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AN EXAMINATION OF THE POTENTIAL AND LIMITATIONS FACING SMALL AND MEDIUM SIZED COMPANIES INTERNATIONALIZATION PROCESS

CHAPTER THREE

RESEARCH METHODOLOGY

INTRODUCTION

This section will explain the methods that were used to collect and analyse data and how the research was carried out.

Study design

The researcher adopted a cross-sectional descriptive study design whereby data was collected over a specific period to determine the views of respondents at that particular time. As such, data was obtained from both primary as well as secondary sources.

Study Area

This study was conducted in the United Kingdom.

Study participants

This study involved 120 respondents from Small and Medium-Scale Enterprises (SMEs) operating in the United Kingdom with prospects of internationalizing their operations.

Research strategy

Research strategy involves the approach utilized while conducting the study by employing either a qualitative approach through case studies or quantitative approach through surveys. Generally, most of the studies focusing on international business rely on quantitative strategies in eliciting data that answers the identified research questions. Approximately 60.9% of the publications in the International Business journals employ quantitative approach using surveys. Similarly, majority of the studies focusing on SMEs internationalization also rely on quantitative approaches (Armario et al., 2008).

Most researchers prefer quantitative approaches due to the possibility of generalizing the findings obtained during a study. In addition, restrictions relating to the amount of time and resources available encourage most researchers to pursue quantitative studies. Finally, accessing interviewees to obtain qualitative data is often a challenge for most international business researchers hence the option for quantitative research strategies. Nevertheless, there qualitative research methodologies continue to gain more attention and recognition in Europe following the increasing number of research studies conducted (Baxter and Jack, 2008).

Qualitative methodology remains invaluable in situations where the researcher seeks to obtain rich explanations, insights, and descriptions of specific contexts of interest to the study phenomenon (Berger, 2015a). Consequently, the context and circumstances around the study subject determine the most appropriate and applicable research strategy that adequately answers the research question. The current study sought to assess the potential and limitations facing Small and Medium-Scale Enterprises (SMEs) during the internationalization process. The study sought to answer the following research questions namely “What is the motivation behind the intentions of SMEs to internationalize their operations?” and “what are the limitations hindering SMEs in their quest for expansion into international market?”

The researcher utilized a mixed approach in answering the study questions by employing both qualitative and quantitative approaches. Consequently, the researcher applied the study questions to elicit data regarding the potential and capacity of SMEs to internationalize as well as some of the challenges limiting the internationalization process of SMEs.

The first aspect of this study focuses on the motivation behind the intentions of Small and Medium Scale Enterprises (SMEs) to internationalize their operations. The context of this study pays attention to the SME’s intentions to venture into international markets hence the applicability of the case study method in order to gain an in-depth understanding of the study phenomenon. Moreover, international markets have indefinite boundaries thus making the qualitative methodology the most suitable approach in obtaining qualitative data regarding the motivation behind the specific intentions of SMEs to internationalize their operations (Onugu, 2005).

Quantitative methodology enables the researcher to deeply understand dynamics of social settings that are complex while providing concrete descriptions for novel theories. The researcher assessed the intention of the SMEs to internationalize into global markets thus making it inductive in its approach. Therefore, the researcher focussed on providing general analysis of qualitative data obtained from the study respondents as opposed to quantitative methodology that strives to obtain bigger samples that enable the researcher to generalize the obtained statistics (Burns, 2012).

Despite the fact that qualitative data collection may be long, generate excess data that does not address the study question, and prone to interviewer biases, it still remains the most suitable approach in analyzing the intentions of SMEs to internationalize their operations by providing a deeper understanding and knowledge regarding the study phenomenon (Bryman and Bell, 2015).

The second aspect of this study involves an assessment of the factors limiting the internationalization process of Small and Medium-Scale Enterprises (SMEs). The researcher refined various theoretical perspectives in a deductive manner to obtain structured information and applying it on larger samples to yield findings for generalization. In order to realize this, the researcher integrated survey techniques into the standardized questionnaire.

