COMPETING EFFECTIVELY IN INTERNATIONAL
MARKETS
Identifying Need, Sharing Best Practice and Adding Value to the Eastern Region through Skills and
Knowledge Transfer
FINAL REPORT
Lester Lloyd-Reason and Terry Mughan
Global Enterprise Research Unit
Ashcroft International Business School
A project funded by the East of England Development Agency and carried out by
Anglia Ruskin University
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TABLE OF CONTENTS
Section Page
1. Executive Summary 3
2. Full Report - Overview 7
3. Cross-Sectional Mapping of International Activity within
the Eastern Region
9
4. The Company Experience – In-Depth Studies of 80 Companies
12
4.1 4.2
4.3
4.4 4.5
4.6
Background and Methodology Characteristics of Firms Interviewed
Motivations and Drivers
Process Problems
Support
12 15
18
23 29
35
5. Sharing Best Practice 40
6. Skills and Knowledge 42 6.1
6.2 6.3
6.4 6.5
6.6
Introduction
Planning, Manning and Scanning Skills
Knowledge Skills and Knowledge Needs
The CEIM Study and the East of England Skills Strategy
42
42 44
47 48
53
7. Recommended Action Programmes 54
Appendix: Resources and References 56
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1. EXECUTIVE SUMMARY
Aims and Objectives
This report summarises the key findings and issues to emerge from an 18-month research project
funded by the East of England Development Agency and carried out by Anglia Ruskin University1. It
involved a study of need and support for small and medium sized enterprises in the Eastern region in
the internationalisation of their business operations.
The aim of the project was to identify successful aspects of international business planning, resource
management, international networking, market intelligence gathering and global skills and knowledge
development that can be made transferable across business sectors via training, educational,
development and recruitment programmes.
Stages in the Research Process
There were four key stages of activity
A large scale telephone survey of 1200 firms throughout the eastern region to provide a map of
international activity within the region. The survey involved a stratified sample across sectors and
geographical location to reflect the characteristics of the six counties of the Eastern region.
Face-to-face interviews with 80 firms on their premises lasting between 1 and 2 hours with either
the owner-manager or the individual responsible for international action to gain insights into why
and how firms become involved in international activity, and of course, why they sometimes do
not, how they manage their international activity, what problems they encounter and where they
go to find solutions.
Face-to-face interviews with many of the key players within the business support community
within the region.
Analysis and review of the quantitative and qualitative data generated by these activities to
identify policy implications and recommended action programmes aimed to help better design
and target the efforts of the business support agencies and educational institutions in the East of
England and build economic growth through international excellence.
Categorisation of firms The sample of companies to be interviewed face-to-face was selected from the larger sample on the
basis of experience of international trade, skills and knowledge and the application of these to their
international activities. The key consideration was not the volume of international activity, but rather
how effective the application of their experiential learning had been in contributing to turnover
generated from international activities. In this respect, mode of activity, geographical location and
sector were regarded as secondary considerations.
On this basis, the companies to be interviewed were classified in five bands as follows:
1 ANGLIA RUSKIN UNIVERSITY would like to acknowledge the assistance of the University of Luton at the quantitative
stage of the project and the assistance of the Foundation for Small and Medium Enterprise Development, University of
Durham at the qualitative stage of the project.
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A: The Curious
Have considered international activity, but have not yet taken action. Little awareness of
available support.
B: The Frustrated
Have previously been, or are occasionally involved in, international activity, but are no longer
actively pursuing this, often due to negative experiences. Little awareness of available support.
C: The Tentative
Have limited experience of international activity, have developed some skills but have some
major problems looking for solutions. Some experience of available support.
D: The Enthusiastic
Have considerable experience of international activity and are keen to grow this side of their
business but are experiencing barriers to that growth. Have developed a range of skills but
suspect that these need to be developed further. Largely aware of available support with some
experience of it, often positive.
E: The Successful
Have extensive experience of international activity with some major successes. Very high skills
and knowledge development, very aware of available support with a high degree of usage. Often
aware of skills and knowledge gaps and very keen to improve effectiveness in international
activity.
Key Findings
i) Quantitative study
Almost as many internationalised firms are involved in importing (61%) as exporting (77%).
Just under half (47%) of all internationalised firms are involved in two or more forms of
international activity, e.g. exporters who also import.
The most frequent mode of export was by agents or distributors (35%) followed by ‘own sales
office (20%) and ‘direct sales’ (13%). If ‘Internet’, ‘word of mouth’ and ‘through current
customers’ are added to the direct sales category this would then increase to 30%. This changes
the interpretation considerably and challenges the traditional view that intermediaries are the
most appropriate route to international markets for SMEs when considering market entry.
The majority of experienced and inexperienced internationalised businesses self generate
solutions to their problems (87%). Amongst exporters, networks of suppliers were used by 23%
of firms interviewed and 31% said they used business support organisations, mainly
BusinessLink and the DTI (including TPUK). Just 5% of importers had used business support
organisations.
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ii) Qualitative Study
Planning (the way in which the firm plans its involvement in foreign markets), manning (the way
the firm organises or develops its resources to service foreign markets) and scanning (the way in
which the firm informs itself about those markets) are the areas of skills and knowledge required
by all firms active in international markets.
The configuration of these skills, and the support designed to improve them, varies according to
experience, sector and size.
All firms benefit from strategic planning and management development.
All firms benefit from the development of international skills (foreign languages and/or
intercultural awareness). It is the development of these skills within successful firms that
facilitates the transfer of business acumen from domestic to international markets.
Firms new to international activity (the Curious and the Frustrated) are very receptive to, and
appreciative of, current support provision.
Successful firms have specific skills and knowledge needs which are not all met by current
provision.
We identify an intermediate set of firms (the Tentative) whose international activity is static, who
have lost the initial enthusiasm for international activity and who need tailored support which is
not currently available.
Demand Transformation: There is a need to distinguish between what companies want and what
they need. They want information, money and solutions to precise, small problems. They need
to learn to plan, to broaden their management mindset and to build better manning and scanning
skills.
Skills and knowledge development for international trade takes place via the processes of
exporting, importing, inward investment and international research arrangements.
Best practice in firms often emanates from patterns of trading involving one or all of these
elements.
Recommended Action Programmes BEST PRACTICE GUIDES
High quality brochures focussing on examples of best practice in the region containing diagnostic
tools. These could include: ‘How to’ guides to provide simple process understanding, written/on-
line case studies from successful firms within the region, problems solving techniques and a
directory of support agencies.
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INTERNATIONAL SME MANAGER DEVELOPMENT
Flexible courses with optional accreditation focusing on the Planning, Manning and Scanning
skills needs as identified.
INTERNATIONAL PARTNERSHIP PROGRAMME
A region wide scheme facilitating international network building and market development,
possibly keyed in to research and innovation projects such as the 6th Framework and Teaching
Company Schemes.
INTERNATIONAL MENTORING PROGRAMME
There are two possible models here. One would bring high-quality graduates (viz STEP) into
SMEs to supply resources and knowledge advantage. The other has a business-to-business
dimension which could be mediated by the International Trade Advisers. A pilot scheme,
GRADEX, is currently running with the support of EEDA/AUEE.
WORKSHOP PROGRAMMES
To bring together small groups of managers of international SMEs to share common problems
and to develop solutions. These could be devised in consultation with Trade Partners UK to
ensure that provision is properly targeted to complement existing programmes. Funding for these
could be sought from BusinessLink or the Learning and Skills Council.
TRACKER STUDY
A study with a five-year time frame to track 50 firms throughout the region as they undertake
their international activities. This would allow rich insights into the skills and learning needs of
international firms as they progress from the Curious stage onwards. This would permit a better
understanding of the reason why some firms exit international markets, some get stuck at the
Tentative stage and others become successful.
PASSPORT PLUS
The Passport to Export programme has been of benefit to many firms interviewed for this study
and will continue to assist the Curious and the Frustrated to become involved in international
activity. The focus for this project has been to assist the Eastern region in the objective of
building a stock of world class firms capable of competing effectively in international markets.
In order to help achieve this objective we would recommend the development of a ‘Passport Plus’
programme targeted at the Tentative and the Enthusiastic to help improve their ability to compete
in international markets. If one of the regional objectives is to improve the competitiveness of
firms in their international activity, and hence increase GDP within the region, our research
overwhelmingly suggests that it is the Tentative and Enthusiastic groups which offer the
opportunity to make the biggest impact within the Eastern region.
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2. FULL REPORT - OVERVIEW
2.1 The project was conceived in two phases. The current International Trade Strategy for the
Eastern region comments that ‘We do not yet have solid, coherent data on the international
activities of SMEs within the region.’ Phase One aimed to address this lack of understanding
through a detailed mapping of the international activity of small and medium sized enterprises
(SMEs) within each of the six counties of the region. This was achieved through a large
telephone survey of 1200 enterprises throughout the region during the course of which a semi-
structured questionnaire was administered. A full regional report and six county reports were
presented to EEDA in November 2002 and in this report we present a summary of this mapping
in section three.
2.2 Phase Two sought to identify successful aspects of international business planning, resource
management, international networking, market intelligence gathering and global skills and
knowledge development that can be made transferable across business sectors via training,
educational, development and recruitment programmes. We aimed to gain insights into why and
how firms become involved in international activity, and of course, why they sometimes do not,
how they manage their international activity, what problems they encounter and where they go to
generate solutions. To achieve this we conducted interviews lasting between 1 and 2 hours with
either the owner-manager or the individual responsible for international action on their premises.
Additionally, we spoke to many of the key players within the business support community in the
region and held a workshop for firms where we could explore some of the key issues emerging
with some of the firms interviewed.
2.3 A number of studies into related areas have recently been completed both within the region and
nationally, and we have drawn upon these reports to help inform our findings. (See resources
section in Appendix I). These studies have either been quantitative or qualitative whereas this
study is rather rare in that it is both quantitative and qualitative. That is, the large telephone
survey of 1200 firms provided a coherent mapping of international activity within the region and
then the 80 face-to-face interviews allowed us to explore the underlying issues behind
international activity to provide valuable insights into the company experience. Rather than
simply report our observations, we have used the unique insights generated by our approach to
identify a set of policy implications which are presented at the end of each relevant section of the
report.
2.4 The CEIM project has thus aimed to help better design and target the efforts of the business
support agencies and educational institutions in the East of England and build economic growth
through international excellence. To this end, the Project leaders are working closely with
EEDA, Trade Partners UK and other sector groups to ensure the sustainability of this learning
throughout the region beyond the lifetime of the current project.
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2.5 This report is divided up into five sections:
i) A quantitative cross-sectional mapping of international activity within the eastern region
ii) A qualitative investigation into the company experience divided into:
an analysis of the motivations and drivers for international activity
an analysis of the process by which firms manage their international activities
an analysis of the problems faced by internationalised firms
an analysis of where firms go for support and their rating of the level of support
received
iii) Examples of best practice from within the region
iv) Key issues emerging in terms of skills and knowledge development
v) A series of recommended action programmes aimed at helping firms within the region to
compete more effectively in international markets
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3. CROSS-SECTIONAL MAPPING OF INTERNATIONAL ACTIVITY WITHIN
THE EASTERN REGION
3.1 Methodology
3.1.1 The mapping of international activity throughout the eastern region was achieved through a
large scale telephone survey undertaken between June 2002 and August 2002. During this
period 560 internationalised and 554 non-internationalised SMEs in the Eastern region
were interviewed. A further sample of 101 larger companies in the region were also
interviewed as a control group.
