Internationalisation is an important factor when it comes to successful and sustainable business management. This also especially applies for small and medium-sized enterprises (in the following SMEs), since internationalisation of SMEs can be a critical challenge.
The success of internationalisation for SMEs is depended on many factors like the actual size of the company or already existing foreign experiences. To generate a successful access to foreign markets the choice of an internationalisation cannot be a spontaneous one. It has to be premised on a strategic plan. Hence in terms of international expand it is important for companies to balance the benefits and the risks of the environment as well as the firm-specific strengths and weaknesses and to formulate a suitable internationalisation strategy. Important factors of this strategy are the choice of a market and location and the choice of an entry mode.
Table of Contents
1 Introduction
1.1 Research problem
1.2 Course of investigation
2 Internationalisation of SMEs
2.1 Characteristics of SMEs
2.2 Internationalisation of SMEs
2.2.1 Characteristics of internationalisation
2.2.2 Motives and goals of internationalisation
2.2.3 Possible risks and barriers of internationalisation
2.3 Entry modes
2.3.1 Characteristics of entry modes
2.3.2 Non-equity entry modes
2.3.3 Equity entry modes
3 North American markets
3.1 Choice of market and location
3.2 Characteristics of North American markets and NAFTA
3.3 United States of America
4 Entry modes for SMEs in the US market
4.1 Benefits and barriers of the US market
4.2 Advantages and disadvantages of SMEs entry modes in the US market
5 Conclusion
5.1 Summary
5.2 Critical acclaim
5.3 Outlook
Research Objectives and Key Topics
This research paper examines the internationalisation process of small and medium-sized enterprises (SMEs) with a specific focus on their market entry strategies for North America, particularly the United States. It aims to identify the challenges, risks, and advantages associated with various entry modes to assist SMEs in developing sound international expansion strategies.
- Strategic planning for international SME expansion
- Classification of entry modes (equity vs. non-equity)
- Market characteristics of the US and the influence of NAFTA
- Comparative advantages and disadvantages of market entry strategies
- Risk management and resource allocation for international trade
Excerpt from the Book
4.2 Advantages and disadvantages of SMEs entry modes in the US market
The in chapter 2.3 named entry modes have different levels of control, ownership and resources transfer. Thus the choice of an entry mode may be motivated by different elements (Nisar, et al., 2012, p. 717) and can lead to significant consequences on the company’s performance and survival (Ekeledo and Sivakumar, 2004, p. 68).
Full-control modes such as a sole venture in the form of new establishments or acquisitions generally lead to the highest return on investment (Ekeledo and Sivakumar, 2004, p. 75). But building a manufacturing and selling entity through establishing or buying up already existent corporations in the US is also associated with a high capital demand and the highest level of risk (Horten and Graf Kageneck, 1996, p. 5).
To avoid those disadvantages firms usually prefer to form a shared business in the form of joint ventures. Since in most cases of international expand firms are also not familiar with the host country and its regulations, an establishment of a joint venture with local companies is beneficial (Nisar, et al., 2012, p. 721). Major advantages of joint ventures are the simple acquisition of the resources of a local partner and the minimized environmental risk (Zhang, et al., 2007, p. 756). The combination of capital, business contacts, technology and economies of scale can open new possibilities for both parties (Horten and Graf Kageneck, 1996, p. 5). However, joint companies might have to deal with opportunistic behaviour on the part of the partner. The success of a shared business is especially dependent on congruent goals of the concerned parties (Zhang, et al., 2007, p. 756).
Summary of Chapters
1 Introduction: Defines the research problem regarding SME internationalisation and outlines the course of investigation for the paper.
2 Internationalisation of SMEs: Describes the characteristics of SMEs and explores motives, goals, risks, and entry mode classifications for international expansion.
3 North American markets: Analyzes the choice of location and provides an overview of North American market characteristics, including NAFTA and the US market.
4 Entry modes for SMEs in the US market: Discusses specific benefits and barriers of the US market and evaluates the pros and cons of various entry strategies for SMEs.
5 Conclusion: Summarizes the findings, provides critical acclaim regarding the lack of a "one-size-fits-all" strategy, and offers an outlook on future trends.
Keywords
Small and medium-sized enterprises, SMEs, internationalisation, globalisation, market entry modes, United States, NAFTA, international trade, joint ventures, licensing, exporting, strategic planning, business expansion, foreign direct investment, risk management
Frequently Asked Questions
What is the core focus of this paper?
The paper focuses on the internationalisation process of SMEs, specifically identifying and analyzing suitable market entry modes for companies looking to expand into North American markets, with a concentration on the US.
What are the primary themes addressed?
The main themes include SME characteristics, the strategic motivations for international trade, the classification of non-equity and equity entry modes, and the specific economic and environmental conditions of the US market.
What is the central research objective?
The objective is to illustrate different international entry modes and evaluate their advantages and disadvantages for SMEs to facilitate informed strategic decision-making in foreign market access.
Which methodology is applied?
The paper employs an academic literature review and analysis of secondary data to define SME characteristics, explain internationalisation strategies, and compare the suitability of different entry modes in the US context.
What is covered in the main section of the paper?
The main section covers the definition of SMEs, the spectrum of entry modes (from exports to joint ventures), an environmental analysis of the US market, and an evaluation of these strategies based on benefits and barriers.
Which keywords best describe the work?
The work is best characterized by terms such as SMEs, internationalisation, market entry modes, North American markets, US market, trade barriers, and joint ventures.
Why are joint ventures often preferred by SMEs entering the US?
Joint ventures allow SMEs to mitigate risks, gain local market knowledge, and acquire local partner resources, which is particularly beneficial given that SMEs often lack extensive foreign experience and capital.
How does the author categorize entry modes?
The author distinguishes between non-equity entry modes (such as export, licensing, and franchising) and equity entry modes (such as sole ventures and joint ventures).
Does the paper suggest a single "best" entry strategy?
No, the paper emphasizes that there is no "ultimate" strategy; the choice of an entry mode is highly dependent on company-specific strengths, weaknesses, and the specific goals of the expansion.
- Quote paper
- Kristina Gribanov (Author), 2015, SME Entry Modes in North American Markets, Munich, GRIN Verlag, https://www.grin.com/document/489340