In addition, the researcher adopted cross-sectional techniques in order to obtain a representative sample. The quantitative approach was instrumental in cutting down on the resources as well as time required for the completion of the study. The study sample involves Small and Medium-Scale Enterprises distributed across the United Kingdom hence the quantitative methodology became the most applicable approach to realize the objectives of the study (Blaxter, 2010).

As discussed above, the researcher relied on both qualitative and quantitative approaches to address the question under the current study. Despite the fact that the two approaches appear incompatible, pragmatist research philosophies provides the researcher with an opportunity to apply mixed methodologies. In addition, applying the mixed methodologies is very useful in overcoming the potential bias associated with any of the two approaches. Moreover, a combination of both the quantitative and qualitative methodologies enables the research to enjoy control of the data as well as gaining deeper understanding of different levels of the study phenomenon (Bradshaw and Stratford, 2010).

Qualitative research was based on previous studies on several subjects related to the research problem, as well as questionnaire questions that do not require responses in numerical form. For quantitative research, data collected from secondary sources as well as primary sources was analyzed using a simple economic regression model, where the dependent variable was internationalization of the SMEs. The independent or else the exogenous variable were the factors causing the limitations such as:

  • Resources needed to internationalize,

  • Management experience,

  • Tariffs, technology,

  • Competition among others

The results were presented in tables, pie charts, scatter diagrams as well as graphs

The complex nature of applying both quantitative and qualitative data approaches discourages researchers from using the two methods concurrently. However, the use of both methods creates an opportunity for harnessing synergy thus increasing the opportunities for gaining new knowledge and in-depth understanding of the study phenomenon. Therefore utilizing the mixed methodology approach was instrumental in unraveling new findings regarding the internationalization of SMEs considering that majority of the previous studies only relied on either qualitative or quantitative strategies (Bryman, 2015).

Sampling design

The sampling procedure took place in two steps whereby secondary data on each of the prospective firms was evaluated based on the established criteria. The second phase only involved the firms that satisfy the established criteria. The researcher contacted and assessed the remaining firms through telephone interviews to ascertain whether the company would be interested to participate in the study and book a meeting to realize this. The companies that did not consent to the study were excluded thus allowing the researcher to focus on the remaining firms (Burnard, 2004)

Inclusion criteria

The researcher strived to reach a suitable number of Small and Medium-Scale Enterprises (SMEs) operating within the United Kingdom with prospects of entering the international market. The following criteria was followed in the identification of the SMEs eligible to participate in this study:

  1. SMEs with a maximum of 250 employees were included

  2. The firms should have an intention to manufacture, and market exports for the international market.

  3. The prospective exports should not exceed $. 10,000,000

Data collection instrument

The researcher developed the standardized questionnaire following a thorough review of the existing literature on the study topic. Thereafter, the researcher determined the layout as well as the specific content of the questionnaire in consultation with the supervisor. The researcher considered relying on measurers that have been previously pretested and published in various journals of international business research. In addition, the researcher adopted an exploratory approach while considering attributes that have never been the subject of previous testing (Creswell, 2013).

In addition, the researcher conducted a pilot study to ascertain the validity and reliability of the data collection instruments. The pilot study involved ten SMEs operating in the United Kingdom whereby the researcher interviewed the responsible persons to identify any inconsistencies, misleading information, and ambiguities within the data collection instrument. The findings of the pilot study then informed the changes made by the researcher in order to ensure that the questionnaire is reliable. Moreover, the researcher developed a guide for the survey that ensured the standardization of the interviews as well as elimination of interviewer effects (Doody and Noonan, 2013).

The questionnaire used by the researcher comprises of three sections with the first section providing an overview and general profile of the SMEs. This includes the location of the company, the number of employees, its years of operations, the type of management in the company, and the company’s performance on the local market. The second section of the questionnaire analyses the intention of the SME to venture into the international market with details of why the company wishes to internationalize, the prospective markets for the company’s operations, the products or services, the channels of distribution, the company’s knowledge and experience regarding the international markets (Duncan and Fiske, 2015).

The final section focuses on the potential limitations that would jeopardize the company’s internationalization process with an assessment of the likely threats and opportunities, the company’s strengths and weaknesses, what the company requires to internationalize, and the possible solutions to overcome the identified limitations.