3.1.2 Telephone interviewing technique was used to collect data because of the rapidity of data
gathering, accuracy, and efficiency. The questionnaire was designed to determine the
extent and nature of international activity within the region. The questionnaire was fully
structured, with response categories defined prior to the study informed by literature
relevant to internationalisation. The questionnaire was pilot tested on a small number of
respondents to ensure understandability prior to the main survey.
3.1.3 The sample frame used was obtained from Business Link and listed known exporters and
non-exporters stratified by county and broad business area (primary, secondary and
tertiary). The listings were a random sample of organisations but in the final event nearly
all organisations recorded as exporters were approached during the survey. A target was
set of an achieved sample of 550 organisations in each of the two categories of
internationalised and non-internationalised. Samples of this size typically yield results
accurate to within four to five percentage points according to statistical theory. A further
sample of 101 larger internationalised organisations was also included in the study for
comparison (250+ employees). The final sample turned out to be 554 non-
internationalised, 560 internationalised and 101 larger companies. (See diagram 1 overleaf
for a mapping of firms interviewed)
3.1.4 Interviewers requested to speak with a senior executive within the organisation, usually at
Director level. The 12-page questionnaire took between 5 to 30 minutes to complete
depending on which of the sections were relevant to the respondent. Response rates varied
somewhat but within the internationalised group these were at a very creditable 22%
overall compared to mail surveys of this nature which often only achieve 12 to 15%
response rates. Those declining to be interviewed cited lack of time as the principal reason
together with an increasingly common reason of ‘having a policy not to engage in surveys’.
Respondents always had the option of refusing to answer questions in the survey if they felt
uncomfortable revealing certain information, or they may not be able to remember (or
never knew) some of the specific details. All responses that represent a "don't
know/refused" are omitted from the analysis of that particular question. As a result, the
number of responses for each question will vary. All "don't know/refused" responses were
treated as missing values.
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Diagram 1: Mapping of telephone survey
3.1.5 A full report detailing the findings from this survey together with individual reports on each
of the six counties was supplied to EEDA in November 2002 in accordance with the project
schedule. We do not intend to replicate that information here but simply present our key
findings below.
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3.2 Key findings from the regional mapping of international activity
Almost as many internationalised firms are involved in importing (61%) as exporting (77%).
Just under half of all internationalised firms are involved in two or more forms of international
activity, e.g. exporters who also import.
The two main reasons for not becoming involved in international activity are: (i) lack of
international opportunities in the particular sector and (ii) ‘benign’ conditions in the domestic
market.
Only 4.2% of non-internationalised firms had previously engaged in international activity but had
discontinued it, lack of profitability being cited as the main cause.
Some 50 respondents (8.8%) had considered internationalisation but had not proceeded. The four
most commonly cited reasons being: (i) complexity of internationalisation; (ii) the emergence of
new UK opportunities; (iii) lack of time and (iv) limited international opportunities.
The main export markets are: Germany (29%), France (25%) and the USA (23%).
The most frequent mode of export was by house or agents (35%) followed by ‘own sales office’
(20%) and ‘direct sales’ (13%). If ‘Internet’, ‘word of mouth’ and ‘through current customers’
are added to the direct sales category this would then increase to 30%. This changes the
interpretation considerably and challenges the traditional view that intermediaries are the most
appropriate route to international markets for SMEs when considering market entry.
The majority of experienced and inexperienced internationalised businesses self generate
solutions to their problems (87%). Amongst exporters, networks of suppliers were used by 23%
of firms interviewed and 31% said they used business support organisations, mainly
BusinessLink and the DTI (including TPUK). Just 5% of importers had used business support
organisations.
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4. THE COMPANY EXPERIENCE: IN–DEPTH STUDIES OF 80 COMPANIES
4.1 Background and methodology
4.1.1 In phase two of the project, 80 companies were interviewed face-to-face on their own
premises between December 2002 and June 2003. The interviews, which were undertaken
by senior academics within the Business School, were semi-scripted and were recorded. In
all cases the person interviewed was the strategic decision maker for international activity
(usually the owner-manager). Each interview lasted between 1 and 2 hours.
4.1.2 Building on the findings from the telephone survey, the purpose of the interviews was to
obtain deeper data about company behaviour in international markets including managerial
traits, skills and knowledge needs, problem-solving and their views of support services.
The interview schedule included a mix of open questions where the interviewees were
encouraged to talk about their motivations and experiences in their international activities,
and closed questions concerning specific problem areas, where they looked to for support
and their opinion on the effectiveness of support provided.
4.1.3 The sample of companies to be interviewed was selected from the larger sample on the
basis of experience of international trade, skills and knowledge and the application of these
to their international activities. The key consideration was not the volume of international
activity, but rather how effective the application of their experiential learning had been in
contributing to turnover generated from international activities. In this respect, mode of
activity, geographical location and sector were regarded as secondary considerations. (See
diagram 2 below for a mapping of face-to-face interviews throughout the region.)
4.1.4 On this basis, the companies to be interviewed were classified in five bands as follows:
A: The Curious
Have considered international activity, but have not yet taken action. Little
awareness of available support.
B: The Frustrated
Have previously been, or are occasionally involved in, international activity, but are
no longer actively pursuing this, often due to negative experiences. Little awareness
of available support.
C: The Tentative
Have limited experience of international activity, have developed some skills but
have some major problems looking for solutions. Some experience of available
support.
D: The Enthusiastic
Have considerable experience of international activity and are keen to grow this side
of their business but are experiencing barriers to that growth. Have developed a
range of skills but suspect that these need to be developed. Largely aware of
available support with some experience, often positive.
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E: The Successful
Have extensive experience of international activity with some major successes. Very
high skills and knowledge development, very aware of available support with a high
degree of usage. Often aware of skills and knowledge gaps and very keen to improve
effectiveness in international activity.
Diagram 2: Map of face-to-face interviews throughout the Eastern region
4.1.5 For the purposes of analysis, as indicated above, each interview was recorded and
transcribed generating in excess of 2,800 pages of transcript. In addition, following the
completion of each interview, a two page summary of the key points emerging from the
interview was produced providing a further 150 pages of text. Finally, three closed
questions providing tick box responses using the Lickert scale were used covering the
international mindset of the interviewee, specific problems experienced and support
providers used.
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4.1.6 Data from 5 of the interviews was rejected as being unsuitable for our purposes and the
analysis presented below is therefore based on data collected from 75 firms. Analysis of
the qualitative data from the 2,800 pages of interview transcript, 150 pages of summary text
and 75 tick boxes was undertaken using a dedicated software package, N6. The software
uses word or phrase recognition and the text was coded down to three levels using four key
categories:
Motivation: What are the motivations and drivers for international activity?
Process: What form does this activity take and how does it impact on the firm?
Problems: What are the key problems encountered?
Solutions: Where do they go to find solutions to these problems?
4.1.7 Analysis was undertaken using both a dedicated qualitative analysis software package, N6
and the SPSS data set generated by the telephone survey across each of the five company
classifications. The key findings are presented below. First we provide the characteristics
of the firms interviewed and this is followed by an analysis according to the four categories
identified above; motivation and drivers; process; problems, and; solutions.
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4.2 Characteristics of firms interviewed
4.2.1 This section of the report provides a brief summary of the main characteristics of the 75
firms by category, mode of international activity, size by number of employees and
turnover, age and first market destination.
Table 1: Companies interviewed by category
Category Title No. of firms
A The Curious 7
B The Frustrated 5
C The Tentative 13
D The Enthusiastic 24
E The Successful 26
Sample size 75
4.2.2 As we can see from the table 1 above, the sample was weighted in favour of those firms
with greater levels of experience of international trade. Through the project we aim to
identify successful aspects of managerial skills and knowledge development that can be
made transferable across business sectors via training, educational, development and
recruitment programmes. Accordingly we interviewed a higher proportion of Enthusiastic
and Successful companies to capture the experiential learning within these firms.
4.2.3 It is also of critical importance that we understand the reasons why the Curious have not
taken those first steps to international activity, what it is that frustrates the Frustrated and
why are the Tentative so tentative, and so these firms are also represented in our sample to
help us understand the challenges facing theses types of companies.
Table 2: Type of international activity
Type of international activity Involvement (%)
Exporting 79
Importing 44
Other 9
4.2.4 The telephone survey clearly demonstrated the diverse nature of international activity
within the region. We have attempted to reflect that diversity in the range of enterprises
included in the second phase. This is illustrated in table 2 above where we can see that
whilst 79% of the firms interviewed were involved in exporting, 44% included importing
within their normal international business activity.
4.2.5 The higher sample figure here represents the fact that many of the firms interviewed were
involved in both exporting and importing.
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Table 3: Size of firm by number of employees
No. of employees No. of firms (%)
1 - 5 3
6 - 25 46
26 - 49 19
50 - 149 20
150 - 250 10
100
4.2.6 The sample included a small number of micro firms and a small number of firms from the
top end of the medium scale, but the majority of firms surveyed employed between 6 and
50 employees.
Table 4: Size of firm by turnover
Annual turnover No. of firms (%)
0 - 0.5 10
0.6 - 1 17
1.1 - 2 21
2.1 - 5 20
5.1 - 10 15
10.1 - 20 12
>20 5
100
4.2.7 The sample included a small number of firms with turnover of less than £500,000 and a
similar number with a turnover in excess of £10m, but the majority of firms interviewed fell
between these two extremes.
Table 5: Age of firm
Age of firm No. of firms (%)
0 - 2 2
3 - 5 3
6 - 10 9
11 - 25 41
26 - 49 26
50 - 99 13
100+ 6
100
4.2.8 Three firms interviewed were younger than 5 years old and four were more than 100 years
old, but the majority were between 6 and 50 years old.
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Table 6: International markets: first market destination
Markets International markets
USA 17%
France 11%
Germany 8%
Other Asia 8%
Italy 5%
Africa 4%
Other EU 4%
Belgium, Holland and Luxembourg 3%
Scandinavia 3%
Central and Eastern Europe 3%
Japan 3%
Other America 3%
Other European (non-EU) 3%
Canada, Australia & New Zealand 3%
Spain, Portugal & Greece 2%
Russia 2%
Sample Size 75
4.2.9 Many of the firms interviewed spoke of the enormous potential of the American market and
this is clearly demonstrated in the table above. In addition to the size of the potential
market, language emerged as an influencing factor for many of the firms interviewed.
France was the second most popular international market followed by Germany and other
Asia, representing the increasing influence of the Chinese market, particularly for many of
the importers interviewed.
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4.3 Motivations and drivers to internationalisation
Introduction
4.3.1 First we sought to identify the main drivers and motivations to internationalisation and how
this differed across the five categories of firms interviewed. There is an established
literature on motivations and drivers within academic thinking and a number of frameworks
have been developed which group motivations into different categories. Ibeh (2000)2
provides a useful overview of this work and identifies four overall general categories:
Internal – proactive (e.g. desire to grow)
Internal – reactive (e.g. declining profit margins)
External – proactive (e.g. introduction of new legislation)
External – reactive (e.g. heightened competition).
4.3.2 Within the current project, the interviewed businesses were allowed to express their own
motivations and drivers underpinning international activities in response to an open
question concerning the mechanism by which the business has managed the ‘process’ of
internationalisation. This enabled the development of an emergent categorisation of
motivations and drivers arising out of a careful consideration of the perspective of the
owner-manager. The emergent categories outlined within Table 7 are grounded in the
language and discourse used by the owner-manager, as opposed to the constructs of the
project team.
