Expansion Barriers Faced by SMEs in the UK. A Case Study of CAD Serve LTD


Master's Thesis, 2013

66 Pages, Grade: 0.5


Excerpt

Table of Contents

Chapter-1 Introduction
1.1 Background of Study
1.2 Purpose of the Study
1.3 Research Aim and Objectives
1.4 Research Questions
1.5 Rationale of the Chosen research topic

Chapter-2 Literature Review
2.1 Introduction
2.2 Why Do Exporting?
2.3 Export barriers and firm characteristics
2.4 Exporting barriers in developed and developing markets
2.5 Small and Medium-sized Enterprises (SME) and Export Barriers
2.6 External factors hampering the expansion of SMEs
2.7 Internal factors hampering the expansion of SMEs
2.8 Internationalization of SMES and Related Theories
2.9 Internationalization Challenges and the Role of Government
2.10 Summary

Chapter -3 Research Methodology
3.1 Introduction:
3.2 Research Philosophy
3.3 Research Approach
3.4 Research Method
3.5 Research Strategy
3.6 Data Collection Method
3.7 Sampling Technique
3.8 Semi Structured Interview
3.9 Data Analysis & Presentation Method
3.10 Justification of Research Method
3.11 Validity
3.12 Reliability
3.13 Ethical Considerations

Chapter 4 Findings & Analysis
4.1 Introduction
4.2 Findings of External factors hampering the expansion of SMEs in UK
4.3 Findings of Internal factors hampering the expansion of SMEs in UK
4.4 Analysis of the Findings
4.4.1 External Barriers of Expansion
4.4.2 Internal Barriers of Expansion
4.5 Summary

Chapter 5 Conclusion & Recommendation
5.1 Study Summary
5.2 Conclusion
5.3 Recommendation
5.4 Suggestions for further research

References

Appendix

Abstract

Small and medium sized enterprises (SMEs) are one of the principal driving forces in economic development. An important issue regarding the exporting is export barriers. Export barriers as those for which a business organization cannot start a new business or expand existing business in a new environment in a foreign country. Export barriers are of two major types’ namely internal barriers and external barriers.

The purpose of this study is to analyze the Barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas. This study conducted case study and the chosen case company is CAD Serve LTD. It is a very small industrial and architectural software selling company in Newcastle, UK. The researcher used to work in this company and found that this company was facing some problems in expanding its business overseas. Therefore, the researcher decided to conduct a research regarding the expansion barriers faced by SMEs when they want to expand. This study was done through qualitative research method. The primary data was collected taking in-depth semi-structured interview. By applying the content analysis and narrative analysis the findings were analyzed.

The first objective of this study was to identify the external barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas. The second objective was to identify and analyze the internal barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas. From the study the researcher found some internal expansion barriers such as Marketing, Management competence, Lack of skilled labor, R&D - Innovation, Technology, Corporate Social Responsibility, Culture, and Language barriers. The third objective was to suggest solutions for SMEs to face these barriers. In the recommendation the researcher has provided some suggestions to face these barriers.

COPYRIGHT AND OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS

Copyright and ownership of any intellectual property rights which may be described in this research rest with the University of Wales and may not be made available for use by third parties without the permission of University of Wales, which will prescribe the terms and conditions for any such agreement.

ACKNOWLEDGEMENTS

I would like to express my heartfelt gratitude to my supervisor, Dr. Franceis Offeh, for his patience, guidance and individual insights which have made the completion of this dissertation fruitful. My appreciation goes to all other respected lecturers and professors of the City of London College for giving me the opportunity to accumulate a vast wealth of knowledge all through my MBA level.

Lastly, my deepest appreciation goes to my dear parents for their love, financial support and encouragement throughout my study period.

DEDICATION

To my beloved parents for their love and support

Chapter 1 Introduction

1.1 Background of Study

Small and medium sized enterprises (SMEs) are one of the principal driving forces in economic development. This sector has been recognized as growth engine around the globe. A healthy and vibrant SME sector contributes in a high and sustainable economic growth. They encourage private ownership and entrepreneurial skills, they are flexible and can adapt quickly to changing market demand and supply situations. They provide employment opportunities to the masses, help diversify economic activity and make a significant contribution to exports thereby increasing foreign trade.