Data collection technique

The researcher invited all the representatives of the SMEs that meet the inclusion criteria set out for this study. Convenient sampling was undertaken to select an appropriate number of respondents who provided the required data. Convenient sampling is a non-probability sampling technique that permits the researcher to rely on a convenient number of study respondents in sufficiently evaluating the study hypothesis. Moreover, the technique enables the researcher to obtain the required information from respondents who posses certain attributes that are of interest to the researcher. The approach also ensured that the researcher collects adequate information to his satisfaction (Daymon and Holloway, 2010).

An invitation was sent to all the prospective respondents through email with a requirement to consent before participating in the study. The researcher then contacted the respondents who consented to the study and conducted the interviews using the structured questionnaire with twenty questions. Secondary data was obtained from the World Data Bank, as well as a review of international business journal articles through google scholar (Berger, 2015b).

Data analysis

Quantitative data obtained was analyzed using Statistical Programme for Social Sciences version 22 whereas qualitative data was analyzed by grouping concepts and findings that are useful in assessing the intentions and limitations of Small and Medium-Scale Enterprises’ internationalization process. The findings were then presented using tables, pie-charts, graphs, charts and narratives (Churchill and Iacobucci, 2010).

Reliability and validity

Pretesting of the data collection instrument was done using 10% of the sample size after which necessary adjustments were made before the actual study. Pretesting was useful in identifying any deficiencies in the questionnaire and making the necessary adjustments hence strengthening the validity and reliability. In addition, the researcher also discussed the questionnaire with two international business experts to improve its quality and reliability to test the hypothesis. Thereafter, internal reliability was measured using Cronbach’s Alpha method (Burns and Grove, 2010).

Techniques for compliance with ethics

The researcher sought ethical approval from the University’s Research and Ethics Committee. Participants were required to give informed consent before filling the survey. Additionally, participants were not required to fill their names on the questionnaire.

CHAPTER FOUR

DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF FINDINGS

Introduction

This chapter shall outline the findings of this study and the data will be presented in form of pie charts, graphs and tables. The chapter further gives inferences of the data through the discussions.

Response rate

A sample comprising of 120 SMEs was selected and 110 of them responded translating into 91.7% response rate. This response rate was instrumental in ensuring the research findings are reliable.

Analysis of the profile of SMEs

Duration of company operations in years

The researcher sought to evaluate the length of operations of the Small and Medium-scale Enterprises (SMEs) in years. The table below illustrates the findings:

Years of operation

Frequency

Percentage

21 and above

The researcher established that majority (38.2%) of the SMEs under the current study had conducted their operations for a period of 6-10 years whereas 32.7% had operated for 11-15 years. 20.9% of the SMEs had conducted operations for a period of 1-5 years and only 8.15 of the SMEs had their operations for more than sixteen years. The pie chart shown below is a representation of these findings:

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Figure 1: Duration of SMEs operations in years

Number of Employees

The researcher sought to evaluate the number of employees working in each of the SMEs in order to ascertain the availability of technical skills essential for internationalization. The table below is an illustration of the findings:

Employees

Frequency

Percentage

1-50 employees

51-100 employees

101-150 employees

151-200 employees

201-250 employees

251 employees or above

The researcher established that majority (53.6%) of the SMEs had approximately less than fifty employees whereas SMEs with more than 250 employees accounted for 2.7% in the current study. SMEs with 51-100 employees accounted for 13.6% while those with 101-150 employees accounted for 17.3%. Finally, SMEs with an employees’ base of 151-200 accounted for 5.5% whereas those with 201-250 employees represented 7.3% of all the SMEs under the current study. The bar graph is a presentation of these findings:

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Figure 2: Number of employees in SMEs

Management of the SMEs

The researcher sought to establish whether the SMEs had a management team distinct from the board of directors. The table below illustrates the findings:

Distinct management team

Frequency

Percentage

The researcher established that majority of the SMEs (71.8%) did not have a management team distinct from its board of directors while those that had a distinct management team accounted for 28.2%. These findings are presented in the pie chart below:

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Figure 3: SMEs that have a management team distinct from the Board of Directors

Performance rating of SMEs on the domestic market

The researcher sought to establish the level of satisfaction of SMEs with their performance ratings on the domestic markets. The table below is an illustration of the findings:

Performance rating

Frequency

Percentage

Very unsatisfactory

Unsatisfactory

Slightly satisfactory

Satisfactory

Very satisfactory

The researcher established that majority of the SMEs (48.2%) were satisfied with their performance on the domestic markets whereas 6.4% were very satisfied. 32.7% of the SMEs were slightly satisfied whereas 7.3% of the SMEs recorded very unsatisfactory performance while an additional 5.5% recorded unsatisfactory performance. The pie chart below represents these findings:

extra pages for the order 501372 3Figure 4: Performance Ratings of the SMEs on the Domestic Markets

Intention to Venture into the International Market

The reasons for entering the international market

The researcher sought to establish` the reasons behind the decision of SMEs to enter the international market. The table below is an illustration of the findings:

Frequency

Percentage

Perceived opportunities

Profit maximization

Growth strategy

Stiff domestic competition

A measure of last resort

The researcher established that 40% of the SMEs opted to internationalize in order to explore the perceived opportunities while 28.2% of the SMEs were implementing their growth strategy. 20% of the SMEs indicated that the reason behind their bid to international was profit maximization, whereas 7.3% opted to internationalize in order to cushion their enterprises against stiff domestic competition while 4.5% of the SMEs were doing it as a measure of last resort. The bar graph below is a representation of the findings:

extra pages for the order 501372 4Figure 5: Reasons for SMEs to enter the international market

Preferred regions for internationalization

The researcher sought to establish the regions that SMEs preferred to internationalize their operations in. The table below summarizes the findings:

Preferred region

Frequency

Percentage

21

19.1%

Nordic countries

15

13.6%

6

5.5%

12

10.9%

2

1.8%

8

7.3%

Australia

17

15.5%

5

4.5%

South America

2

1.8%

7

6.4%

Middle East

4

3.6%

13

11.8%

The researcher established that most of the SMEs (19.1%) in the United Kingdom intended to internationalize their activities within the European Union market. This was followed by preference to Australia accounting for 15.5%, Nordic countries (13.6%), Africa (11.8%), and the United States (10.9%). The least preferred markets for internationalization were China (1.8%), South America (1.8%), Middle East (3.6%), and Japan (4.5%). The bar graph shown below is a diagrammatic presentation of the findings:

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Figure 7: Preferred region of SMEs internationalization

Export channels

The researcher set out to establish the export channels that SMEs intended to rely on during their process of internationalization. The table below is a summary of the findings:

Export channels

Frequency

Percentage

Direct to customers

Subsidiaries

Distributors

The researcher established that 51.8% of the SMEs with an intention to internationalize preferred direct exportation to their customers, 22.7% preferred relying on distributors, 16.4% would use agents, and 9.1% would rely on subsidiaries on the international markets. The findings are presented in the pie chart below:

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Figure 8: Preferred export channels for SMEs internationalization

Intended international activities

The researcher sought to establish the nature of international activities that SMEs intended to engage in. The table below summarizes the findings:

International activities

Frequency

Percentage

Exporting

35

31.8%

Technical agreement

13

11.8%

License agreement

7

6.4%

Subcontracting

12

10.9%

Franchising

10

9.1%

Alliance

5

4.5%

Joint venture

13

11.8%

Production networking

6

5.5%

Sole venture/ Acquisition

9

8.2%

The researcher established that majority of the SMEs intended to carry out exportation activities (31.8%), followed by technical agreements (11.8%), joint ventures (11.8%), subcontracting (10.9%), franchising (9.1%), sole venture/ acquisition (8.2%), license agreements (6.4%), production networking (5.5%), and alliances (4.5%). The findings are presented in the bar graph below:

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Figure 9: Intended international activities by SMEs

Anticipated Internationalization Timeline

The researcher sought to establish the anticipated timelines by the SMEs prior to internationalization of their operations. The table below is a summary of the findings:

Timeline

Frequency

Percentage

Within one year

1-3 years

3-5 years

5 years and above

The researcher established that majority of the SMEs (47.3%) will internationalize their operations after five years from the date of the current study, 23.6% will internationalize within 1-3 years, 17.3% will internationalize within 3-5 years, and 11.8% will internationalize their operations within a year’s timeframe. The pie chart below demonstrates the findings:

extra pages for the order 501372 8Figure 10: Timeline for internationalization of SMEs

Knowledge of international markets

The researcher sought to establish the mechanisms employed by SMEs in gaining knowledge of the international markets. The findings are summarized in the table below:

Frequency

Percentage

Conducting studies

42

38.2%

Cooperating with international agents and distributors

15

13.6%

Through the internet

26

23.6%

Recruiting employees with international experience

16

14.5%

Acquiring an international firm

11

10%

The researcher established that majority (38.2%) of the SMEs had conducted studies on the international markets of their preference. 13.6% of the SMEs acquired knowledge of the international market by cooperating with international agents and distributors, 23.6% searched for information on the internet, 14.5% recruited employees with international experience, and 10% of the SMEs acquired an international firm. These findings are presented in the pie chart below:

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Figure 11: How SMEs acquire knowledge of the international markets

Limitations for venturing into international markets

Anticipated barriers by SMEs

The researcher sought to ascertain some of the barriers that SMEs anticipated during their internationalization process. The findings are summarized in the table below:

Threats

Frequency

Percentage

Geographical barriers

12

10.9%

Cultural differences

15

13.6%

Tariff barriers

17

15.5%

Language barriers

13

11.8%

Political instability

13

11.8%

Insecurity

11

10%

Adverse weather

29

26.4%

The researcher established that adverse weather was the biggest barrier to SMEs operations during internationalization reported by 26.4% of the SMEs. Tariff barriers (15.5%), cultural differences (13.6%), language barriers (11.8%), political instability (11.8%), geographical barriers (10.9%), and insecurity (10%) followed this. The bar graph below is a presentation of these findings:

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Figure 11: Barriers against the internationalization of SMEs

Opportunities for internationalization of SMEs

The researcher sought to establish the opportunities identified by SMEs prior to the internationalization process. The table below is a summary of the findings:

Opportunities

Frequency

Percentage

Untapped market segments

23

20.9%

Unique product line

36

32.7%

Lack of competition

27

24.5%

Minimal regulatory bottlenecks

13

11.8%

International media platforms

11

10%

The researcher established that most SMEs (32.7%) intended to capitalize on the uniqueness of their products during the internationalization process. 24.5% of the SMEs will capitalize on lack of competition, 20.9% will take advantage of the untapped market segments, 11.8% will capitalize on reduced regulatory bottlenecks while 10% will leverage on the availability of international media platforms. The pie chart below demonstrates the findings:

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Figure 12: Opportunities targeted by SMEs during the internationalization process

What SMEs require to capitalize on the existing opportunities

The researcher sought to establish what SMEs required prior to capitalizing on the opportunities existing on the international market. The table shown below is a summary of the findings:

Frequency

Percentage

Technical capacity

More capital

License agreements

Export channel

The researcher established that majority of the SMEs (35.5%) required more capital, 26.4% required license agreements, and 20% required improvement of their technical capacity while 18.2% required an export channel. The pie chart below demonstrates these findings:

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Figure 12: The requirements of SMEs prior to internationalization

Limitations of SMEs internationalization

The researcher wanted to establish the factors that limit the internationalization of SMEs. The table below summarizes the findings:

Limitations

Frequency

Percentage

Experienced personnel

Equipment

Export channels

The researcher established that most of the SMEs (52.7%) lacked the essential capital required to internationalize their operations. The other limitations for SMEs included lack of equipment (20%), lack of experienced personnel (16.4%), and lack of appropriate export channels (10.9%). The bar graph below illustrates the findings:

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Figure 13: Factors limiting the internationalization of SMEs

Suggestions for overcoming the identified limitations

The researcher sought to establish some of the suggestions by SMEs to the identified limitations in order to facilitate a smooth internationalization process. The findings are summarized in the table shown below:

Suggestions

Frequency

Percentage

Alternative financing

Recruitment of experienced personnel

Training existing personnel

Partnering with a distributor or agent

The researcher established that 48.2% of the SMEs recommended the availability of alternative financing options, 20% suggested the recruitment of experienced personnel, 18.2% suggested training of existing personnel to boost the available technical skills, and 13.6% suggested partnering with an international distributor or agent as solutions for overcoming the identified limitations. The pie chart shown below illustrates the findings:

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Figure 14: Suggestions for overcoming the limitations for internationalization identified by SMEs

CHAPTER FIVE

DISCUSSION, CONCLUSION, AND RECOMMENDATIONS

Discussion

The current study established that majority of the SMEs have conducted their operations for a period of 6-10 years whereas SMEs that have had their operations for more than sixteen years accounted for the least proportion of the SMEs. Notable also was the fact that very few SMEs have operated beyond a period of five years. These findings are consistent with those of previous studies which indicated that very few SMEs tend to live beyond their second birthday. This has been attributed to the lack of technical capacity and resources that would otherwise enable the SMEs navigate through the teething challenges (Onugu, 2005).

Majority of the SMEs under the present study reported to have an employee base not exceeding fifty employees whereas only a small fraction of the SMEs that had operated for several years had more than two hundred employees. This stems from the fact that most SMEs take time to establish and develop their capacity in regards to having an adequate number of employees. In most cases, SMEs rely on labour obtained from the business owners, their family members, and friends. This is useful in minimizing the labour costs incurred by SMEs during their inception years before the business becomes sustainable and begins to reap profits from its products and services (Arteaga-Ortiz and Fernández-Ortiz, 2010).

Regarding the management of SMEs, it was established in most SMEs, the members of the board also double up as the technical team offering management of the business. Most SMEs lack the capacity to employ technical personnel who would be instrumental in the management of the daily operations. This also limits the technical capacity of the SMEs thus impairing the top management from making informed decisions regarding the growth of their enterprise. As SMEs continue to expand and gain market share, they begin generating extra income that can then be used to hire personnel that are more qualified (Sparrow, 2012).

This study ascertained that majority of the SMEs were satisfied with their performance on the domestic markets and this motivated them to venture into international markets. In this case, the SMEs had identified some opportunities on the international market that can contribute to profit maximization and expansion of the SME. This would also feed in to the growth strategy of the SMEs that were keen on gaining more market share on both the domestic and international platform. On the other hand, some SMEs were exploring the possibility for internationalizing their activities following a dismal performance on the domestic markets. Such SMEs hoped that the international market would bring new tidings to the enterprise and rescue it from collapsing. In some instances, the SMEs hoped to wade of domestic competition by entering the expansive international market that has limitless opportunities (Startienė and Remeikienė, 2015).

According to Moen and Servais, (2002), satisfactory performance on the domestic market does not guarantee a successful business on the international market. Therefore, SMEs must assess their capacity before exploring the international markets in order to prevent a possible collapse of the business due to lack of awareness of the dynamics of international markets. Established SMEs with the prerequisite technical skills and resources should explore international markets with a lot of precaution (Moen and Servais, 2002).

The researcher established that most of the SMEs intended to internationalize their activities within the European Union market and Australia. The decision to stay within the European Union is perhaps motivated by the uncertainty occasioned by the decision of the United Kingdom to exit the European Union. Most SMEs are not sure about the long term implications of Brexit and thus the decision to limit their operations close to home. On the other hand, the European Union provides a ready market that is easily accessible with minimal barriers and tariff restrictions expected. Consequently, most SMEs would opt to international their operations within a more familiar market that requires minimal resources to gain access (Francis and Collins-Dodd, 2000).