Overview of findings and analysis by category of firm
4.3.3 We can see from Table 7 that three key motivators and drivers tend to underpin
international trade:
Response to an opportunity in the market or an enquiry from a potential customer.
Part of a wider business development/expansion plan and strategy.
Operating in an international market since starting the business due to the nature of
the product or service.
4.3.4 Seven other drivers and motivations emerged, but apart from issues related to limited or
saturated home markets and stagnation or decline in demand in the home market, less than
two businesses in ten identified these as the primary motivation or driver for international
activity.
2 Ibeh, K. (2000) ‘Internationalisation and the Small Firm’ in Carter, S. and Jones-Evans, D. (eds.) Enterprise and Small
Business, Financial Times Prentice Hall, Harlow.
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Table 7: Internationalisation and motivations and drivers of the interviewed businesses
Motivation Curious Frustrated Tentative Enthusiastic Successful Totals
Received or response to
opportunity/enquiry
2 2 5 2 5 16
Part of wider business
development and growth
strategy
1 - - 6 7 14
Operating in an international
market
- - - 7 5 12
Limited/Saturated home market - 1 1 6 2 10
Stagnation and decline in home
market
2 - 2 2 2 8
In response to an opportunity - - 1 - 5 6
Reducing profit margins - - 2 1 2 5
Other motivations and drivers - - - 4 1 5
Increasing competition - - - 2 1 3
Clients moving overseas - - 2 - - 2
Total no. of businesses 4 3 10 21 17 55 Note:
1. Motivations and drivers could not be ascertained for 20 interviewed businesses (A = 3, B = 2, C = 3, D = 5, E = 7)
due to non-response, unwillingness to disclose information or the interviewed business did not or had ceased
international activities.
4.3.5 Nearly 30 per cent of businesses started international trading activity in response to an
opportunity or an enquiry from a potential customer. As highlighted within section 4.4, this
tends to reflect a lack of distinction between domestic and international markets,
particularly amongst the Enthusiastic and the Successful. These two groups tend to deal
with domestic and non-domestic orders in much the same way with international activity
being perceived as simply one way of supporting business development:
‘We then developed this for fixed wing aircraft. About 10 years ago, British Airways
heard about this and asked for a demonstration. They liked the product and put in an
order. Other airlines heard about this and the business received orders from
Singapore Airlines, Continental and American Airlines in the USA’ (Software business,
Cambs).
4.3.6 The attitude of the owner-manager tends to determine whether or not an international
enquiry or order is regarded as a driver for international trade. We find that the Curious
and the Frustrated tend to receive and respond to orders in a reactive, tactical way whereas
the Enthusiastic and the Successful tended to be more strategic.
‘We started exporting about 10 years ago in response to an opportunity at a trade fair’
(Manufacturer, Cambs).
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‘At trade fairs, agents started approaching us offering to market the product overseas,
mainly in the USA’ (Manufacturer, Norfolk).
4.3.7 The second key grouping of motivations and drivers related to internationalisation as a
business development and growth strategy. Approximately 25 per cent of interviewed
businesses highlighted that internationalisation activity was considered as part of the
process of developing and growing the business. Therefore, the decision of whether to
engage with international activity was an integral part of the planning and strategy process
within the business.
‘Part of our strategy was to broaden the portfolio and win additional customers at the same
time. It was clear from the beginning that international trade was to be a key factor in
achieving the turnover we were aiming at’ (Chemicals Distributor, Herts).
4.3.8 The way in which businesses start to trade internationally underpins the majority of
publicly-funded offerings within the region, in that SMEs are encouraged to develop action
plans and structured business plans as part of the process of accessing support. The key
target market for business support agencies are the Curious, the Frustrated and the
Tentative, but Table 7 shows that the main driver for these groups is the response to an
enquiry or order received by the business. Rather it is the Enthusiastic and the Successful
who identify the key driver to international trade as the outcome from the business planning
process. This raises an important issue concerning how different types of motivation and
drivers influence the subsequent approach and management of the internationalisation
process. (See Section 4.4 of the report.)
4.3.9 The nature of the product or service was identified as the key driver by just over 20 per cent
of the interviewed businesses. In the majority of cases, the business had been operating
internationally since its inception or initial stages of development. Such businesses are
increasingly labelled ‘born global’, a description appropriate to around one in three of the
Enthusiastic and Successful. The activities of these businesses included the manufacture of
scientific instrumentation, automotive manufacturing, business software development and
international recruitment. The nature of such product and service offerings ‘forced’ the
business to operate internationally as there were none or a minimal number of customers
within the home market.
‘The company was founded in 1986 as a born international venture as the nature of the
industry is fundamentally international’ (Engineering Business, Suffolk).
4.3.10 These experiences and insights demonstrate the intrinsically proactive nature of the ‘born
global’ motivation and driver, as it ‘pulls’ the owner-manager into international activity and
forces the business to confront the key issues such as the type of presence required in
overseas markets, how to sell in overseas markets and how to maintain an awareness of
developments in the related market at an early stage of the development of international
markets.
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4.3.11 It is clear that there are a variety of motivations and drivers to international activity with
SMEs throughout the Eastern region being both pulled and pushed into internationalisation.
The nature of these drivers will influence the way in which international activities are
developed, the subsequent barriers and challenges faced and the type of support required.
The Curious, Frustrated and Tentative
4.3.12 There was a tendency for the Curious, Frustrated and Tentative to express largely reactive
motivations and drivers related to responding to, or receiving, orders and enquiries and/or a
stagnation in the home market. This translated into a largely tactical approach to
internationalisation via exporting:
‘When we started we looked around and the best quality at the price was Spain and so
we went over there walked around the food markets, approached some of the
producers and now we import all our poultry from there’ (Food Wholesaler, Norfolk).
The Enthusiastic and Successful
4.3.13 The Enthusiastic and the Successful expressed more proactive and ‘pull’ related
motivations and drivers (e.g. internationalisation as a vehicle for developing the business).
However, there are a number of subtle, but crucial differences in the motivations and
drivers to internationalisation between these two groups of firms. For the Enthusiastic, the
main driver was a limited or saturated home market or the nature of the product or service
offering. For such firms, international trade was seen as the only way to help secure the
future of the business. In comparison, the Successful tended to focus on drivers to
internationalisation as a way of developing and growing the business and/or responding to
opportunities or enquiries within the market. That is, international activity for these firms
tends to be more a matter of strategic choice and highlights the fact that motivations and
drivers to internationalisation can, and do, change over time as the business decides to
engage with or continue to trade internationally.
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Policy Implications
There are a wide variety of motivations and drivers underpinning international activity
which influence the approach to internationalisation.
The less experienced internationalised businesses are far more reactive/tactical than the more
experienced.
The ability to respond to enquiries is an important driver to international activities for both
inexperienced and successful internationalised businesses.
Not all the successfully internationalised businesses were pulled into international activities as
part of developing the business. Some were operating internationally due to the nature of the
product or service or the nature of the home market.
Motivations and drivers underpinning internationalisation strategies are not static over-time.
Smaller businesses that have been largely ‘pushed’ into considering exporting and other
forms of internationalisation are the least likely to contact business support agencies within
the region. Their lack of awareness of the process of internationalisation means that they are
likely to need assistance and guidance with understanding the process, when the basic
problems are going to occur and the areas of likely additional cost.
In contrast, those businesses that have proactively considered, and been pulled into
internationalisation are more likely to approach agencies with specific needs and
requirements. These businesses will be looking for assistance with particular stages of the
process, such as researching a specific market or developing a sales office or distributor
network, and confirmation that they have been undertaking the necessary activities as part of
the process (i.e. confirmation and enhancement of process skills).
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4.4 THE PROCESS OF INTERNATIONALISATION
Introduction
4.4.1 In this section we seek to understand the process by which the firms interviewed manage
their international activities. The way in which a company manages business emanating
from non-domestic markets can be understood in a variety of ways. The approach of the
company will generally be influenced by its extant culture (particularly the character of the
owner/manager), the reasons and ways in which it engaged with foreign markets in the first
place and the relative importance of export sales vis-à-vis overall sales in the company
portfolio.
4.4.2 As already explained, this study did not seek to test any particular theory or model of SME
behaviour but rather set out to obtain and present as loyal a picture as possible of the ways
in which companies behave, based on a qualitative interview process whereby the
interviewee was invited to respond to open questions and describe his company. Data
obtained about individual companies nonetheless has been assembled and analysed laterally
to identify company types with regard to key elements of the management process. This
‘bottom-up’ categorisation of company behaviour therefore has the advantage of being
based in SME reality whilst producing portraits which are in their collected features and
characteristics only ever a partial representation of any individual company. Similarly, the
types and the descriptions presented here can to some extent be understood as a reflection
of existing theories and models since it is impossible to distance ourselves from prior
research in our attempts to be faithful to the integrity of the single firm experience and in
our attempts to describe it.
4.4.3 Within the analytical framework adopted for this study (Motivations, Process, Problems,
Support) Process may be seen as a unique element in that it describes the entirety of the
experience rather than occasional events or matters of limited temporal significance or
impact. We asked companies how and why they became involved in international markets,
how they manage this involvement, how it impacts on the company in terms of resources
and skills and how the company attempts to understand and relate to the markets with
which they are trading or intending to trade.
4.4.4 Three key elements emerge in the way the firm manages the Process of international
activity:
i) Planning The way in which the firm plans its involvement in foreign markets. It comprises
financial and legal matters as well as production, resources and logistics. Some
companies (a minority) will undertake careful preparations and analysis of its own
readiness and suitability for a particular exporting venture in a foreign market
including the drafting of a business plan. Other companies (the majority) simply
respond to an opportunity to export with a view to generating revenue without too
much thought as to the implications of this action or how to undertake it in a
sustainable way.
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ii) Manning The way the firm organises or develops its resources to service foreign markets.
These resources may be physical and human. Some adaptation of products and
manufacturing process may be needed to meet the needs of overseas clients. The
need to communicate with those clients will generate a demand for skills such as
foreign language competence. These may be met by recruitment, training or
consultancy measures.
ii) Scanning The way in which the firm informs itself about those markets. Market information is
one of the more obvious elements of exporting activity. More and more channels of
communication requiring varying levels of skills and investment are now available.
Many of these can be carried out at a distance but the most valuable form of
knowledge, market intelligence, is usually obtained through a wide variety of sources
such as personal relationships and visits to the market or other events such as trade
fairs.
Overview of findings and analysis by category of firm
Table 8: Behavioural analysis in terms of Planning, Manning and Scanning.
TYPE OF
BEHAVIOUR
Curious Frustrated Tentative Enthusiastic Successful Total
Responds to circumstances 5 3 8 6 3 25
Plans for circumstances 2 3 6 18 22 51
Absorbs exports within existing
resources
5 5 14 11 3 38
Invests in resources for exporting 2 0 0 13 22 37
Relies on incoming information 6 2 11 5 5 29
Scans the markets for information 1 3 3 19 20 46
Total No Companies 7 6 14 24 25 76
The Curious
4.4.5 As they are at an early stage of exposure to international trade, these companies exhibit few
pro-active instincts and tend simply to respond to information and opportunities. Any
international activities they undertake tend to be on a no or reduced risk basis whereby they
might exploit a lead given to them by a support provider or other contact. They will be
parsimonious in their allocation of time and resources to that lead, whilst expressing
interest in further such opportunities which will help them assess the appropriateness of
their product and the potential in the market.