However, there are several problems facing by the business sector in UK at present. An important issue is the exporting is export barriers (Majocchi, Bacchiocchi, & Mayrhofer, 2005). Export barriers refer to those for which a business organization cannot start a new business or expand existing business in a new environment in a foreign country (Pinho & Martins, 2010). Based on many studies, export barriers are of two major types’ namely internal barriers and external barriers (ArteagaǦOrtiz & FernándezǦOrtiz, 2010; Leonidou, 2004; Pinho & Martins, 2010). These similar researches concluded that organizations’ internal conditions which hinder to export are known as internal barriers. Examples of internal barriers include organization’s terms and regulation, inadequate resources, inefficient management, unstable environment etc. On the other hand, barriers outside of the organization include external barriers. Examples of such barriers are government regulation, foreign country rules regarding exporting, political instability of the country, and high rate of tariff on export etc. sometimes, country’s social customs and culture also create barriers to export. Several studies concluded that export barriers are also include factors such as psychological, organizational and operational market related (Leonidou, Katsikeas, & Piercy, 1998; Tiwari & Herstatt, 2012).

Furthermore, numerous lessons have recognized numerous larger exterior and interior fences, counting: peripheral difficulties, operative difficulties, interior difficulties, and informational difficulties (Katsikeas & Morgan, 1994). Though, earlier lessons by Kaleka and Katsikeas (1995), Morgan (1997), and Leonidou (1995b) have protracted the zones and re-termed them by way of: internal-domestic trade obstacles; internal-foreign trade barricades; external-domestic trade blockades; and external-foreign trade blocks.

Paramount, internal-domestic trade blocks, that is to say, hitches and reasons that the organization’s involvement in their household nation and indoors swarm country (Ayob, 2013), for instance: necessity of capable control for worldwide actions (Yang, Leone, & Alden, 1992); pitiable association and solemnization of trade subdivisions (Bauerschmidt, Sullivan, & Gillespie, 1985); lacking manufacture abilities (Yaprak, 1985); deficiency of the interval of administration (Kaynak & Kothari, 1984); and organizations’ apprehensions concerning local market place actions (Ah Keng & Soo Jiuan, 1989). Next, internal-foreign trade barricades, for instance difficulties inside the firm, knowledgeable in the congregation country; instances contain: extraordinary conveyance charges (Bauerschmidt et al., 1985) squat merchandise excellence (Gripsrud, 1990); conveyance and consignment problems, imperfect acquaintance of marketplace astuteness to study external marketplaces (Carrera, 2003); and jeopardizes and expenses in retailing overseas.

Thirdly, external-domestic trade barricades, which ascend from the exterior surroundings, nevertheless are quiet knowledgeable by the firm in their household country, for instance: the difficulty of the paper exertion tangled in trading (Eichengreen & Temin, 2010); the absence of government support to over awed trade blockades. Fourthly, external-foreign trade obstacles, ascending from the exterior atmosphere and skilled by the firm in the congregation country; illustrations contain: limitations levied by overseas government rubrics and principles (Kahiya, 2012); a privation of data about abroad marketplaces. Nevertheless, firms are clashing in what way they recognize those difficulties and barricades, founded on their level of connection in trading actions (G. Morgan, 2001).

The UK SME Sector

Napoleon once rightly said that the British are a nation of shopkeepers. Small and Medium sized enterprises have been the backbone of British economy since the ancient times.

The SME sector in the UK is defined differently for various institutions. For instance, for the Department of Trade and Industry (DTI), it is defined on the basis of the number of employees in the unit.

Since the UK is a part of the European Union (EU), it also has to follow the EU definition of the SMEs. According to the definition of the European Commission, there are approximately 23 million SMEs that fall within the European Union. The European Commission defines the SMEs on the basis of turnover, balance sheet figures and the number of employees employed. In order to qualify, the enterprises must fulfill the limit for the maximum employs that can be employed and either the turnover limit or the balance sheet limit.