Based on the findings of this study, majority of the SMEs intend to export their products directly to customers. This also arises from the fact that majority of the SMEs intended to internationalize within the European Union market that is accessible and with minimal restrictions. In order to minimize the associated costs, it is prudent for the SMEs to eliminate middlemen in the process of distributing their products to customers. According to a study conducted by Ellis and Pecotich, (2001), it was established that direct distribution of goods to customers is associated with reasonable amounts of savings. On the other hand, outsourcing the services of agents or distributors minimizes on the labour requirements for the production and supply of good s to customers. Either way, SMEs incur these costs hence the need to assess the most viable options that would minimize costs while maximizing profits (Ellis and Pecotich, 2001).

The study established that SMEs intended to engage in a wide range of international activities with majority opting for exportation. Other activities include technical agreements, license agreements, subcontracting franchising, alliances, joint ventures, production networking, and sole ventures/ acquisition. Existing evidence shows that both direct and indirect evidence accounts for the biggest proportion of activities witnessed on the international markets. The decision by an SME to venture into a specific activity should largely be informed by its technical capacity, knowledge, and experience of the market (Karadag, 2015).

Internationalization of business operations requires adequate planning, mobilization of resources, as well as close monitoring and evaluation. In order to realize a smooth transition from the domestic market to the international market, adequate time is essential. Consequently, SMEs should spend adequate amount of time to execute their plan and keep it within the established timelines. Based on the findings of this study, most SMEs intend to internationalize after a period of five years. Essentially, the businesses are conducting their operations on a safe mode as they speculate the happenings within the European Union market. This duration will also allow them to make necessary adjustments before risking casting their nets deep into the uncertain market considering the short-term and long-term effects of Brexit (Gnyawali and Park, 2009).

It is important that SMEs gain adequate knowledge of the international markets before finally exploring the available opportunities. SMEs can increase their understanding of international markets through different ways such as conducting baseline and feasibility studies, working closely with international agents or distributors, searching information on the internet, acquiring an international firm, and recruiting employees with international experience. This study established that most Small and Medium-scale Enterprises in the United Kingdom gain their knowledge of the international markets by commissioning studies on specific dynamics of interest to their enterprise. The resultant information is reliable and obtained using established scientific methods thus enabling the SMEs to make informed decisions regarding their intentions to explore opportunities on the international markets (Berthon et al., 2008).

Majority of the SMEs reported adverse weather conditions as the most significant barrier to their internationalization process. Other barriers reported include tariff barriers, geographical barriers, language barriers, political instability, insecurity, and cultural differences. According to the Global Market Opportunities Report of 2016, adverse weather conditions pose the greatest risk to businesses operating on the international market platforms. Businesses should be privy to weather forecasting data available prior to making decisions regarding their exploration of international market opportunities. This will enable them to plan adequately and minimize potential losses occasioned by the harsh weather conditions. In reference to tariff barriers, SMEs ought to assess all the tariffs that the enterprise would attract prior to venturing into the international markets (Njogo and Safiriyu, 2012).

The findings of this study revealed some of the opportunities that SMEs in the United Kingdom intend to capitalize on during their internationalization process. A significant proportion of the SMEs intend to advance a unique product on the international market while others seek to tap in the untapped market segments, leverage on lack of competition, international media platforms, and reduced regulatory bottlenecks. Based on recent studies, a unique product that addresses the needs of consumers gives competitive advantage to a business while entering new markets. Consequently, the business enjoys some monopoly by determining the trends and setting the pace for such products (Raynard and Forstater, 2002).

This study established that SMEs required additional capital investments prior to internationalization. In addition, building their technical capacity, securing license agreements, and establishing the appropriate export channels were essential requirements. Recent studies confirm that internationalization is a capital-intensive venture that requires additional investments beyond what is available on the domestic markets. The process also requires a business to restructure its operations in order to address the needs of an expanded market that presents new challenges and opportunities in equal measure. In addition, SMEs also require personnel with international market experience, and equipment in order to internationalize their operations (Osotimehin et al., 2012).

Conclusion

The present study examined the potential and limitations facing Small and Medium-scale Enterprises’ internationalization process. Existing literature confirms that globalization has significantly influenced SMEs by expanding the market opportunities and creating novel challenges that threaten the very existence of the SMEs. Technological advancements have condensed the world into one interconnected global village with rapid flow information from one point to another. Consequently, SMEs have undergone restructuring in order to keep pace with the global trends.