‘This is a very dynamic business with tremendous expansion plans in the UK and overseas.
Yet we have been reactive towards our international clients’ (Healthcare company,
Suffolk).
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The Frustrated
4.4.6 These companies have usually identified one or two potential markets for their products
and remain tempted by them. Having estimated the cost of developing these markets, they
have usually decided that it is beyond their means actively to pursue them. They therefore
remain on the lookout for low-investment, high return opportunities that will supplement
domestic revenue and profits.
‘Word of mouth brings in the majority of customers. We do very little advertising because
we do not know where to place it’ (Manufacturer, Beds).
The Tentative
4.4.7 These companies have become expert in one-off responsive exporting. It is infrequent and
often troublesome but occasionally lucrative, so they carry on. Some flirt with the idea of
not bothering when the big orders dry up for a while. They can be wasteful of support
providers’ time as they appear interested only to baulk at the idea when any kind of
investment is proposed. Some of these companies only export to satisfy the demands of
larger clients who pull them into foreign markets. They tend to rely on word of mouth
business. Alternatively, a personal contact has helped them secure worthwhile one-off
business but they lack the ability to transfer this success to other clients independently.
They lack proximity to the markets and fail to appreciate the importance of skills and
relationships.
‘Our international activity consists of being asked by overseas companies to service
machinery containing our parts that have been sold abroad’ (Manufacturer, Cambs).
The Enthusiastic
4.4.8 These companies have managed to break the back of the resources/opportunities dilemma
that characterises the previous group. They have realised that they are no longer afraid of
uncertainty and actively pursue new opportunities. Key people will frequently travel to
foreign markets and return with ideas as to how better satisfy overseas clients. They
communicate well with their markets. A major weakness resides in their dependence on
distributors who may not be performing so well for them and the ensuing low profit
margins which prevent them from investing in more efficient market operations. They are
often too busy generating revenue to think smartly and strategically. Shifts in strategy may
also be hindered by reliance on traditional management methods.
‘Our normal approach is simply to find a distributor but there are few good ones in our
sector and those that do exist guard client relations very carefully. This means that the
company is usually in the dark about market conditions and client needs’ (Electronics
company, Cambs).
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The Successful
4.4.9 These companies tend to be proactive across all three areas of behaviour. International
markets play a central part in their business strategy and they exhibit a proactive approach
to overseas market development. They manage to sharpen their industry-based networking
skills whilst being open and receptive to other relationships and opportunities. Trade fairs
are exploited intelligently and where distributors are used, they are monitored and assessed
using networks and web-based tools. A positive attitude to growth is complemented by an
awareness of the importance of training and skills, particularly language and finance.
‘He sees himself as a bridge-builder between the company and its distributors and
extensive travelling (3 weeks per month) supports his relationship-building activities. The
internationalisation process is based on trust’ (Adhesives manufacturer, Norfolk).
4.4.10 If we examine this range of portraits vertically (i.e. look at the issues and trends that
emerge across and between the five categories), we can see a number of issues, trends and
tendencies which make interesting reading.
4.4.11 The way in which international activity is managed by a company will reflect the culture,
structure and resources of that company. In keeping with British business culture
generally, SMEs tend to be pragmatic organisations concerned primarily with short-term
figures and profit considerations. In this context, some of the companies we interviewed
see export opportunities as a means of ensuring revenue by benefiting from different
demand and product cycles from those that prevail in the domestic economy. Export
customers and markets are therefore only there to meet the needs of the company. The
company is not really interested in meeting the on-going needs of the client or of the market
at large. It is this mentality that gives rise to the under-performance and stasis already
referred to. Companies which do not reach the Enthusiastic/Successful status are
frequently uninterested in export markets in a pro-active sense. They are interested in
servicing a limited number of export clients.
4.4.12 This mentality determines the way in which they manage the exporting process. Each
experience along the way is either a success or a problem. When it is the latter, they are
interested in finding a solution, but not necessarily in learning from it to extend their
understanding of the market. Most companies we interviewed in the Frustrated to
Enthusiastic categories believed they had an outstanding product with little international
competition. Not all of them had fully researched the market before saying this or had
questioned the medium-long-term sustainability of this position, even if it were true.
Information and support given by external agencies was used primarily to ascertain whether
a specific action or issue in a specific market would prove to be viable (i.e. profitable).
When agencies were not able to deliver this kind of support (e.g. provide a list of the best
semi-conductor distributors in Germany) the company would be dissatisfied with it and
would not know what to do next.
4.4.13 The management of the process amongst the Successful was better in that it assumed that a
venture into a foreign market required research, investment, relationships and skills. These
companies committed themselves to satisfying foreign customers and clients, see this as a
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normal business risk and dedicate the necessary resources to it. A medium-term assessment
of international activity is wide-spread among these companies. They do not like making a
loss on any venture but will try to learn from it for the next attempt. These companies carry
out extensive research before reaching a decision, including foreign visits and attendance at
trade-fairs. They will develop skills that address specific needs such as export
documentation and which help build relationships and knowledge of the market, such as
foreign language competence. In these companies, the export manager works alongside
other managers to plan the production, marketing and financial activities properly. Agents
and distributors are cultivated and assessed for performance at the same time and always in
mind is the option of developing direct routes to market or more efficient manufacturing
and customer service operations. These companies take competition for granted and whilst
proud of their products, see them as being in a constant state of evolution in response to
competitive pressures, market demand and technological changes.
4.4.14 Our research has revealed a range of approaches to the management of exporting activities
amongst SMEs which, to a large extent mirrors the changes undergone by larger companies
in the increasingly competitive and open world economy of the current era.
4.4.15 There are as many companies which rely on traditional customers and methods as there are
those that embrace change and competition. All may be active internationally but those
which plan their actions, listen to markets and develop management skills, emerge from our
study as the ones which prosper in the medium-long term. Of course, not all companies
have the resources immediately to implement such a new and different mentality but
deserve support all the same. In order to continue to progress their international activity
this support needs to target the way in which companies manage the entire process of
international trading activity, rather than the way in which they deal with isolated problems,
such as market information, export documentation or shipping. A management mentality is
required which sees overseas markets as integral to the business activity and which services
those markets through a planned management of the company’s resources.
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Policy Implications
Planning, manning and scanning are key characteristics of successful exporters.
Inexperienced exporters tend to lack these skills and often respond to events rather than
prepare for them. The development of mechanisms to improve these skills in the less
experienced internationalised businesses is likely to help them compete more effectively in
international markets.
A stasis frequently sets in whereby companies lose momentum in their development of foreign
sales after initial investment and enthusiasm. The Tentative are a key group here and helping
these companies to adopt the practices exhibited by successful exporters is critical.
Obstacles which discourage inexperienced companies from exporting are considered to be
minor by successful companies. Successful exporters have developed skills in their personnel
to deal with such obstacles and could assist less experienced firms in developing ‘how to’
knowledge to deal with these challenges.
The management mindset is a key element of successful companies’ performance and can be
developed with good planning. Successful companies have developed systems for obtaining
proximity to their markets and clients. These include regular visits, good use of trade fairs,
good management of distributors and agents and investment in skilled personnel. Such
managers see the management of exporting as no different from any other aspect of their job
and they have been able to reduce the ‘psychic distance’ that deters less experienced
companies from taking initiatives and taking risks and stops them from managing clients
effectively.
Attitudes towards trade fairs and foreign visits varies across the range of companies in a
systematic and predictable way. Companies which prepare for trade fairs with marketing
and sales flair invariably enjoy and benefit from them. Companies which go there at the last
minute or under duress obtain little benefit from them.
Companies which develop a good communication policy are more likely to reach Successful
status than others. Translating packaging and correspondence into the language of the client
appears to be an avoidable expense to some companies. All companies which make this effort
benefit from it both directly and indirectly.
Management structure does not always sufficiently recognise the needs of the exporting
function. Long-standing presence in export markets often results in a complacent attitude to
the management of exporting. Exporting often remains with the personal domain of the
Managing Director and, even where export managers are appointed, they have insufficient
authority to develop strategy and maximise opportunities. Younger managers driven more
by relationship issues in marketing often find themselves unable to influence managing
directors driven by an ‘order and profit-margin’ mentality.
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4.5 PROBLEMS
Introduction
4.5.1 In this section we investigate the key challenges, as identified by the Curious and the
Frustrated, preventing them from becoming involved in international activity, and the major
problems experienced by the Tentative, Enthusiastic and Successful in their non-domestic
trading activity. Previous researches undertaken by the Project team allowed the
identification of seven key potential sources of difficulty likely to be faced by the firm
involved in international trade (see Table 9 below), that is, seven key areas where any
weakness is likely to result in a source of competitive disadvantage when competing in
international markets. In a closed question, using a tick box approach, the interviewee was
asked to rate the degree of difficulty presented by each of the seven areas on a scale of 1-5,
where ‘1’ represented no real problem and ‘5’ represented a major problem. Each of the
seven areas were then investigated in further detail during the course of the interview to
gain insights into both the causes of the problems and their potential solutions.
4.5.2 The research objective here was to build an understanding of the problem issues facing the
Curious, the Frustrated, the Tentative and the Enthusiastic and to learn from the Successful
how solutions to these problems might be generated. We found, of course, that the
Successful firms have certainly not found solutions to all their problems whilst the other
four categories were often able to contribute to the generation of solutions.
Overview of findings and analysis by category of firm
4.5.3 Table 9 below provides a breakdown of the responses to the closed question followed by an
analysis informed by the insights gained through further discussion during the course of the
interview.
Table 9: Rating of problem issues across the five categories of firms interviewed
Mean Curious Frustrated Tentative Enthusiastic Successful
Management skills 2.82 2 3.2 2.3 2.8 3.8
Internal capacity 2.14 1.3 2.6 2.6 1.8 2.4
Finances 2.44 2 2 2.7 2.9 2.6
Strategic planning 2.78 2.7 3.8 2.2 2.5 2.7
Information Sources 1.50 1.3 2.3 2.1 2 1.8
Market intelligence 2.80 2.5 2.6 3.2 2.9 2.8
Product issues 2.20 1.2 3.2 2.1 2.3 2.2
The Curious
4.5.4 This group cite concerns surrounding strategic planning and market intelligence as their key
reasons for choosing not to become involved in international activity. This group rate each
of the seven areas fairly low, including the problem issues, reflecting perhaps a general
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inability to self-analyse and a rather unrealistic appreciation of the scale of the potential
difficulties involved in international trade.
4.5.5 Within this category of firm, we can identify two sub-groups. The first of these two groups
readily identify internal skills as the key issue. There is a general awareness that
international activity requires a different set of management skills which they feel are
lacking within their firm. With respect to strategic planning, the whole planning process
looks so complex and daunting that they prefer to avoid it. They are aware that
international trade will bring fresh market opportunities, but things are not so bad that they
need to put themselves through the pain of planning and all that it would entail. In terms of
market intelligence, many feel that there might be an international market for them, but
they are not really sure and do not really know how to find out.
‘We used to generate all our business within about 15 miles from here, but in the past few
years we have had to employ a salesman to travel the country to find the work. We have
thought about sending him overseas but we don’t really know if we have a market there and
in any case he doesn’t have any experience in this area’ (Manufacturer, Norfolk).
