Planning the internationalization of an SME

The internationalization of a business is a strategic choice that affects:

• the internal processes;
• the corporate organization;
• the overall strategy.

A small or medium-sized entrepreneur who wants to enter a foreign market must therefore take some essential preliminary steps. At first glance, these may seem like trivial, even obvious measures, but-as internationalization consultants well know-too often this preliminary analysis is underestimated, downplayed or even ignored.

Structured planning of internationalization

SMEs, by their nature, do not usually have the budgets of large companies available for export.

Therefore, the path of internationalization can only be started in a gradual and structured way, divided into steps:

1. Preliminary strategic analysis: why and where to export, what and to which countries, pricing, marketing, etc.
2. operational plan: how to export, how to change business organization and how to plan market activities (trade missions, branding, trade fairs, business contacts, etc.)

These steps are well outlined, for example, in the article "Pmi: the six rules for export success" edited by the editors of PMI.it, one of the leading portals for Italian small and medium-sized enterprises.

Analysis of product appeal in the chosen market

One must first understand, as experts from the consulting and marketing firm Tradecube also suggest in the post "The Internationalization of SMEs: strengths and weaknesses", whether and how "attractive" one’s product or service can be internationally, considering all possible variables: quality, price, design, flexibility, transportation, cost and production time.

The higher the added value of a product/service the more likely it is to succeed in foreign markets.

If, for example, Tradecube again points out, the price of one’s product or service is very rigid and non-negotiable, thus a point of weakness, one can set up a marketing campaign in that country that aims to enhance its uniqueness or quality as its strengths.

Or from this analysis one might find that production costs impose a certain selling price. Cross-referencing this with the results of the subsequent market analysis, one could conclude that the minimum selling price is beyond the reach of the potential customer in the country to which one would like to export.

It is clear that failure to reflect at this stage can lead to disastrous consequences.

Similarly, before venturing to launch a product in a foreign market, it is essential to have a network of partners that can cover some of the aspects mentioned above. For example, too often the importance of logistics (transportation and thus delivery time) or communication (including marketing and customer service in the language of the new market) is downplayed.

Ability to absorb market increase

The SME must then very carefully assess its productive capabilities: to sell more it is necessary to be able to produce more.

If a company runs out of product stock or does not have enough staff to deliver the service, it risks not being able to meet the purchase orders it receives in the required timeframe and not meeting the established terms of sale. The resulting image damage is often irreparable and can jeopardize one’s internationalization strategy to the point of even ousting the company from a market.

Market analysis

At the same time as the internal analysis, a market analysis should also be conducted to assess:

• where to export, based on market demand for their products/services;
• what information to acquire about the characteristics of potential new markets;
• how they will position their products against those of competitors in their target markets;
• what sales channels to exploit.

Organization and structure ready for expansion

The company about to internationalize must have a proper business organization. If you want to compete in foreign markets, professionalism is essential. One cannot improvise in roles that require specific experience and knowledge.

The company must first possess some professional figures who know how to develop the most suitable export strategy, skilled in the rules of international marketing and able to move in constantly changing scenarios.

If these figures do not exist in the company, the entrepreneur or management can consider whether, as Assimpresa experts suggest:

• training an internal resource, or
• resort to specialized external personnel, such as consultants and so-called Temporary Export Managers (TEMs), figures who help entrepreneurs in planning and executing the steps of the [internationalization] process(/resources/blog/category:Internationalization).

It is then essential to have:

• commercial personnel with appropriate export training to effectively translate strategy into action;
• Administrative figures specializing in international regulations.

In all phases of an export business, it is obviously essential to have IT tools that simplify and speed up the work of export professionals.

These tools are needed not only during strategic planning, to analyze competitor behavior, compare products or services, and to evaluate markets and channels, but also to support business activity.

Platforms based on statistical directories that create matrices for analysis are used in the planning phase, while CRM (customer relationship management) programs integrated or not into the company ERP are used to set priorities and produce progress reports.

Internal verification

The company intending to internationalize must therefore carry out, as Stefano Toro reiterates and as Giorgio Pavia, head of the Milan office of the Exportpiù consulting firm and Tradecube consultants also suggest, a serious internal check-up to test the impact of internationalization on the corporate structure, and highlight its strengths and weaknesses with respect to:

• financial structure and investment possibilities;
• productive organization;
  • human resources;
  • business office structure;
  • predisposition to novelty and change;
  • flexibility;
• linguistic issues;
• warehouse;
• logistics.

With regard to languages, it should be considered whether it is sufficient to train internal business office staff (with appropriate language and internationalization courses) or whether it is necessary to turn to a professional translation service provider, a language consultant or a Temporary Export Manager.

Indeed, the goal of internationalizing a company cannot be achieved with sporadic, uncoordinated or short-term actions, but with a structured medium- to long-term process that is constantly monitored and readjusted in case of problems. This is the only way to have real results in an increasingly crowded and difficult market.