SMEs are defined by the Companies Act as meeting two of the following criteria:

- Employing 250 people or less;
- Having a turnover of less than £11.2m (EC use less than E40m);
- Having net assets of less than £5.6m (EC use less than E27m).

The Small and Medium Enterprise sector is widely spread in the United Kingdom. The off license shop, the corner shop, the restaurant, the accountant, the web designer, the engineering business or the hairdresser, are the different types of SMEs in existence in the United Kingdom forming the backbone of the UK businesses.

Significance of UK SMEs

The UK SMEs contribute around 33% of the total GDP. They provide employment opportunities to more than 50% of the total employment in the UK. They contribute to 37% of private sector turnover. The SMEs in the UK as in the other developed and the developing nations are a strong support for the overall growth of the economy, creating more and more employment opportunities year after year. there were approximately 4.7 million enterprises in the year of 2007 in the UK which saw an increase of 4.8% over the previous year (Macgregor et al., 2009). This increase has been the highest increase in a year since 1994, the first time since the time series began. An estimated 22.7 million people were employed by the SMEs. The SMEs contributed to nearly 99.9% of all UK enterprises which contributed to approximately £ 2800 billion of the total production. The SMEs contributed to 59.5% of total private sector employment and 51.5% to the total private sector turnover. According to the data, around 175,000 businesses register for VAT every year. The most important feature of the UK SMEs is that a large number of the businesses are dominated by enterprises which have no or very few employees. Around 73% of all UK businesses consist of self-employed businesses accounting for only 7.4% of the GDP around 24% employees which have less than 10 employees. There is a huge concentration of the SMEs in the service sector. Approximately 72% enterprises with employees are into the service sector whereas 17% are engaged in the production activities and around 8% in construction. The UK SMEs contribute approximately £ 1.48 trillion towards the total UK turnover and GDP.

Lind. P (2009) farther added that only 22% of SMEs are involved in exporting activities. Exports don't form a major part of the SME business. Most of these perform their export activities in countries close to the UK. In the UK, women entrepreneurs are actively involved in business owning 17% of the total businesses. The minority ethnic group (MEG) makes up for around half of the owners. Despite having such huge contributions, the UK SME sector has always been overshadowed to the large UK corporate houses and has been considered to be fragmented and often ignored.

The UK SMEs employing one or more person in all employ approximately 14.23 million people out of the total working population of 30 million. Around 1.1 million enterprises operate in the Business Services sector recognized in Section K by the Standard Industrial Classification 2003 (SIC 2003). This sector represents approximately 24% of the total UK private sector enterprises. This sector employs around 4.3 million people approximately 19% of the total private sector employment. The turnover of this sector amounts to £421 billion of the total UK private sector turnover.

With regards to employment, the wholesale, retail and repairs sector (SIC2003 Section G) has been the biggest employer. With 562,000 enterprises, this sector provides employment to 4.8 million people which amount to 21% of the total UK private sector employment.

At the beginning of 2007, small enterprises (0-49 employees) contributed 47.5% of the total private sector employment having varied between various sectors according to the Standard Industrial Classification 2003 (SIC2003). Off the total employment provided by small enterprises, 94.3% were engaged in agriculture, fishing and forestry (SIC2003 section AB). In mining, quarrying, electricity, gas and water supply (SIC2003 section CE), 12% of employment was provided by the small industries.

1.2 Purpose of the Study

The purpose of this study is to analyze the Barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas.

1.3 Research Aim and Objectives

The aim this study is to explore Barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas. This study will achieve following objective:

i. To identify the external barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas;
ii. To identify and analyse the internal barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas;
iii. To signify the solutions of various obstacles and challenges are faced by Small and Medium Enterprises in the United Kingdom when they try to expand the business abroad.

1.4 Research Questions

1. What are the internal barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas?
2. What are the external barriers faced by the Small and Medium Enterprise in the UK when they try to expand their business overseas?
3. What are the steps should be taken to solve these problems?