4.5.6 The second sub-group feel that the problems are mainly external to the firm. For them the
real problem is the market, where they identity two critical issues. The first issue is a
general feeling that they do not have the right product, although this is often nothing more
than a ‘gut feeling’. The second issue is a basic mistrust of international markets per se,
from distributors and agents who would fail to deliver their products to market through to
customers who would fail to pay.
‘We sometimes get faxes through inviting us to tender for work overseas, but I don’t think
there is anything there for us really…we are currently looking into an offer from India, but
I worry about getting paid if we sent something there’ (Printer, Bedfordshire).
The Frustrated
4.5.7 This group, who unlike the Curious have actually had experience of international trade,
give all seven potential problem areas a higher score than the previous category of firms.
The key problems identified, all graded higher than 3, include strategic planning, marketing
skills, and product issues. Again, two distinct groups can be identified here.
4.5.8 The first group found their experience of international trade quite satisfactory, are quite
keen to do more but are not really sure how to go about it. Again this group feel that their
inability to successfully pursue international activity is probably due to their poorly
developed skills in the areas of strategic planning and marketing. Like the Curious, in
product terms, they either feel that they probably don’t have the right product for
international trade, or suspect that there might be a market for them but are not really sure.
‘We have had some excellent collaboration with the Malaysian partners over the years, but
it is over for now. I wish we could do more, and I am sure we could, but we never really sit
down and think it through properly. Strategic planning is definitely an issue for us’
(Chemicals manufacturer, Norfolk).
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4.5.9 The second group are somewhat bemused by their ability to generate international sales and
are often taken by surprise. They are always happy to respond to an international enquiry,
but have no desire to be proactive in developing this side of their business activities.
We had never sold anything overseas and then one day we got an order from Hong Kong
out of the blue. We didn’t know how to send anything overseas, but we looked into it and it
all worked. It was quite easy really, but we didn’t really think about trying to see if we
could sell any more there. We are quite busy enough as it is really’ (Manufacturer/Service
Company, Suffolk).
4.5.10 It is important to note that neither of these groups see international trade in strategic terms
but rather as a means of improving profitability.
The Tentative
4.5.11 This group see market intelligence as the only real issue facing them. There is a general
feeling that internally things are under control and the only real problem is in finding
international customers. Within this group we often find an inability to self-analyse, little
critical awareness of the competitive realities facing them and a tendency to look to service
providers to solve their problems for them, that is, to effectively remove their commercial
risk by finding them customers. It is very interesting to note that this is the group of firms
performing least well in their international markets, are faced with the greatest range of
problems, are generally badly equipped in terms of skills and knowledge to find solutions
and yet think that only real problems are external to the firm.
‘The most useful thing TPUK could do for us would be to give us a list of potential overseas
customers’ (Software design company, Cambridge).
The Enthusiastic
4.5.12 This group of firms identify management skills, finance and market intelligence as their
key challenges. They have greater experience of international activity and as this activity
develops, the increasing need for higher level management skills becomes apparent if they
are to manage an increasingly complex trading environment effectively. Finance now
becomes more of an issue both in terms of capital funding and cost management. Market
intelligence remains a key issue, but less so than for the tentative, representing an increased
awareness that the key issues here are more internal to the firm than external. As a
consequence of the increased complexity and more diverse nature of their international
activity, the importance of effective strategic planning is now becoming increasingly
recognised.
4.5.13 This group of firms are perhaps the most frustrated. They have the required enthusiasm
for international activity, and many have extensive experience in international markets, but
we find a large gulf between this group and the Successful. In the section on motivation
and drivers we noted that the international activity of these firms is driven by financial
rather than strategic considerations and in the process section we saw that these firms
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commit very limited resources to international activity. In terms of problem issues, this
translates into a reluctance to commit the necessary resources to improve skills and learning
within the firm to the level required to deal with the increased level of complexity required
of the successful international firm.
‘New management have come in and we now have incredibly ambitious international
growth targets. I think these are unrealistic because the new management don’t really
understand the market properly and they don’t really take time to talk to the staff who are
left in the dark sometimes. I must admit I find it very frustrating sometimes because we
could do so well’ (Manufacturer and retailer, Norfolk).
The Successful
4.5.14 This group identify management skills as their key challenge. Many of these firms are
now operating in a highly complex international trading environment which requires
advanced management skills. The remaining problems have not gone away, but their
accumulated learning and knowledge has enabled these firms to regard them as secondary
considerations. We find a number of successful firms resolving problem issues through the
employment of former employees of large firms. These individuals bring with them the
large firm experience which the SME is then able to draw upon in the generation of
solutions to their international trading problems.
4.5.15 We find a significant difference between the Successful firms and the other groups in that
for the first time we find international trade being considered an integral part of general
business activity. That is, as has already been identified in the section on motivations and
drivers, many firms in the previous groups take a largely tactical approach to international
activity, regarding it as simply an additional extra aimed at adding revenue, that is,
contributing to the bottom line. Conversely, the Successful firms think of international
activity in strategic terms, as an integrated element of their general business operations with
the aim of adding value to the business rather than added revenue.
4.5.16 Interestingly, growth now becomes an issue for the first time. For many of the successful
firms, growth is a key business objective and international trade is seen as a primary vehicle
for the delivery of that growth. Hence the consideration of international activity in a
strategic manner. Conversely, a number of successful firms interviewed had no wish to
grow beyond their current size (often around 25 –30 employees). The owner-managers at
the head of these firms are quite happy with the current trading situation of the firm, which
provides them with the desired mix of an interesting, manageable working environment and
the required lifestyle. The accumulated knowledge gained through their international
activity has taught them that increased levels of international trading would be
accompanied by greater complexity, both internally and externally, the need to recruit
additional senior management, greater levels of delegation and increased levels of
commercial risk.
‘We have now become very successful in the USA and have picked up some multi-million
dollar contracts. Our finance director rubs his hands, but I just see potential difficulties in
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looking after our new customers. This is all very public and if something goes wrong that is
also very public. Yes, our key challenge for the future is our ability to manage our customer
relationships and service their needs at distance’ (Software design company, Cambridge).
‘If you came back in five years, where would we be? Just where we are now I hope. In the
same building and about the same size. We have enough cash to go five years without
selling anything and still cover all our costs so we can just concentrate on developing our
software and every now and again we go overseas on a selling trip to find some new
customers. It’s a great place to work’ (Software design and service company, Cambridge).
Summary
4.5.17 Three key skills areas emerge as critical if the firm is to compete effectively in
international markets, namely: i) strategic planning skills; ii) management skills; and, iii)
market intelligence skills. This reinforces our findings in section 4.4 where we looked at
the process of internationalisation and where we identified Planning, Manning and
Scanning as the key elements in the successful management of that process.
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Policy Implications
Firms at all levels of experience encounter problems and have learning needs.
For all firms market intelligence is more of a problem than market information.
At all levels of experience, internal problems are generally more important than external
problems.
Improved management skills are required at all levels, particularly for the Successful who are
often competing in a complex trading environment.
Different groups of businesses emphasise different problems and so business support agencies
need to segment the market if they are to provide an appropriate and effective response to the
range of problems identified.
The Curious, Frustrated and Tentative need assistance with clarifying and understanding
their problems. This could be achieved through, for example, the provision of ‘how-to’
guides, written/on-line case studies and support from the Successful to provide assistance and
‘how to’ knowledge in addressing initial problems and challenges.
The Enthusiastic and Successful need more direct intervention as their problems tend to be
more specific to the business. This could be achieved through the delivery of specific services
or brokerage to specialised sources of support.
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4.6 SUPPORT
Introduction
4.6.1 In this section we seek to identify how each of the categories of interviewed firms attempt
to solve their problems and where they might go for assistance to do so. We identified
seventeen potential sources of business support and in a closed question, using a tick box
approach, the interviewee was asked to indicate which sources of support they had used in
the past. For those services used, the interviewee was then asked to rate the usefulness of
the support received on a scale of 1 to 5, where ‘1’ is poor use and ‘5’ is excellent. Again,
any interesting issues arising were then investigated in further detail during the course of
the interview to gain further insights into support provision.
Overview of findings and analysis by category of firm
Table 10: Take-up and rating of business support
Type of
organisation
Curious Frustrated Tentative Enthusiastic Successful Totals
No Av No Av No Av No Av No Av No Av
Business Link 3 1.7 4 3 7 3 14 3.3 19 3.2 47 2.8
DTI 3 3 3 4 5 3.6 11 3.5 17 2.9 39 3.4
Chamber of Comm 3 1.7 3 3.3 6 2.2 11 3.7 14 3.3 37 2.4
Trade Associations 4 3.3 2 3.5 3 3.3 10 4.2 12 4 31 3.7
Competitors 2 4 1 5 6 4.2 8 3.9 11 3.1 28 4.0
TPUK 2 3 2 3 9 3.3 12 3.3 25 3.2
Banks 2 2 1 4 4 2 9 3 7 4 23 3.4
Legal consultants 2 3.5 1 3 1 4 9 4.4 8 3.3 21 3.6
Accountants 3 3.3 1 2 8 3.6 7 4.4 19 2.6
Family & Friends 1 5 3 4.3 5 4 7 4.3 16 3.5
Universities 2 4.5 2 4.5 1 3 8 4.3 13 3.3
Recruitment consts 1 2 3 3.7 3 2 6 2.2 13 1.2
Other organisations 3 3.3 4 3.3 3 4 10 2.1
Marketing consts 1 3 3 3 5 3.6 2 2 11 2.3
Prof Associations 3 3 6 2.5 9 1.1
Management consts 1 3 3 2 3 4.3 7 1.9
Financial consts 1 1 1 5 1 5 2 4 5 3.0
Total Businesses 7 5 13 24 26 75
Note:
No.= Number of business using this service; Av. = rating of that service on a scale of 1-5 where 1 is poor and 5 is excellent.
4.6.2 In terms of business take-up rates, the four major providers of business support are all
present in the top six, that is, Business Link (63%), DTI (52%), Chamber of Commerce
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(49%) and TPUK (33%). Trade Associations (41%), which were rated as the most useful
of this top group, and competitors (37%) are the remaining two in the top six.
4.6.3 It should be noted that the take-up rate for Trade Partners UK is likely to be higher in
reality as many firms think they are dealing with the DTI when in fact they are actually
dealing with TPUK.
4.6.4 We can see from Table 10 above that in general take up rates of public sources of support
tend to be higher than private sources, across all categories of firms and as a percentage of
the whole sample. Having made contact with these public sources, the majority of firms
interviewed were much more satisfied with the level of service offered that with the private
sector. In particular firms often cited the support offered by the banks, recruitment
agencies and management consultants as being the least consistent.
4.6.5 Informal sources of support were often cited as important and we can see from the table
that competitors are in fifth place with 37% and family and friends are tenth with 21%.
These two informal sources were generally regarded as supplementary to the formal
sources as opposed to replacements, and both the Enthusiastic and the Successful tended to
regard these two informal sources as occasional, but essential, sources of support.
‘We heard that Hong Kong were about to ban imports and we panicked a bit. So I rang
one of my competitors to see if they had heard anything and to ask them what they planned
to do. They were already aware of this and had started exporting to the Carribean. So we
did a bit of research and caught a plane over there to investigate’ (Wholesaler, Norfolk).
4.6.6 We find that the more experienced internationalised firms, the Enthusiastic and the
Successful, are much more aware of the potential support available, have at some time or
other accessed all the potential sources of support identified and having done so generally
rate the usefulness of support received more highly than the less experienced firms.
