The objective of every business or firm is to generate as much revenue as possible. Such an objective may not be realized if a company operates on a small-scale. It is important that companies develop a wider scope in regard to soliciting for wider markets for their goods and services (Garcia, 2015). Expansion, however, has two connotations; expanding the level of operations such as increasing the level of output, diversification of products and services, as well as, looking for new markets.
Before discussing the various strategies which firms can use to internationalize, it is important to understand the reasons that cause small companies to have the desire of expanding their operations to a global scale. According to Rowden (2001), the most prominent reason that causes firms to internationalize is the likelihood of increasing sales. Internationalizing a firm means that the firm will have a wider market for its products hence more sales (Vinaja, 2015). Secondly, small companies may want to diversify their operations and the risks associated to the operations. Fillis (2013) states that firms which have several global branches and deal with a variety of products have an advantage because the failure of one branch or product does not cause it to close. On the contrary, a firm that operates only in one place and in one kind of product may experience challenges when an undesirable situation arises.
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As Picot et al. (2014) succinctly assert, it is important that businesses get closer to their clients. A small company may produce products that are direly needed in another part of the world. It thus becomes a necessity for the company to open offices or outlets close to the customers so that a part from increasing its sales, it can also serve the needs of its customers better (Nummela, 2010). Also, small companies may find it necessary to internationalize to minimize the cost of labor or supply. It may be noticed that some places offer the much needed labor and at a lower cost than the location where the company is located. Some cities in the world have a high population of job seekers as well as people with relevant skills. It is important that small firms also tap into the large pool of labor supply to minimize costs while generating significant revenue.
Pertaining to strategies, Rowden (2001) emphasizes that the first step that any small company has to take in an attempt to internationalize is to carry out conclusive research. In agreement with Rowden,Bürgel (2012) points out that the research process begins with the objective of the small company. That means that the company will have to define the type of market it needs to increase the sales of its products. Most specifically, the company will need to research about the culture of the proposed market (Brush, 2013). For instance, it will be in vain for a company that deals with pork products to set branches in the Middle East; the people will not only reject the products, but will take it as offence. Culture, therefore, encompasses aspects such beliefs, consumption habits, among others (Jones, 2009). It is also vital for some officials from the company to conduct reconnaissance visits to the proposed markets. Additionally, it is also critical that the company employs people from the different culture to understand the values of the particular culture better. People may also embrace the products of the company better if they interact with people who understand them (Ogunrin & Inegbenebor, 2015). It is unlikely for people to seek the services of companies that only employ foreigners and do not offer any employment opportunities to the natives. Some individuals may frustrate the company’s efforts by calling upon their citizens to boycott the products of the company.
Secondly, the company needs to plan. The process of internationalization is not simpler rather; it is dynamic (Bell, Crick & Young, 2014). Small companies have to take enough time proposing, evaluating and finding ways of making the process to work. Internationalization means that the structure of the company changes; the number of employees increases and the operations of the company expand too. The cost of setting up operations in a different country may also be different. Therefore, the company needs to investigate how it will meet also the expenses as well as carry out the transition without much interference. In such a case, the company will need to hire people who have experience of working in diverse cultures, especially the culture in which the company intends to open outlets (De Clercq, Sapienza & Crijns, 2005). Even more importantly, it is best that the company considers hiring individuals with experience of managing international companies. Such a move is better than training new people, which may be too costly.
It is also vital to look at the specifics in regards to the strategies that small companies need to employ to internationalize. According to Alam (2013), a small company that intends to compete globally with an already established international company needs to differentiate its products first. That means that the company needs to add value to the goods or services it produces. People will embrace the products more readily if they realize that the products offer more benefits than the existing ones (Ellis & Pecotich, 2001). Especially when the existing multinational company offers inferior products or charges exorbitant prices, there may be a shift towards the products of the new company if it offers more superior products at reasonable prices. To boost the shift, the company needs to advertise its products using different media such as the mass media and social media.
It is also not advisable for small companies to internationalize at once. Instead, the process needs to be implemented in stages (Huber, Nerudová & Rozmahel, 2015). For companies that deal in exports, they can follow the various steps outlined in this paragraph. First, the company needs to do passive exporting. It is where the company fills international orders without doing the actual exportation. The objective here is to gauge the international market. Secondly, if the company sees enough potential in the international market, it begins exporting some products. Nevertheless, some small companies may not have enough resources to export their products overseas. It is best that small companies partner with other companies at this stage to do the exportation. Partnerships also reduce risks.
Thirdly, the small company may then establish an export department after finding out that the new market is viable. The export department focusses on increasing the sales of the company’s products. The next step is to create branches in the new country or region to enhance better interaction with the clients. This step comes when the export department ascertains that there are no significant risks associated with the process and that there is high demand for the products or services of the company (Bell, Crick & Young, 2014). Lastly, the company expands its operations to produce more products to meet the demand of the new market. Expansion means that some managers may relocate to the new market to improve efficiency in administration.
In summary, internationalization means that small companies expand their operations such that it becomes necessary for them to look for new markets in different countries. The process itself is complex hence needs competent strategies to realize the objective. The strategies need to address issues such as managing of more people, the culture of people in the new country or region, and the costs involved (Prabhu, 2010). As stated in the article, small companies need to research, plan, understand people’s cultures, differentiate their products and forge partnerships with other companies to enhance an effective internationalization process.
References
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Bürgel, O. (2012). The internationalisation of British start-up companies in high-technology industries (Vol. 9). Springer Science & Business Media.
Fillis, I. (2013). The Internationalisation Process of the Smaller Firm: an examination of the craft microenterprise. The Open Business Journal , 1 (1), 53-61.
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Ogunrin, F. O., & Inegbenebor, A. U. (2015). Distribution channels and internationalization in a developing-country clothing industry. Journal of Research in Marketing and Entrepreneurship , 17 (2), 130-148.
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