Market entry strategies and their applicability to SMEs - The winding road to foreign business
Research Paper (undergraduate) from the year 2003 in the subject Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media, grade: 1,9 (B+), Heidenheim University of Cooperative Education (Economic - International Commerce), course: International Commerce, 22 entries in the bibliography, language: English, abstract: “There will be hunters and hunted, winners and losers. What counts in global competition is the right strategy and success.” Heinrich von Pierer1 In business planning the globalization of the world market and the limits of domestic growth raise the question to what extent a foreign commitment should be considered if at all.2 In Germany these considerations are particularly underlined by the strong integration into the world economy. German enterprises obtain a third of their total revenue in foreign business, 25 % of all jobs depend on foreign trade.3 Contrary to expectations, going global is no longer subject only to large multinational companies. Due to saturation tendencies in the domestic market, global competition and the dependency on international key-account customers small and medium-sized enterprises (SMEs) have been faced with the need for international activities. 4 Considering the fact that SMEs account for 97,3 % of all German enterprises, generating almost 45 % of the total revenue per year, the importance of future growth potential becomes evident.5 In general, SMEs are referred to as the “backbone” of German economy and many of them, the so called “hidden champions” have successfully faced the challenge of entering foreign markets.6 Others have been afraid to take this step. For these, the need for adaptation remains and their continuity will depend on the competitiveness in the world market. In general, entering new markets is connected with a multiplicity of chances and risks. SMEs especially, tend to underestimate the importance of profound information and the need for a realistic estimation of own capabilities.7 Accordingly, it becomes necessary to focus on a SME specific approach which considers major evaluation criteria for carefully developing market entry strategies. 1 Dr. Heinrich von Pierer, President and Chief Excecutive Officer of Siemens AG: Quotation cp. ‘TheGlobalist’ (2000) 2 cp. Hoppen (1999:144) 3 cp. Statistisches Bundesamt (2001:1.6) 4 Due to the IFM in Bonn (2000) SMEs intend to increase their foreign sales from an actual average of 30 % to 50 % in 2020 5 cp. IMF Bonn (2000) 6 cp. Hibbert (2000:1) 7 cp. Brenner (1999:2 et sqq.)
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Accordingly adapt advantages approach to foreign Aspects Market aspects of SME AUMA Backes-Gellner basic orientation framework basis Bonn business field commitment competition competitors costs countries customer relationship decision matrix defined developing Direct export direct investment disadvantages Dorsch entering foreign markets entering new markets enterprises especially relevant especially to SMEs experience external aspects Fifield Figure focus focuses follower strategy foreign market entry geographic expansion German Ghemawat Global marketing Heinrich von Pierer Hibbert Hoppen international markets joint venture Kabst Kattler Keegan know-how limited financial limited risks major aspects major evaluation criteria managerial market barriers market entry modes market entry strategy market potential Niehoff obstacles OECD Ohmae partner potential and market Potential Market Regiocentric Strategy sales networks Sarathy Schmid Selling directly Seringhaus simple structures SME characteristics SMEs face social specific product Strunz study paper successful suitability for SMEs Terpstra total revenue Weber world market