1.5 Rationale of the Chosen research topic

On the word of D'Souza & McDougall, (1989); Edmunds & Khoury, (1986) export is one of most important necessities for SMEs from both the perspective of organizational and economical (D'Souza & McDougall, 1989; Edmunds & Khoury, 1986). The reason behind this is that exporting improves the opportunity for growing SMEs rapidly. In case of international trade, knowledge of country’s customs and culture are also important because they do affect foreign trade. Research done by Leonidou, (2004) showed that many SMEs do not have any perspective of international aspect. And these firms often do face problems because this may be the outcome of perceiving risks of operations held by the managers of such firms. Studies done by Leonidou, (2003); Karakaya, (2002); Chen, (2006); also proved that there exist many hindrances in line with international marketing (Redon et al., 2006). According to them, the most eminent risk factors in this case are risk regarding institutionalization, risk regarding initiating the process, continue or even discontinuing the process.

Hence, it can be said that barriers to export are essential in the sense that they provide an overall view regarding the expansion and also the scenario of contraction of international trade. And the study of expanding or contracting of international trade is important for studying the growth of SMEs because SMEs are important for the economic development of all of the countries regardless they are developed, developing or under developed. On the other hand, the information regarding the problems in case of information technology while establishing SMEs in UK cannot be found to the appropriate level. Hence, it is obvious that while studying factors influencing the growth of SMEs in an economy, factors leading to the growth of exporting should also be studied simultaneously.

Chapter-2 Literature Review

2.1 Introduction

Exporting literatures usually shows trade and export barriers imposed by the countries over the globe. Countries impose export barriers to protect the home companies from the international business organizations (Nadolska & Barkema, 2007). Barriers are some com mom phenomenon that is imposed to restrict and challenge the small and large enterprises to the international market. They come in the form of barrier to start the venture or developing a strategy which can beat the other companies in the existing market. In a study Leonidou, (2004) showed some aspects of trade barriers and he showed few categorizes of barriers including internal and external aspects. He showed the barriers are related to trade policy, tax imposition, cultural barrier, administrative policies, and home country development categories and so on. With these phenomena Hamill, (2007) prepared a research showing that some other factors like as social, economic, psychological, product behavior and organizational structures make impact on the exporting.

With these aspects the studies of Katsikeas & Morgan (2004) have showed the extensive internal and external obstacle related to exporting can make hazard for exporting. The obstacles are related to the problems within the organization including informational, knowledge or are related problems. In another study there are many aspects which were found that in-home and domestic and internal barriers provided by the local govt. and foreign government (N. A. Morgan, Kaleka, & Katsikeas, 2004).

2.2 Why Do Exporting?

Exporting is done for fulfilling demands of the counties of worlds. As the countries all are not fully self-sufficient to meet their demand they need depend on the others. To meet such demands they operate their activities in small and large scale companies. Small companies are both threat and opportunity for the existing companies. They are listed for the long term chances and expansion. They find the management of the company well equipped for the more competitive advantage. Tough small scale companies are facing different sort of hindrance because of size, investment, network or information on the business they are improving their efforts in international trade.

Small firms get some privileges with the large companies from different perspectives (Luo & Tung, 2007), such as:

- Small enterprises takes less time to meet customer order
- Exports activities are remained in the level of control to easily handle
- Managing and deciding for the small enterprises are comparatively easy for the management of the SMEs. Foreign trade and foreign investments are getting through a relationship among the parties of small industries.
- Customers can find the firms more flexible in terms of their knowledge and experience.
- Usually SMEs don’t have experience human resources to handle the terms and conditions of the organisation‘s sellers. They get support from the countries that do the export processing activity. They can find training for the activities well standard.

With the mentioned opportunities SMEs also get some threats from the existing big business entities. All these activities are threatened in the competitive international market. Managing cost and operating effectively is a major factor for the SMEs as they do not get proper chance from the market situation. Costs are larger for the SMEs, because they do not find economies of scale in the short period of time. In a report prepared by the British Overseas Board in UK, published that the tomorrows exporters can get more challenges which were published in The Financial Times in 2007.

- Domestic market get some opportunity of exporting if it get surplus in its production
- Economies of scale may depend on the production of company but size and capability of the firm and opportunity all are interrelated.
- A business get larger opportunity of production and export if it is considered in big aspiration
- The small visionary firms get more advantage in the export activity.