4.6.7 In general, we find that the Enthusiastic and the Successful have greater awareness of the
need for support in their international activities. Having identified this need, they are then
better at identifying the appropriate source of support which in turn leads to a higher degree
of satisfaction with the support received. Conversely, the Frustrated and the Tentative are
largely unaware of the types of support on offer, have had contact with a significantly lower
number of support agencies and are generally less satisfied with the support received.
‘I think you have to know what you need. If you ask for help and they say ‘What with?’, you
can’t just say ‘everything’ The more you are aware of just what you need, the better your
chances are of actually getting it’ (Manufacturer, Norfolk).
4.6.8 Reinforcing our findings elsewhere, the Enthusiastic and the Successful demonstrate a
greater degree of self-analysis informed by the learning that comes with experience. This
leads to an increased awareness of the need for support, both formal and informal, if they
are to be effective in their international activities.
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4.6.9 Assistance with Trade Fair attendance was widely regarded as the most valuable source of
support by the Successful and is a very typical example of how many firms use the formal
route but informal means to exploit the opportunity to the full. Rather than simply using
these events to generate sales, the Successful tend to use Trade Fairs as a critical element of
their market intelligence gathering activities. They are used to keep an eye on the
competition, to see who is doing what, to meet up with customers, to find new distributors
and agents, to keep up with market developments and so on. The other four groups of firms
tend to regard Trade Fairs uniquely as a selling opportunity, and would be reluctant to
commit resources to attendance unless they thought a sale would result.
‘The best thing that ever happened to us was getting a subsidised place on a Trade Fair.
This allowed us to travel to the region, talk to the people there and from that we started to
build up relationships. We were then able to travel over independently because we had the
contacts’ (Recruitment Agency, Cambs).
‘Our biggest Trade Fair is in Detroit and all our customers come there to see us. So by
going there we get to see everyone in the USA at least once a year’ (Manufacturer, Cambs).
‘Whenever I ask to go abroad to visit a Fair or anything I am told I can only go if I bring
back a sale. I keep telling them that it takes ages to build up relationships and turn them
into sales but it doesn’t do any good’ (Manufacturer and Distributor, Suffolk).
4.6.10 Three general points tended to be raised by The Curious, the Frustrated and the Tentative
concerning the available support: i) some confusion as to what is available and which
providers offer which particular services; ii) that the support available tends to be too
general and that no one is able to help with specific problems; and iii) that the assistance
available only takes the firm so far but then at the point assistance is needed the most there
is no further assistance. These comments reflect the tendency for these groups to be
reactive rather than proactive in their actions, as already identified elsewhere in this report.
They tend to become frustrated quite quickly if they cannot find what they want with a
tendency to blame others rather than to look inside the firm for the source of difficulty.
One could say that there is almost a ‘told you they wouldn’t be able to help’ mentality even
before the search for assistance has been started.
4.6.11 The issues raised in the previous point are indicative of the significant difference in
mindset found between the Successful and the other four categories. The Successful seek
to self-generate solutions to their problems either internally or through their networks.
They are constantly scanning the environment to see if anyone else can help, are very
happy to engage with the formal support agencies, but they view these agencies as part of
the wider support network rather than the solution to their problems. That is, they regard
themselves as self-reliant. Conversely, the Curious, the Frustrated, the Tentative and the
Enthusiastic all tend to look to the support agencies to solve their problems, but generally
feel that nobody can help because their problems are so specific. They are not really clear
about what they want but think that they probably won’t get it anyway.
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‘We had a guy over from BusinessLink a while ago. I must say he was very good, but he
couldn’t really do anything for us and so we haven’t bothered with anyone else since’
(Printer, Beds).
‘My advice to anyone starting international trade for the first time would be to talk to
everyone and any don’t be afraid to ask for help from anyone. I think we have probably
used just about everybody over the years’ (Chemicals Distributor, Herts).
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Policy Implications
Support should aim to improve skills and build organisational capabilities. This will help to
generate a sense of self-reliance and self-confidence and avoid the development of a
dependency culture within the firm.
The Curious, Frustrated, Tentative and Enthusiastic often need assistance in understanding
their problems before they are able to identify the most appropriate type of support required.
Off-the-shelf solutions are unlikely to be effective for the Successful, for whom specific
solutions need to be tailored to specific problems.
There is a need to develop mechanisms which encourage learning and experiential exchange
between SMEs and the support community. It may be useful for policy makers to ‘live with’
internationalised SMEs within their world to help develop understanding and insight from
within the ‘inside’ rather than from the ‘outside’.
Business support agencies could review the ways in which they market their services to the
Curious, Frustrated, Tentative and Enthusiastic to improve the delivery of the key messages.
One support provider is unlikely to be able to resolve all the challenges facing
internationalised firms and therefore there is a need for joined-up-thinking rather than
competition among support providers.
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5 SHARING BEST PRACTICE
5.1 Background and overview
One of the objectives of this project has been to identify best practice from around the Eastern region
and to add value to the region through the sharing of this best practice through skills and knowledge
transfer. We have evidenced elsewhere in this report that skills and knowledge development are
critical if firms within the region are to compete effectively in international markets. In this section of
the report we offer a number of profiles of highly successful internationalised firms from within the
region we feel have been highly effective in developing their international activities through the
building of organisation capabilities, learning and skills.
5.2 Company profiles
Polar Systems, Manufacturer, Norfolk
Founded 16 years ago manufactures ‘one-off’
machines for the food industry. Specialised
products with a high R & D input for specific
customers. Owner-manager has a strong
international orientation and believes in being
very close to the customer. Uses trade fairs to
build up network of personal contacts and to
understand customer needs. Very hands-on,
intimate relationships with clients, control over all
aspects of the business and a sharp grasp of his
industry and markets. In all respects sees no
difference between domestic and non-domestic
trading activity. Aware of skills needs but looks
for individuals who will ‘fit’ into the business and
trains them rather than looking simply for
qualifications. Is looking to develop the business
but will do this steadily without putting the future
position of the business at risk.
Cornelius Group plc, Chemicals Manufacturer
and Distributor, Herts
Formed in 1935, this firm went through a
management buyout 14 years ago. They are
among the top 5 companies in the UK and the top
100 in Europe. The firm employs 75 with a
turnover of around £30m. The firm imports raw
materials from around the world and exports to
western Europe, Poland and the USA. The firm
believe the keys to successful international
activity are closeness to the customer, establishing
an appropriate infrastructure and getting the
product right. Cultural issues are regarded as very
important and are thought more important than
language skills. Great effort is made to develop
relationships with the customer and to develop a
clear understanding of the target market. High
level internal skills are regarded as critical and an
appreciation that things do not happen quickly.
Growth is a key business objective and
international activity is seen as the delivery
mechanism.
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41
Cavendish Silks, Clothing Manufacturer and
Retailer, Essex
Owner-manager founded the firm after having
worked previously in Spain and Germany. Very
appreciative of the importance of language skills.
An entrepreneur with a strong sense of identity
and tight control over the business. Used the
Commercial Attaches as an introduction to the
markets in Norway and Italy and then worked
hard to develop a network which he sees as the
key to market development. Believes in high
level management skills to ensure professionalism
and quality. For him the key skills in international
dealings are to keep close to the market, be able to
react quickly to changing situations, develop close
relationships with agents and clients and spend
time with them getting things right.
Tyron Automotive, Systems Manufacturer,
Beds
Manufacturers flat tyre protection systems with 9
employees and a turnover of £1m. Initially pulled
into international activity by market opportunities,
quickly appreciated the potential and started
attending trade fairs to learn about overseas
markets. Started building a ‘preferred’ list of
contacts and clients, and then worked hard to
obtain orders and establish a distribution network
though international distributors. Due to the Ford
Explorer/Firestone issue there is huge potential for
expansion and the firm sees international activity
as the way to grow the business, primarily through
the USA and the Middle East. Have made good
use of the support offered by Trade Partners UK,
BusinessLink and the Chamber of Commerce.
BIOTEC Laboratories Ltd, Manufacturer,
Suffolk
Assembles and manufactures diagnostic testing
equipment for TB, Hepatitis etc. Started in 1987
by a biomedical scientist married to as Nigerian
who recognised the market opportunities through
visiting the country, so in effect a ‘born global’
company. Grew steadily until 1996 when new
staff effected a strategic shift in the firm when it
was decided to grow the business through
international markets. Trade fairs and existing
networks were used to reactivate dormant contacts
to generate orders. Now export to over 60
countries world-wide. Employ 25 with a turnover
of £2m. Market entry strategy is to use trade fairs
and networks to identify the main distributor and
to negotiate an exclusive contract. This minimises
the cultural and other difficulties of trading in
such complex market conditions. Very extensive
use of business support agencies. Advice to new
internationalised firms would be to get to know
the target market well and develop relationships
and networks before committing resources. Be
aware of who can help with which problems,
don’t be afraid to ask for help, and ask everyone
you can think of.
NetSupport Ltd, Software Business,
Cambridgeshire
Started 13 years ago by an IT consultant to
develop software allowing remote control of
linked computers. Was joined by the former
Group Finance Director of a large firm who
became Finance Director. Used trade fairs to
learn about the market and build up contacts.
Eventually obtained an order from Germany and
discovered high potential there. Servicing
customer needs of critical importance and difficult
to do at distance and so the Finance Director used
his large firm experience to open an office in
Germany. Through trade fairs obtained an order
from the USA and also opened an office there to
exploit market. Very effective mix of skills,
founder with product knowledge, Finance
Director with market development skills.
Recruited in key areas to build organisational
capabilities. Use the DTI for market intelligence,
attend trade fairs to learn about the market, obtain
some direct sales and then either use distributors
or open own facility. Now with 50 employees and
a turnover of £4m their product is sold worldwide.
Seeking to grow the business mainly through
international activity.
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6. SKILLS AND KNOWLEDGE
6.1 Introduction
6.1.1 The method adopted for this study has been to observe and record the behaviour of
companies from a wide range of sectors and of varying size, age and international
experience. We did not seek to squeeze these companies into a pre-conceived analytical
framework but have attempted, in our analysis, to identify the variables in their
composition, culture and context which have played a significant part in their progress, or
otherwise. It was not our aim to locate the companies or their personnel on a scale of
educational achievement, though we are able to make some general estimates of the
relationship between performance and educational qualification of key personnel.
6.1.2 This analysis will therefore focus in the first instance on the skills and knowledge required
by companies, in normal circumstances, to sustain successful performance in a competitive
international trading environment. Some of these skills (general management) may apply
equally to the domestic trading environment. Others (foreign language skills) may be
specific to the international environment. Very importantly, and this is something we need
to research further, we will discuss the nature of the transition from domestic trading to
international trading from a skills and knowledge perspective, as it emerged from our study.
Do all companies make this transition successfully, or is there something about the make-
up of some that helps them do it better? In order to simplify the complexity of the issues
surrounding skills and knowledge development, we conclude our analysis with an
identification of skills and knowledge needs across the five categories of firm interviewed.
6.1.3 In conclusion we will venture some observations about the relationship between our
findings and the skills strategy for the Eastern region.
6.2 Planning, Manning and Scanning
The process section of this report broke down the exporting experience as described by
companies into the concepts of PLANNING, MANNING AND SCANNING. These are the titles
we will use to describe the skill-sets and knowledge characteristics of successful international
companies.
