly, a particular market selection could be "vulnerable" if motivated only by opportunities, without taking into account any of its weaknesses. Such actions could also cause the company to inadvertantly amplify negative effects of associated threats and risks.
Only the integrated development and presentation of the four SWOT elements wiil ensure that any negative interelationships are not underestimated.
Data-Driven Decision Making
Many theoretical and empirical studies underline the importance of the process in which strategic decisions are taken inside companies. Typically, they draw attention to the importance of involving all those within an organisation who have useful knowledge to participate in the decision-making process and to evaluate the possible outcomes of alternative decisions.
However, SMEs often do not have resources with the requisite knowledge inside their organisations, partly because experienced people are few in number and partly because the areas of interest are very broad. In these cases, it is possible to compensate for a lack of knowledge with information derived from numerical data. Of course, the benefits are proportional to the quality of the available data.
Data quality depends to a greater or lesser extent on the facts to which it refers. If the fact is, for example, the size of a market, the quality is much better as it approaches the true size of the market. But data quality is even better in relation to its functionality rather than to the decision-making processes in which it is used. Finally, data quality cannot be separated from the costs incurred to obtain it. This can lead to an evaluation of the cost-benefit ratio of data rather than a search for absolute data quality in itself.
The goal of increasing data quality while reducing its production cost is one of ExportPlanning's distinctive features. Moreover, the platform is specifically designed to support decision-making processes in the context of internationalisation.Costs are reduced through the use of:
- Open data from institutional sources
- IT resources and efficient methods of organising data structures to minimise data processing and representation of information.
- Multiple observations regarding the same fact, in order to obtain robust signals from the data
- Machine learning techniques for the identification of possible outliers
- Estimations of missing data to produce consistent information on multiple classification levels .
Given the fact that internationalisation can be a complex process, outcomes should be periodically subject to a critical review. It is likely that decisions will not be optimal immediately, requiring subsequent adaptations and improvements.
The control phase therefore assumes a fundamental role during verification and adaptation of decisions taken.
To this end, KPIs (Key-Performance-Indicators) used in the evaluation phase must be clear. In turn, selected KPIs must also consider the external context in which the process of internationalisation is taking place, in order to avoid interpreting results that derive from a particularly favorable external situation such as the outcome of optimal choices or, vice versa, such as the outcome of incorrect choices that reflect a decidedly negative economic situation.
The ability to evaluate company performance, distinguishing between effects of the external environment and effects of decisions, make it possible to identify any modifications to the path being followed, thus progressively refining the optimal internationalisation process for the company.
1) In this article, the term internationalisation does not refer to "one-off" selling abroad, but it implies a comprehensive process which considers the world as the potential market.