The firms to be successful they need to find some opportunities and strengths which are mentioned in the above description. The organizations need to have commitment in their approach of entering into the global market.

Strategies are common factors in exporting the products in the foreign market. Every firms need to have firm strategic in exporting procurement. Some studies and schools of thoughts proved that exporting is a kind of strategy for the domestic companies. They outflow the domestic production to the outer world. They help to make the overall business system effective in the long run and create more effective chance of enrichment. Another research showed export carry extra profitability for the firms while they are very busy in managing production and make advantage of location (Jensen, 2003).

Every firm tries to initiate and maintain some common standards and process to carry out the success. They utilize some forces and resources to carry success for the firm. The factors are directly related to the export facility, and these can put some long term economic goals and short term earning goals. So we can say export is exploitation some strategic intent of the organization. In the following some motivational factors of exports are discussed:

- Goals related organizational growth and profitability
- Reducing risks of the firm
- Grasping global market opportunity
- Achieving low expense per unit production
- Marketing effectiveness
- Apprehending product sales
- Building capacity of resource management
- Coping existing domestic market
- Making healthier business environment

2.3 Export barriers and firm characteristics

A firm’s export behavior can be measured through different techniques and the techniques depend on the firms shape and size (N. A. Morgan et al., 2004). Basically a firms export capability and behavior is impacted by the management’s philosophy and perception of the regarding trade obstacles. Firms may have different perception in their influence in the international trade. They may have different experience in dealing with the customers. Some empirical research studies on export of small size industries have showed some aspects of advantage and disadvantages of their activity (Allouani & Berbou, 2012). Katsikeas & Morgan (2004) proved that small sized organizations are facing more challenges than the large size business entities. Large firms get advantages on financial terms, strong capacities and large number of human resources and other things. All these things are correlated in the organization’s capabilities. A study has been showed that an organization size is not matter in the exporting advantages (Paliwoda, Slater, Chadee, & Raman, 2009). Organization’s advantages are not related to its shape and size.

With exception to this there are some schools of thoughts of having perception that an organization’s capabilities and capacities depend on the knowledge and experience; economies of scale and level of its expertise in export also rely on risk regarding transaction. There are some common factors related to the firm’s export performance and the firm’s size and here export barriers associated knowledge, information, communication, production capabilities, logistics services are prevalent as constraints (Katsikeas and Morgan, 2004).

2.4 Exporting barriers in developed and developing markets

For economies of both developing and developed export is a significant element to boast up its economy. It helps to race in the competitive global arena making involved many parties in a race, in a challenging pavement. The business entities operating in the developing economies find challenges and obstacles that are not faced by the organizations of the developed economies (Al- Karasneh & Fatheldin, 2005). While developing economies tries to enter into the developed economies face the barriers most and the firms of the developing economies face incessant barriers in exporting.

There are many studies which also tried to find out many other problems of exporting (Albornoz, Pardo, Corcos, & Ornelas, 2012; Leonidou, Katsikeas, & Samiee, 2002). The studies also showed many overall overseas risks such as political and commercial. Firms get some constraints in case of size of their organization’s and foreign market expansion (Petersen, Welch, & Liesch, 2002). Small enterprises are laagered in managing business expansion in the global market. These organizations face problems regarding governmental issues and incentives as the countries from the developing economies do not provide adequate assistance to their home companied sin expanding its market to the outer world (Petersen et al., 2002). Sullivan & Bauerschmidt (2009) proved that companies that entered into the market newly lacks knowledge in operation their organization and their capability in getting information is also become very low. They have less networking to expand their coordinated relationship among the parties. Small and large scale companies are not getting the job done in the international marketing perspective. They become incompetent in attracting the foreign consumers and buyers to their product (Kaynak & Kara, 2002). The companies are becoming more incapable of proving more standard products and their products remain unfamiliar in the international market (Cleveland, Laroche, & Papadopoulos, 2009).

