Why internationalize an SME
La business internationalization It turns out to be a very important issue in our days, as we find ourselves in globalized societies that are interrelated at different levels.
This is why it has become an important focus of study for many academics, with the aim of studying the circumstances that can lead a company to internationalization and the results of this.
With this, authors such as Hamel and Prahalad affirm that The competitive position of a company in the international arena will depend on how it makes viable the barriers that appear along the way and the achievement of effective management of its resources and capabilities..
Let's see, therefore, what these barriers can be and what positive effects internationalization can have for an SME.
Advantages of internationalizing an SME
Firstly, regarding the advantages that business internationalization can bring, we find:
- Productivity diversification: By acting in a broader market, companies can achieve greater profits. If the company develops a product capable of adapting to different markets without losing its attractiveness, it will be able to increase its income through this internationalization.
- Cost optimizationIn the same way, companies that internationalize can benefit from economies of scale, thereby benefiting from lower costs, or they can relocate SME chains to take advantage of the different options offered by other markets.
- A solid SME: In order to position themselves in the international arena, companies must develop a high degree of competitiveness and overcome the possible barriers that may arise, which makes them persistent against the different market risks.
- Reduction of SME risk: there will be no dependence on the local market nor will sales to regional clients be restricted. In this way, by not depending on a small group of clients, these companies are not as susceptible to being affected by reductions in demand in the usual market or economic recessions.
- Knowledge factor: the information acquired by the company in foreign markets about consumers and competitors is a very good tool when it comes to acquiring an advantageous position in both local and international markets, making future decisions based on the present data they analyze.
- Increase in company value: Companies that internationalize are intrinsically related to recognition of strength and courage, among other positive values that can reinforce the image and brand of the SME.
- New investors and new sources of employment: By emerging in a new market, the SME will attract its investors, which will start the wheels of the company's growth moving, generating alliances and maintaining the continuity of the product. Likewise, the growth of the company will lead to the growth of a professional team, which can be beneficial for the place of origin and also for the countries belonging to emerging markets where the company will generate new jobs.
Disadvantages of internationalizing an SME
Secondly, and in relation to the disadvantages, three important issues should be noted:
- Need for a good team with a good strategy: It is important to previously evaluate the costs that the process of internationalizing an SME may entail and the resources that the company has at its disposal, as well as the pre-established plan for the distribution and continuity of the product in the new market. For all this, it will be good to evaluate the team and delegate responsibilities, trying to enhance each area of the company. Likewise, it is important to design a strategic business model with the risks we face, and establish realistic objectives.
- Socio-economic context: a study of the economic, social and political context of the country in which we want to internationalize will be crucial for the successful achievement of our objectives. Whether it is political changes, laws and regulations that can harm the business or its growth, as well as culture or language that can influence internationalization, we must be aware of the circumstances and characteristics of the new market and how they can influence our SME. For all this, it is crucial to be aware of the legislation and influential news in the country.
- The coin: it will be of utmost importance to take into account the currency of the country where you intend to operate, its possible fluctuations and its convertibility when carrying out transactions, since if, for example, the company must cover future debts, it may suffer losses during these currency fluctuations. currency. Thus, many Spanish companies decide to internationalize within the European Union, especially in those countries belonging to the euro zone.
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For all this we can conclude that following a good internationalization plan and taking into account the possible risk factors that this process entails in order to act accordingly, business internationalization will always be a positive issue for the growth and development of the SME, reinforcing its brand, making it more persistent, optimizing costs and ultimately increasing its value.
Jurist and internationalist passionate about international trade.
