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Rapid Internationalization of traditional SMEs: Between gradualist models and born globals

A case study of IKEA

Maik Beermann

on 14 January 2013

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Transcript of Rapid Internationalization of traditional SMEs: Between gradualist models and born globals

Rapid Internationalization of traditional SMEs: Between gradualist models and born globals Introduction Theoretical Background Method Cross Case Analysis Discussion Conclusion International Challenge Almost every Company faces international Challenges Small and medium sized enterprises (SMEs) 2 Views Gradual Approach Born Globals Rapid
Internationalization Slowly
Internationalization SME Internationalization SME Development Rapid Internationalization of several traditional SMEs

Establishment of Production Units in Eastern Europe and North Africa, South Africa and Asia

Investigation for mechanisms that influence speed of internationalization Uppsala Model (U-Model) Gradualist model

Internationalization as process of the company's international involvement

Usual begin: Oversea sales

Aim: Countries which are perceived culturally, economically, and geographically close International New Ventures Knowledge-intensive and knowledge based SMEs
accelerated internationalization

INV: - 'Born global' firms
- 'Born-again global' firms

Two Key Sources:
1) Knowledge
2) International Networking Key Dimensions 1) Founder's characteristics Managerial Vision
Prior International Experience
Managerial commitment
Networking 2) Organizational capabilities Market knowledge and market commitment
Intangible assets
Value creation sources 3) Strategic focus Extent and scope of international strategy
Selection, orientation, and relationships with foreign customers
Strategic flexibility Approach with aim to gather rich, in-depth longitudinal data

Retrospective multiple case study

Multi case design: Five traditional SMEs from Italy

Sampling of Cases: Theoretical Systematic comparison Internationalize production
Situated in different industrial sectors Case Interviews Highly knowledgeable informants

Interviews with entrepreneurs and managers

9 Interviews in total

Focus: Occurrences with regard to internationalization Significant decisions
Influential factors
Key-people in decision making Companies & Industry Mechanical:
Compressors Electronic:
electro-mechanical devices Plastics:
Lightning and scale retail items Apparel:
Sportswear Mechanical:
Metal profile forming machines (Names and logos disguised to illustrate sector diversity) Case Data Data Analysis Data Agglomeration Single Case Studies Comparison Conceptual
Macro-categories Sub-categories Cross-case Analysis e.g. Story e.g. Expansion
Competitors Common Traits I - Initial local/national orientation

- Performance as subcontractors

- Significant importance of entrepreneurs

- Manufacture/ assemblage of own products

- Intial focus on export to Western Europe Common Traits II - Expansion to Eastern Europe

- Involvement in foreign subsidiaries:
gradual, constant & rapid

- Planning: limited

- Risk: affordable - Negligible commitment to the region
- Low knowledge about host country
- Choice for country led by the entrepreneurs' connections
- Significant criterion: Low labor cost Growth in number of employees Types of FDI Patterns - Focus on a few major national customers

- Int. Experience limited to export activities

- Initial trust and reciprocity problematic

- No unique or intangible knowledge-based assets

- Value added through personalization Differences with existing models Difference to gradual internationalization models: 1) Omission of learning process Difference to 'born' global models: 1) No global/international vision from inception
2) Begin of international activities with sporadic sales Difference to 're-born' global models: 1) No critical incident as trigger to internationalization Focus on high-level commitment
with low market knowledge & a
non-existent international network Explaining Mechanisms Strategic focus + proactive entrepreneurial orientation Speed Commitment Creation of direct and close relationships Rapid Extension
of Supply Network High strategic flexibility Competitive Advantage Rapid Internationalization
Process High Increase in
Turnover Company
Growth Coding: #2 More than 99% of all European enterprises are SMEs #3 SMEs provide two out of three private sector jobs in Europe #4 SMEs are the true back-bone of the European economy being primarily responsible for wealth and economic growth #5 Nine out of ten SMEs are actually micro enterprises with fewer than 10 employees The mainstays of Europe's economy are micro enterprises! #1 Two main factors determine whether a company is a SME

1) Number of employees


2) Either turnover or balance sheet total 5 important facts about SMEs you should know Approval of traditional SMEs ability for rapid acceleration of internationalization

Key success determinant:

Less influential: Specific strategic focus Knowledge-intensity
International networks
International experience Discussion Question Critically reflect the limitations of the case study about internationalization of traditional SMEs? Many thanks for your attention! MST-related Questions The following symbol is to be found on certain slides of the following presentation and indicates a question for the audience:
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