When companies go for exporting often they have to struggle with home country currency conversion and adjusting the currency policy. These problems and struggles are categorized as financial problems. Kaynak (2002) showed that these problems increase credit risks and property handling risks and risk for the insurer as well. According to Sullivan & Bauerschmidt (2009) each and every country impose some specific rules while building the export and import policies these policies are made from the policy maker either to ease the export procedures or to restrict it’s protect to import. So, policy lack of knowledge, information and cultural difference these things interactively act to play the role of controversy in trade and exporting activities. Another study showed organizations faces challenges due to lack of resources that could bring well strategic fit among the bodies of the organization, resourceful labor and quality personnel and so on (Crick, 2004).

Exception to it the studies also found some other things that are many ways to cope up with the barriers and obstacles faced in the competitive global market. The researchers found to have some ideas and ways finding the ways of operational in the international market (Gertner, Gertner, & Guthery, 2007). Their study found that obstacles can be formalized in to four specific divisions which include lack of finance, competitive rivalry in the market, incapability in resource allocation and facing unusual market demand in the market. Some researchers also cited some countries illustration in the exporting arena, here the illustration of Taiwanese companies are form in the lack barriers faced by the companies they possess less information of business market, lack of experience in the operation management, human resource management incapability and so on. In a another study it is found that anti-dumping policy, increasing taxes and tariffs for the some countries, product differentiation, price adjustment, raw material management and employees management is the challenges for the companies intended to the international arena.

2.5 Small and Medium-sized Enterprises (SME) and Export Barriers

SMEs have great influence in the international market effectiveness (Collins, 2002). They make the market vibrant in operating the competitive arena and becoming a vital part of the economic segmentation of the market economy (Al-Rashidi, 2011). Study of Al-Aali (2009) showed this origination is making impact in making more job opportunity for the domestic market and international market as well. They are also assisting in developing product services and encourage entrepreneurial initiatives.

In the recent years the impact of internationalization and globalization of the product market get some new issues in the business operation. Such new operations of the businesses of are impacted by the trade regulations, online business opportunity and SME chances. There are some significant factors which were found through the research initiatives, these factors are performance in the market, tackling in the competitive market rules with barriers. These factors are important as per Hill et al. (2002), the opportunities are created and regulations are also made for restriction.

There are some research that showed that obstacles are really exists in the international arena and the obstacles are more prevalent for the SMEs. With this indication the obstacles are formed in a scale that is provided in the following (Cieslik, Kaciak, & Welsh, 2010; Klatt, 2006).

- Competitive international and trade market
- Less market information
- Restricting policies like as dumping and anti-dumping
- Increasing taxes and tariff
- Restriction through obscure agreement
- Increasing cost of raw materials
- Few personnel in management

Developing and developed economies both face some obstacles in managing international trade (Matlay, Neupert, Baughn, & Thanh Lam Dao, 2006). The obstacles for the developing economies are maintaining standards and quality where the developed economies face obstacles regarding appreciation and export utilization.

Exporting is one of the most important tools in the international market that strives to make market stability among the global markets. That plays a committed role in stabilizing countries economy. It enhances chances of controlling the production of the firms and also help to pursue enter into the new markets. According to Jaffe & Pasternak (2004) small enterprises are considered as the most challenged entity in the global market those lack resources both in national and global perspective, they have to face battle in the international competition they are unflavored by the international policies. The researcher also argued that the firms get experience in the international in the short run rather than long run and managers need to find more specialists to get advantage.

SME’s have some limitation as it has been found that they have less management and educational capabilities and they induce more cost in operation of the usual management activities, less quality product, lack of awareness among the personnel and less strategic planning capability. They have less accommodation in terms of monitoring and evaluating the activities of the internal strategy making. Research study on this perspective found that software firms of United States got large market for its type of products and they could get large opportunity to enter and get the chance of determining the market strategies. In this perspective SMEs companies of Canada are more exposed to the international arena and they viewed the natural development of their own activities and could plan well in accordance with the market size (Ojala & Tyrväinen, 2007).

