Since expanding internationally requires time, money, effort, and substantial risk, most business people assume that only large companies are able to make the investments needed for new market expansions. Conversely, small to mid-size enterprises (SMEs) are often encouraged by experts to stay out of the international fray due to financial and logistical reasons.
Knight (2000), however, has found that SMEs often have exactly the right mindset, tools, and corporate structure to do extremely well in the international marketplace.
First, normally one of the key cultural attributes of a SME is an entrepreneurial mindset. Dess, Lumpkin and Covin (1997) note that most SMEs have an “entrepreneurial orientation, which is associated with opportunity seeking, risk taking, and decision action. Firms with this orientation engage in product-market innovations, undertake relatively risky ventures, and initiate proactive innovations.” All of these traits are ideal for evaluating the risks and opportunities in a new market.
Second, most SMEs show marketing leadership strategies through their careful control of distribution channels. While this control usually is related to budgetary constraints, it also means that the SME has to rigorously examine every channel opportunity based on its long-term strategies and goals. Since one of main new entry market strategies is to develop a sales agent or distributor relationship, SMEs are well positioned to perform the analysis required to determine if the proposed relationship is a good fit.
Third, most SMEs have to show leadership in either (or both) quality or product specialization; the long tail of niche leadership is most relevant for SMEs and they often use this strategy extensively. A critical aspect of a niche/quality strategy is the development or improvement of products that meet specific needs; this laser-like focus on a particular customer segment can mean that the SME will be able to locate and speak to their target audience easily in the new market.
Knight (2000) found that SMEs with strong entrepreneurial orientation, coupled with a quality leadership strategy, realized the greatest short- and long-term success in internationalization efforts. Knight speculates that a “quality focus may enable firms to achieve stronger customer loyalty, charger higher prices than competitors, and lower overall marketing costs,” offsetting the costs and risks involved in pursuing a new market.
Knight, G. (2000). “Entrepreneurship and marketing strategy: the SME under globalization.” Journal of International Marketing. 8 (2) pp. 12-32.
- How SMEs Innovate to Differentiate (business2community.com)