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Internationalisation


Written by Christian Saublens

 

The concept

How to implement it?

Step in the RIS process

What can be expected?

A quote

References

 

The concept


Internationalisation can be defined as the capacity for an enterprise to engage any form of collaboration with a partner in another country. The most obvious form of internationalization is export. In an open global economy, internationalization might also take the form of opening a subsidiary abroad, a franchise agreement, a joint venture, a joint R&D+I project, outsouring projects, co-branding, licensing, …

 

How to implement it?


To provide a wide range of financial skills development and mentoring support to enterprises to assess, design and implement an internationalization strategy. An internationalization strategy especially for SMEs requires at least a project development capacity, new cultural and professional skills including language, strategic market knowledge and networking awareness.

The regional support needs to address he three following types of enterprises:

  • Enterprises with experience in export
  • Enterprises with no export record
  • Start-up enterprises that need to go international from the start, because the national market is too small.

Globalisation increasingly requires businesses to go international. Internationalisation activities may address one or more of the following objectives:

  • Boosting sales or market shares;
  • The need to grow fast;
  • The search for opportunities on emerging markets;
  • Cutting input costs;
  • Procuring knowledge to improve innovation;
  • Strategic relocation.

The main tools available to public authorities in stimulating business internationalisation need to include different possible intervention formats including:

a) Commercial / Financial

  • Plain exporting
  • Agent and distributor
  • Franchising
  • Co-contracting
  • Joint venture
  • Acquisition or participation
  • Merger

b) Industrial

  • Joint production
  • Subcontracting
  • Joint tendering
  • Licence
  • Technological development
  • Technology transfer
  • Offshoring
  • Outsourcing

c) Inward investment or strategic delocalisation.

The rationale behind doing this might as well be the need to geographically follow a major client or to access cheaper components.

d) Co-research and co-innovation activities.

Evidently, the first form of internationalisation for many SMEs is making an export sale; subsequently, the enterprise will look into market analysis, looking for an agent and then a distributor, and finally negotiate a partnership agreement. Some enterprises may turn out to have no need to exceed the first step consisting of direct sales.

An intermediation body may offer a vast range of services for promoting the internationalisation of the enterprises. These services generally depend on the intended type of internationalisation. The services may be grouped in six main categories :

  1. Information and promotion services
    These services cover actions such as internationalisation awareness campaigns, market information (sector or geographic area), organising information and contact missions, organising missions abroad and hosting foreign enterprise missions to the region, setting up systems for assisting in participating in trade fairs or for financing internationalisation activities.
  2. Training services
    These services cover actions implemented with a small group of enterprises that have the intention and the capacity to internationalise. Very often these will be specific seminars and advice to enterprises, so that they may improve their performance, mainly in the field of the organisation of the enterprise and the flexibility as regards products or production. Establishing contacts (for instance in exporters' clubs or clusters) between enterprises with established experience in internationalisation and enterprises in the learning stage is an excellent means for stimulating the self-confidence of the exporters.Placing new graduates in SMEs to help them develop an export strategy can be a very useful tool.
  3.  Custom-tailored services
    These services include the individualised services, amongst which we would like to mention the exchange of enterprise profiles, bilateral contacts between enterprises, granting personal advice or also financial assistance of all kinds (product development, etc…). The use of export consultants temporarily made available for SMEs is being tested in several countries with success.After the achievement of certain actions it can reveal useful to ensure an "after-sales service" in order to avoid that the contacts made would not properly be followed-up.Moreover the placement of young graduates in SMEs in order to help them develop an export strategy can be a valuable training tool for SMEs.
  4. Specialist collective services
    When the regional productive fabric consists of small enterprises, one should consider grouping the internationalisation assistance services within a specific association, a cluster or an exporters' club. The association or cluster will propose specific export services, while the enterprises will keep their freedom of action at the regional or even national level. Amongst the services to be proposed, one observes most often the understanding of foreign market trends, the trademark or label, the design, the technology, the logistics and the economic intelligence, etc.More and more regional intermediary bodies have today offices in foreign countries to help their SMEs develop contacts with potential partners.
  5. Export Finance Tools
    A lot of European SMEs face problems to access finance and so have weak balance sheets. Export or internationalisation activities are often expensive (market research, logistics costs, product redevelopment, marketing, payment delays, exchange risks). In order to help enterprises overcome those challenges, public authorities can offer financial assistance in the form of export credits and/or guarantees.
  6. Hands on management
    Today, public authorities try to provide added value services also called advanced services. The most efficient way to deliver such support services is to combine training, advice and access to finance.
  7. Coaching and mentoring
    In order to improve SME awareness of the specifics of foreign markets, some development agencies have set up mentoring schemes involving large companies with international experience.
  8. Business hotels
    Some organisations (RDAs, incubators, etc.) provide SMEs that want to enter new markets on a trial basis with – often free – temporary (1-3 months) office space and advice, including bilateral appointments with experts (see EOS: http://www.euroffice-services.eu).

Regional business internationalisation strategies systematically need to reckon with the type of companies they target. Indeed, going international requires in-house capacities and abilities that are not necessarily in evidence in all SMEs and companies whose primary market is regional.

Below is a proposed model of regional ecosystem for SMEs discovering innovation or export activities.

  • Business plan competitions for export projects. Prizes take the form of coaching or ad spece in the press and/or seed or proof-of-concept funds or consultancy vouchers.
  • Coaching of businesses to help them identify export markets. Coaching includes three steps, i.e.

a)      An introductory seminar on how to identify export markets

b)      A brainstorming seminar for SME staff and management

c)       Mentoring within the SME with the aim of defining a suitable business model to implement the findings of the brainstorming seminar described under b) above.

  • Loans/grants. This type of support would be delivered in five stages: (a) brief presentation of projects and partnership aims; (b) agreement in principle or rejection; (c) development of a draft project proposal; (d) project approval; (e) project delivery.
  • Internationalisation voucher schemes. Grants to acquire specific knowledge in connection with internationalisation (advice on maiden export activities or on issues relating to export taxes and finance: credit/insurance) could be granted, ranging between 2 000 € to 3 000 € per SME.
  • A system of student placement grants during school holidays or of summer student living labs could be implemented for SMES facing e-commerce needs (market analysis of internationalisation).

 

Step in the RIS process


  • Step 1: Analysis of the regional context
  • Step 5: Definition of a coherent policy mix

 

What can be expected?


  • Growth and jobs creation both at entreprise and regional level
  • Greater propensation to invest in innovation to face the challenge of a greater number of competitors or to network with different types of players.

 

A quote


“The enterprise having developed international presence are more innovation than the others.” From an Insee study 2014

 

References


 

Mr Christian Saublens


 

Christian Saublens has more than 30 years of working experience in European trade organizations. Since 1992 he is the Executive Manager of EURADA, the European Association of Development Agencies, a network of 145 organisations. Christian has been involved in the organization of numerous conferences and meetings dealing with all matters related to regional development. He wrote several papers and working documents on business support schemes for SMEs. He played an important role for the dissemination in European regions of concepts such as benchmarking, business angels, investment readiness, proof of concept, clusters, open innovation, financial engineering, crowdfunding, … Several times Christian has been appointed as an expert by the European Commission and the Committee of the Regions.

christian.saublens@eurada.org

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