According to D'Souza & McDougall (2009), exporting for SMEs is always important in both national and international level and also in economic and organizational level. To involve an organization to the international arena some sorts of capabilities regarding knowledge and process are prevalent in the organizational level. SMEs are needed to have face and tackle the forces and uncertainty of the global arena. They require more international capabilities related to the management and they also require facing the perceptional risks related to transactions in the market (Leonidou, 2004). If some things can be checked they may require having the activities done with well standard of international market. In a study prepared by Westhead et al. (2001) it was prevalent that the process of internationalization factors urges to get the chances of decision making much more effective and apprehensive.

2.6 External factors hampering the expansion of SMEs

Small and big all sorts of business are influenced by the environmental factors. These factors are influential in operating the business activities. The factors that influence the activities are political aspects, economic level, social aspects, technological phenomena and legal. These factors impact on the management decision making of the SMEs.

This research paper intends to get some common factors that make export barriers for the enterprises of the developing economies. If an organization is experienced in the home country then it gets some extra facilities in the international market (Mbonyane & Ladzani, 2011). SMEs cannot neglect the challenges in the exporting. High operating costs of capital, financial return and less governmental assistance, lack experience are needed to overcome. The export incentive for the SMEs and they need to have adequate promotion programs for adaptation.

It has been seen that external factors of exporting barrier of the foreign country and host country are arising. Some studies on this perspective showed some phenomenon of external factors for the SMEs that are hindering them to cope in the international market. Hook & Czinkota (2008) cite that lack of information on the foreign market and challenges in making contracts with the international buyers, lack marketing channel, intermediaries and fewer skills in developing business structures. There are some other factors that can make the market competition much more challenges are language, cultural hindrance, intensive competition and differences in perception of the bodies (Jumat Muhajar & Khairuddin Hashim, 2009).

Competition

SMEs face higher challenges in market with the competitors from varied countries. An organization can get competitive advantage if it plays more actively in the market. The successes depends on, according to Walley (2008), more creative knowledge, invention, investment and operation experience, good governance, standards of quality are prerequisite to the competitive advantage.

According to Lind (2009,b) developing countries SMEs are facing more challenges in the global trade, the countries are now entering in to the new business arena the interdependent countries are imposing new trade barriers to restrict their home country’s market. Without these barriers they are facing challenges in high level competition in management and increased competition are becoming more intense as foreign firms are restricted in the trade zones. In a report studied by OSEMEP (2007a), it is seen that WTO has major role in mobilizing the market to the country centric where WTO itself imposed some technical barriers for some countries. Some countries like China, India, Vietnam, Indonesia produces some product like as Thailand’s product. These sorts of products are low cost oriented and these are produce through more labor centric and less value based. So the countries are tackling the Thai SMEs as they are producing effectively. According to World Bank (2009) record it was established that these countries are becoming price sensitive. Some points in this perspective that wherever the SMEs operates and whatever the companies do they need to be more vale centric (Lind, 2009).

Economic crisis

Economic crisis are made through the recession and inflation in the world’s economy. Most of the countries from Africa and Asia found such economic crisis in their business activity and SMEs are threatened by this situation (Chew, Yan, & Cheah, 2008). The researcher also said SMEs from these countries are vehemently threaded for creditor and investment problem.

Consumer behavior

Consumers got their behavior through several cultural and traditional customs, and these things are continuously are changing over the mind of the consumers as they are more changing their behavior. So to manage their demand SMEs need to acquire demand management properly. SMEs need to make sustainable policies to make the demand properly managed. They require building organizational policies to get sustainable advantage of their products or services.

Governmental policies

Government policies are always important and significant for the SMEs and the governmental policies are to support SME industries and foreign trade. The regulation and policies need to be more SME centric. Although government always tries to get some policies which are consumer

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Details

Title
Expansion Barriers Faced by SMEs in the UK. A Case Study of CAD Serve LTD
Course
Master in Business Administration
Grade
0.5
Author
Year
2013
Pages
66
Catalog Number
V312885
ISBN (eBook)
9783668117129
ISBN (Book)
9783668117136
File size
720 KB
Language
English
Tags
expansion, barriers, faced, smes, case, study, serve
Quote paper
Jobaire Alam (Author), 2013, Expansion Barriers Faced by SMEs in the UK. A Case Study of CAD Serve LTD, Munich, GRIN Verlag, https://www.grin.com/document/312885

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