The internationalization process of SMEs is gaining widespread importance with increased integration of world economy. SMEs are vital for emerging nations in terms of providing employment opportunities and contributing to the national economy. They are responsible for encouraging entrepreneurship and innovation. SMEs also play an important role in breaking the monopolistic nature of big players.

In order to develop India’s ties with other countries, the Government started relaxing import and other regulations. As a result of this, SMEs have started facing stiff competition from international players. SMEs which are not into export business lack information to deal with international business as well as experience to develop an international strategy. These firms being small in size lag behind in terms of financial capital and human resources. These firms are at competitive disadvantage in terms of power which is positively correlated to the size of an organization. They generally have a very small customer base and have little impact on global pricing.

A firm must be innovative, proactive and be willing to take risks in order to enter the international arena. It should be innovative in terms of implementing creative solutions to solve its own problems. It should continuously upgrade its products and services, spend on research and development activities, and use effective managerial concepts. It should be proactive in terms of understanding its competition and take necessary steps to beat them and achieve its own objectives. Financial investment is the major risk for a small enterprise. Nevertheless, the firm should be willing to borrow capital and invest in its expansion to new markets. It should be willing to take up projects which are risky, but have high return in terms of revenue if successful.

SMEs must include IT in their business models in order to ensure success in the long run. IT helps in cost reduction and enhancement of global communication.

A SME faces three types of issues:
• Country specific issues – These are the external environmental factors (political, economic, social, technological, legal)
• Industry specific issues – Business environment of the firm
• Firm specific issues – capital, human resource, R&D, technology, organization structure and culture

The organizational culture must focus on entrepreneurial perspective to expand internationally. The employees and managers must have the knack of observing their surroundings and process information. This will enable the company to deal with uncertainty and other challenges in the business environment, and implement an effective strategy to expand internationally.

About the author

Siddharth Chhottray wrote 9 articles on this Website.

Siddharth Chhottray is an alumnus of BITS, Pilani (Class of 2009)

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