PLANNING
Describes the way in which a company navigates its involvement in foreign markets. This
comprises financial and legal matters as well as production, resources and logistics. Some
companies (a minority) will undertake careful preparations and analysis of its own readiness and
suitability for a particular exporting venture in a foreign market including the drafting of a
business plan. Other companies (the majority) simply respond to an opportunity to export with a
view to generating revenue without too much thought as to the implications of this action or how
to undertake it in a sustainable way.
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MANNING
Describes the management process by which a company organises or develops its resources to
service foreign markets. These resources are usually both material and human. Some adaptation
of products and manufacturing process may be needed to meet the needs of overseas clients. The
need to communicate with those clients will generate a demand for skills such as foreign
language competence. These may be met by recruitment, training or consultancy measures.
SCANNING
Describes the way in which the firm informs itself about those markets. Market information is
one of the more obvious elements of exporting activity. More and more channels of
communication requiring varying levels of skills and investment are now available. Many of
these can be carried out at a distance but the most valuable form of knowledge, market
intelligence, is usually obtained through a variety of sources such as personal relationships and
visits to the market or other events such as trade fairs.
Table 11: Skills and Knowledge breakdown
SKILLS PURPOSES
(FIND ANSWERS!)
KNOWLEDGE
PLANNING Markets
Financial
Legal
Production
Competition
What are the reasons
for going international?
Is the company ready
to do it?
What will be the
impact of this decision
on the organisation?
Do the responsible
managers know how to
build a strategy?
MANNING Communication
(foreign languages)
Sales
Logistics (inc.
documentation)
Leadership
Do we have the
resources to support
exporting?
Do we have the skills
to meet the needs of
overseas clients?
Are we prepared to
build and develop
relationships with key
partners?
Do the responsible
managers know how to
structure and skill up
the company?
SCANNING Market research
Building the best
channels to market
Identifying
opportunities
Building networks
Monitoring the
competition
Is there a market for
our products and, if so,
what do we need to
know about it?
How do we find these
things out?
How do we exploit
these opportunities?
Do the responsible
managers know how
business practice
differs in other markets
and how this might
impact on the
company?
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6.3 Skills
According to the Cambridge Advanced Learner’s Dictionary, a skill is:
an ability to do an activity or job well, especially because you have practised it.
6.3.1 Planning
The Planning skill-set poses serious challenges to the typical small and medium enterprise.
Most companies came into existence not as a deliberated, rational response to a set of
market conditions but in response to an opportunity or a passion. To ask such an
organisation to adopt a strategic planning approach to international markets is therefore
asking them to do something foreign. All of their personal and commercial history may
even militate against the suggestion. They have built their persona around the value of
being pragmatic, problem and sales-oriented and commercially astute. That is, at this point,
strategy is driven by sales rather than the other way round. Indulging in abstract concepts
and calculations about markets and competences seems to them to be the antithesis of
business success. Even if they could see the case for it, it is usually not something they
would see themselves as capable of. The average educational qualification of the decision-
makers interviewed in our study was between GCSE and A level. The average for
Successful companies was between A level and degree level. Most, when questioned, said
that their reason for starting exporting was to respond to an opportunity. When these
companies approach business support agencies it is not usually to ask for advice, but to ask
for support or information to help them achieve something specific they have already
resolved to do. In our study we found evidence of a transformation process at work. Good
advice will not simply give them what they want. It will alert them to what they need and
help them find a way to obtain it.
Along the way, it is clear that Successful companies, through training, experience and self-
development BECAME planners. Their initial level of educational qualification may not
have indicated them as being capable or inclined to do this, but they achieved it and their
status as successful exporters owes much to this achievement. Some may have been
persuaded to join a training programme offered by one of the support providers. Others
may have recruited an individual who had relevant education or experience and has
introduced this thinking into the company. Either way, they have acquired a foundation for
planning and analysis and the ability to respond to market conditions which are essential for
international growth.
Companies which have failed to make this progression (most notably the Tentative) may
not have had the fortune to acquire these skills. They may alternatively be more resistant to
them than some of the other companies. They display a static and passive attitude towards
their business problem which results in an inability to place their situation in context, assess
strengths and weaknesses, understand market conditions and find alternative ways forward.
Support packages directed at these companies which are not underpinned by a strategic
analysis and plan are likely to falter.
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We therefore can distinguish between what companies want and what they need. They
want information, money and solutions to precise, small problems. They need to learn to
plan, to broaden their management mindset and build better manning and scanning skills.
6.3.2 Manning
Most of the companies we interviewed have limited resources with which they can develop
their international trade ambitions. Some, however, often as a result of sound strategic
planning, develop a clear idea of how they need to develop their material and human
resources to make their international activities more profitable. This often involves
investing in skills which are not critical to domestic business success, such as foreign
language skills.
There are many arguments for and against foreign language competence in UK business
organisations. The arguments against tend to emanate from observers with a short-term
cost/benefit approach to business transactions. The acquisition of language skills can be
costly if it involves employing individuals who are not able to carry out other tasks. This is
in reality very rarely necessary if the labour market is properly exploited. Some doubt the
benefit of foreign language use by British companies when English has become the lingua
franca of international business. Recent research in the Eastern region rebutts this
argument by identifying incidences of business lost at 25% of companies questioned. 40%
rely on English or the intermediation of English-speaking local agents and 21% report that
they have experienced cultural barriers.
We found a close correlation between valuing foreign language use and sustained success
in international trade. Successful companies value relationships and market intelligence
and these are best cultivated and exploited by use of the language of the client and market.
We also discovered a complex appreciation of foreign language use by successful
companies. Good managers will see occasions on which they individually, or a member of
their personnel, will profitably exhibit the ability to speak or write the foreign language.
These occasions are normally critical to understanding and relationship development and
can, in one fell swoop, make those expensive language classes worthwhile. On another
level, a good manager will see how the foreign language used in the right place and in an
expert fashion can make his product and company look more professional and appealing to
the market. Using a professional translator to produce packaging, invoices, web-sites or
instruction manuals and safety leaflets in the foreign language can help find clients, make
the product more attractive and ensure customer satisfaction and repeat business.
We can say much the same about other skills needed to enact international trade well. The
international company has to equip itself with the skills to dispatch the goods, satisfy
customs and excise requirements and ensure customer satisfaction in a more complex
transaction than most which apply in a domestic environment. It is however important to
note the key role played by the owner-manager in this context. He/she has to provide the
leadership and informed decision-making in this challenging environment. There is a
strong body of literature that suggests that owner-managers with a strong international
orientation tend to be more successful in the long term as they appreciate the need for new
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skills more quickly. The skills he/she possesses are therefore the critical ones and they
need to be in place before any of the others can be developed or effectively deployed. In
this respect, manning follows on from planning, which, as a process, needs to identify skills
shortages and devise a plan to redress them.
6.3.3 Scanning
Much export support has traditionally leapt straight to the process of scanning, bypassing
the first two stages. Information about opportunities in a foreign market can be sufficient to
create an exporting opportunity which a company will seek to exploit.
In a more competitive and strategic environment where the company first needs to assess its
readiness and ability to export effectively and in a sustained manner, information about the
foreign markets needs to be aligned in a more structured way with the company’s plans.
Information is not just about one-off opportunities, it is about market conditions, national
regulations and competition. The forms of information available in the global economy are
multiple and accessible through multiple channels. Competing effectively at a distance is
only possible if a company can maximise its understanding of the local environment and
conditions. Market information (and its partner, intelligence) is therefore an on-going and
crucial tool to a company that wishes to grow in international markets. The Successful
companies we interviewed used the internet, trade fairs and exhibitions, personal
relationships and networks and visits to the foreign market regularly and effectively to
improve their decision-making and adjust their business strategy. Managers we observed
who were successful at international trade tended to be people able to carry out these tasks
with similar confidence and ease to what they show in the domestic market. Some, but not
all, of these managers may have had previous experience of international trade. Others did
not but simply felt comfortable in different environments and with foreign clients. The
ability to read signals, solve problems, interpret data and understand clients in other
cultures can be developed alongside or, in some case, independently of foreign language
skills and some are more predisposed to it than others.
Here once again, the process of scanning needs to be seen, not just as an activity in itself,
but as a part of a strategic approach towards international trade. The issue is not the
obtaining of information, but the decision as to what information to look for and how and
where to look for it. Answers to these questions should emerge from a strategic business
plan. This does not preclude the possibility of a fortuitous order coming through the
letterbox and proving to be the start of a successful exporting venture. The strategic plan
will ask of the company and the owner-manager questions that will help him/her devise the
tools and skills to take advantage of such an opportunity, to develop it and to apply it to
other markets. In this way, the firm continues to behave opportunistically or
entrepreneurially, but within a more strategic framework so that international activity
becomes targeted rather than ad hoc.
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6.4 Knowledge
Whilst the concept of skills currently carries a great deal of significance in economic and
educational strategy in the UK at the moment, it is probably correct to say that the concept of
knowledge has even greater import within the context of global economic and corporate
competitiveness. As a concept, it is less easily grasped than is the notion of a skill. It takes many
more forms, is less easy to quantify and to isolate in its manifestations in daily life. This quality
has made of it something of a Holy Grail in contemporary management theory. As Holden3
points out, ‘It can be shared, in principle, universally. (Alternatively…) it can be forgotten and not
used.’ The operating assumption for many theorists and business leaders is that much of the
knowledge that makes a critical contribution to the modern organisation is tacit, i.e. we do not
necessarily know we are using it in our daily decision-making. It is therefore particularly
difficult to analyse and exploit as it is sometimes conscious and sometimes unconscious.
According to the Cambridge Advanced Learner’s Dictionary, knowledge is
understanding of or information about a subject which has been obtained by experience or study,
and which is either in a person's mind or possessed by people generally.
6.4.1 Planning
As already acknowledged, the process of strategic planning is a rather vague, abstract
concept. It involves the assembling of data from the past and observations about current
trends in an attempt to prepare the company for the future. It is no surprise that these
predictions often turn out to be wrong, no matter how good the data was or the intellectual
ability of the planners.
Nonetheless, planning has a number of benefits. The process of planning:
increases the familiarity of the planner with the business and the market
it forces the planner to consider and reflect on a variety of possible scenarios
it puts the planner into a position of informed readiness to confront emerging realities
These are all very valuable experiences for anybody who has to deal with the international
environment, where political events, natural catastrophes or mergers and acquisitions can
overnight change the competitive position of your company in a foreign market. Clearly,
planning is a demanding process and it is no surprise that, where declared in our study, all
the individuals responsible for exporting in Successful companies were educated to at least
A level standard, with a good number having at least a degree. Conversely, the Tentative
companies, who we found generally to have stagnated in their international operations had
a poor record here. The majority were educated just to GCSE level or equivalent.
6.4.2 Manning
Once a business strategy has been defined, the resources and skills of the company have to
be aligned with it and the target markets. This process requires a sound knowledge of both
3 Holden N. (2002) Cross-cultural Management: A Knowledge Management Perspective. Financial Times Prentice Hall.
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the company and its markets. When these markets are overseas, the data on them is
inevitably distant and complex. The owner/manager needs to ensure the quality of the data
and its application to the company’s operations. Our research found that whilst the Curious
and the Successful companies were attentive to this issue, once again the Tentative
companies lacked commitment to it. 80% of Curious companies and 72% of Successful
companies possessed foreign language skills but only 23% of Tentative companies did.
The flow of knowledge about clients and the market to the company that is facilitated by
foreign language skills and other examples of commitment to, and experience of, the
foreign market becomes a critical tool in the company’s attempts to sustain and improve its
performance there. This knowledge is present in the individuals who work in and for the
company (including distributors) and a key management task is to help facilitate the flow of
this information through the management process.
6.4.3 Scanning
Knowledge about foreign markets usually resides primarily in the owner/manager (or the
sales manager) who goes there and liaises with clients. The quality of the data obtained
will depend on the quality of the relationships he/she can build with the market. Here, as
earlier, we can identify skills which help obtain that data. Equally important, however, is
the flow of information from the owner/manager to other stakeholders. This process has to
be managed if the data is to have meaning beyond the owner/manager. On a mundane
level, the expense of sending personnel to overseas markets can be expensive but savings
and benefits can be obtained if information about travel, customs or expectations are passed
on. On a more critical level, what might appear on the surface to be unimportant
information to the owner/manager about a particular client can become invaluable
information in the hands of the Finance Director or the Production Manager. Once again,
obtaining data is only a part of the task, the critical element is knowing what to do with it.
6.5 Skills and Knowledge Needs
In the discussion above we have attempted to examine some of the key issues surrounding skills
and knowledge development through an examination of the key role these play in building the
ability to compete effectively in international markets. In order to summarise these complex
issues, in the Tables below we identify the skills and knowledge needs of the firms interviewed
across the five categories.
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Table 12: Skills and Knowledge Needs: The Curious and Frustrated
The Curious and The Frustrated
Inactivity in international markets is largely due to the lack of perceived
international market opportunities (no pull factor) and generally benign
domestic conditions (no push factor)
Key questions facing these two groups:
Planning: Do we really want to grow the business through international activity?
Manning: If so, do we have the skills and resources to achieve this objective? If not
how do we fill the skills and resource gaps?
Scanning: How do we find out if there is a potential international market for our
products?
Skills and Knowledge needs
Planning
How to build a business plan
How to map course of actions and learn basic process
How to anticipate the consequences of the decision to go international
How to identify the actual costs associated with new market development
How to evaluate company response to export opportunities
Manning
How to assess strengths and weaknesses of resources
How to obtain extra resources, where necessary
How to approach support agencies
How to manage doing business in a foreign language
How to modify products to meet market needs better
How to process orders
How to plan market visits and trade fair strategy
Scanning
How to find out about potential market opportunities
How to assess competitive position in selected markets
How to identify where and when problems with foreign languages occur
How to identify potential partners
How to triangulate market intelligence sources
How to find out about market regulations that affect market development
How to find the type of information and/or contacts to comply effectively
How to identify and approach support agencies
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Table 13: Skills and Knowledge Needs: The Tentative and Enthusiastic
The Tentative and The Enthusiastic
The Tentative: Little ability to self analyse. Have discovered that international
trading is complex and challenging and have lost their initial enthusiasm.
Perceive problems to be largely external to the firm and largely expect support
agencies to solve them on their behalf.
The Enthusiastic: Understand complexity of international trading environment
and perceive the critical challenge to be (in)ability to compete effectively. i.e.
understand the key problems are internal rather than external. Much more
receptive to support agencies than the Tentative.
Key questions facing these groups:
Planning: Are we committed to international activity? Do we need to revisit our
business objectives? Are we being strategic enough in the way we deal with our
international markets and customers? How can we develop more established
guidelines and procedures?
Manning: How do we identify our skills gaps? How do we acquire/develop dedicated
resources? How do we find and assess appropriate support?
Scanning: How can we learn to understand the differences between markets and how
to manage those differences? How do we evaluate market opportunities?
Skills and Knowledge needs
Planning
How to develop more established guidelines and procedures
How to identify processes by which to evaluate current international activity
How to evaluate new market opportunities
Manning
How to affirm market operations and negotiate changes, if necessary
How to identify the appropriate type of market presence
How to undertake an audit of skills and resources
How to move towards a geo-centric HR strategy
How to understand the differences between markets and how to manage them
How to evaluate and review partner agreements
Scanning
How to service the needs of current international customers
How to identify new market opportunities
How to test new products/channels
How to develop a framework for new market development
How to find and assess the most appropriate type of support
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Table 14: Skills and Knowledge Needs: The Successful
The Successful
Have a number of strengths: Internal – high level skills development; External -
strong products and well established markets. Understand the key to success is
their ability to manage an increasingly complex and challenging international
business environment.
Key questions facing this group:
Planning: How do we control the new market development process? How do we
influence key stakeholders? How do we manage/influence support?
Manning: How do we acquire dedicated resources for key markets? How do we
develop specific higher level skills?
Scanning: How do we service customer needs at distance? How do we ensure
appropriate local presence?
Skills and Knowledge needs
Planning
How to control the new market development process
How to influence key stakeholders
How to develop a strategic approach to effectively establishing a local presence
How to manage/influence support
Manning
How to identify and develop specific skills
How to build a tighter international team
How to acquire dedicated resources for key markets
How to assess support in the new market development process
.Scanning
How to develop client relationship management systems, particularly the
management of client relationships at distance
How to use cultural differences to benefit the business
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POLICY IMPLICATIONS
PLANNING
Strategic planning provides the learning and skills foundation on which successful, sustained
international activity can be built.
Many SMEs will resist the exhortation to plan but, once it has been done, will realise the
value of it.
Whilst it is possible to remain international without being a ‘planner’ few such companies
manage to grow and compete effectively in the long term.
Some companies will require special encouragement and support to learn to plan.
MANNING
The skills and knowledge of the manager are critical in the deployment of material and
human resources for international trading.
Resources and people have to be obtained and developed to improve exporting performance.
Relations with overseas clients and markets are much enhanced by the use of the foreign
language and intercultural skills.
Extra knowledge gained in this way is not usually burdensome. The human relationships and
cultural insights are usually a source of personal enrichment.
SCANNING
In an environment where information is plentiful, Successful companies plan market research
activities carefully.
Electronic resources and skills are indispensable for good international management.
Market intelligence and presence are built up through networks and relationships.
Flow of knowledge to and from the market and the company and within the company needs
to be planned and managed.
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6.6 The CEIM study and the East of England Skills Strategy
6.6.1 The East of England Development Agency has actively sought to analyse and promote
employment and business skills since its inception. This has led to the publication of the
East of England Skills Analysis in January 2003 and the formation of the Framework for
Regional Employment and Skills (FRESA).
6.6.2 Although it was not a specific objective of this project to respond or report to these events,
it would appear appropriate to venture some proposals as to the place of this study within
the skills debate in the region.
6.6.3 The main FRESA policy document (January 2003) does not specifically raise the issue of
skills for international trade, though it does highlight shortcomings in the region in the
areas of management development, take-up of training by SMEs and higher level skills
generally.
6.6.4 The authors would argue that most of the skills highlighted in this section would probably
be classified as higher level skills if a ready and reliable means were available to make this
assessment. It is notoriously problematic to relate foreign language and environment
related skills to conventional vocational competences, such as those that feature in the East
of England analysis. Yet, given the importance of international trade in the strategy, and
the desire to benchmark skills in the region against standards of excellence world-wide, it is
surely important to foster international skills. In all the cases outlined in this study, the
skills required to improve effectiveness in international markets serve to enhance and add
value to existing competences and operations and to help apply them in challenging
contexts. At present, these skills are most easily represented by the concept of foreign
language learning, and we have already argued for the promotion of well-targeted
programmes in this area. We have also highlighted a less visible (or audible!) set of
competences which characterises successful managers and companies. These competences,
usually referred to as intercultural or cross-cultural skills, help individuals and companies
understand and develop proximity with foreign partners and cultures by understanding their
values, attitudes and behaviour (referred to on occasion in this study as ‘international
orientation’). The East of England, through its universities and consultancy services, is
already at the forefront of British and European activity in this area. A comprehensive
policy to promote sustainable performance in international trade would do well to consider
the place of these skills in the development of its workforce.
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7. RECOMMENDED ACTION PROGRAMMES
7.1 Our objective in undertaking this project has been to help build a stock of firms in the Eastern
region capable of competing effectively in international markets. We have aimed to do this
through identifying successful aspects of international business planning, resource management,
international networking, market intelligence gathering and global skills and knowledge
development that can be made transferable across business sectors via training, educational,
development and recruitment programmes.
7.2 The firms interviewed during the course of this research have provided us with a clear message as
to their skills and learning needs with respect to their international activity as identified in the
previous section of the report above. In this concluding section to the report we now identify a
number of initiatives capable of both addressing the skills gaps identified by the firms
interviewed and building upon current skills and learning to assist firms throughout the Eastern
region become more effective in their international trading activities.
7.3 It is important to note that the majority of the actions suggested below would have the Curious,
Frustrated, Tentative and Enthusiastic groups as their primary targets, and a clear aim of these
actions would be to facilitate the transfer of knowledge from the Successful. Any action
programme would however need to recognise that the Successful also have skills and
knowledge requirements which need support and development. A number of firms from this
group have expressed a particular interest in management development programmes of an
advanced standard to improve their skills levels and the opportunity to take part in workshops
with other successful firms to discuss problem issues.
7.4 The recommended action programmes are now itemised below:
i) BEST PRACTICE GUIDES
High quality brochures focussing on examples of best practice in the region containing
diagnostic tools. These could include: ‘How to’ guides to provide simple process
understanding, written/on-line case studies from successful firms within the region,
problems solving techniques and a directory of support agencies.
ii) INTERNATIONAL SME MANAGER DEVELOPMENT
Flexible courses with optional accreditation focusing on the Planning, Manning and
Scanning skills needs as identified.
iii) INTERNATIONAL PARTNERSHIP PROGRAMME
A region wide scheme facilitating international network building and market development,
possibly keyed in to research and innovation projects such as the 6th Framework and
Teaching Company Schemes.
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iv) INTERNATIONAL MENTORING PROGRAMME
This would bring high-quality graduates (viz STEP) into SMEs to supply resources and
knowledge advantage. This also has a business-to-business dimension which could be
mediated by the International Trade Advisers. A pilot scheme, GRADEX is currently
running with the support of EEDA/AUEE.
v) WORKSHOP PROGRAMMES
To bring together small groups of managers of international SMEs to share common
problems and to develop solutions. These could be devised in consultation with Trade
Partners UK to ensure that provision is properly targeted to complement existing
programmes. Funding for these could be sought from BusinessLink or the Learning and
Skills Council.
vi) TRACKER STUDY
A study with a five-year time frame to track 50 firms throughout the region as they
undertake their international activities. This would allow rich insights into the skills and
learning needs of international firms as they progress from the Curious stage onwards. This
would permit a better understanding of the reason why some firms exit the international
markets, some get stuck at the Tentative stage and others become Successful.
vii) PASSPORT PLUS
The ‘Passport to Export’ programme has been of benefit to many firms interviewed for this
study and will continue to assist the Curious and the Frustrated to become involved in
international activity. The focus for this project has been to assist the Eastern region in the
objective of building a stock of world class firms capable of competing effectively in
international markets. In order to help achieve this objective we would recommend the
development of a ‘Passport Plus’ programme targeted at the Tentative and the Enthusiastic
to help improve their ability to compete in international markets. If one of the regional
objectives is to improve the competitiveness of firms in their international activity, and
hence increase GDP within the region, our research overwhelmingly suggests that it is the
Tentative and Enthusiastic groups which offer the opportunity to make the biggest impact
within the Eastern region.
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