Most SMEs venture into international markets venture into international markets in order to explore the perceived opportunities, execute their growth strategy, and wade of stiff competition on the domestic market. SMEs utilize various channels to achieve their internationalization namely direct exportation to customers, through subsidiaries, distributors, and agents. In the course of establish operations on the international markets, SMEs experience various challenges such as inadequate capital, adverse weather conditions, lack of technical capacity, lack of equipment, tariff barriers, geographical barriers, insecurity, and political instability.

Recommendations

In the first place, SMEs require additional capital in order to realize a smooth and effective internationalization process. Consequently, there is need to provide support to facilitate their internationalization process by availing additional resources that SMEs could borrow and invest in the enterprises. Most SMEs lack the required technical capacity required to explore the international markets hence the need to build their capacity by providing training and internship opportunities on the dynamics of international markets. Finally, there is need for additional studies on additional innovative strategies that SMEs can employ to overcome the challenges associated with the internationalization process.

REFERENCES

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APPENDIX 1: STRUCTURED QUESTIONNAIRE

INSTRUCTIONS

  1. lease provide your answers and comments in the spaces provided and tick ( ) in the boxes representing the most appropriate response. extra pages for the order 501372 15P

  2. Do not indicate your name on the questionnaire

SECTION A: COMPANY PROFILE

  1. State the location of your company headquarters

______________________________________________________________________

  1. How long has your company been in operation?

  1. 1-5 years

  2. 6-10 years

  3. 11-15years

  4. 16-20 years

  5. 21 years or above

  1. How many employees does your company have?

  1. 1-50 employees

  2. 51-100 employees

  3. 101-150 employees

  4. 151-200 employees

  5. 201-250 employees

  6. 251 employees or above

  1. Does the company have a management team distinct from the board of directors?

  1. Rate your performance on the domestic market on a scale of 1-5 with 1 being very unsatisfactory and 5 being very satisfactory

1=Very unsatisfactory

2=Unsatisfactory

3=Slightly satisfactory

4=Satisfactory

5=Very satisfactory

SECTION B: INTENTION TO VENTURE INTO INTERNATIONAL MARKET

  1. Why do you want to enter the international market?

  1. Perceived opportunities

  2. Profit maximization

  3. Growth strategy

  4. Stiff domestic competition

  5. A measure of last resort

  1. Which parts of the world does the company intend to trade?

Trade Market

Tick all that Apply

Tick all that apply

Australia

Nordic countries

South America

Middle East

  1. List the export channels that the company intends to use during the internationalization process (Tick any that applies)

    Direct to customers

    Through a subsidiary

    Via a distributor

    Via an Agent

    Nordic countries

    Middle East

    Australia

    South America

  2. Which international activities do you intend to engage in?

  1. Indirect exporting

  2. Direct exporting

  3. Technical agreement

  4. License agreement

  5. Subcontracting

  6. Franchising

  7. Alliance

  8. Joint venture

  9. Production networking

  10. Sole venture/Acquisition

  1. When do you want to venture into the international markets?

  1. Within one year

  2. 1-3 years

  3. 3-5 years

  4. 5 years or above

  1. State whether the following statements are AGREE or DISAGREE

DISAGREE

We have sought for information regarding international markets

Being active internationally is a strategic necessity

  1. Indicate whether the following statements are TRUE of FALSE regarding your international experience

OUR COMPANY HAS EXPERIENCE IN:

Marketing products in international markets

Dealing with international competitors

Collaborating with foreign authorities

Dealing with intermediaries on the international markets

Supplying goods and services to foreign customers

  1. How did you gain knowledge of the international markets? (Tick all that apply)

  1. Conducting studies on internationally established firms

  2. Cooperation with international agents and distributors

  3. Through the internet

  4. Recruiting employees with international experience

  5. Acquiring an international firm

SECTION C: LIMITATIONS FOR VENTURING INTO INTERNATIONAL MARKETS

  1. What are the main threats to your business do you anticipate as you venture into international markets?

  1. Geographical barriers

  2. Cultural differences

  3. Tariff barriers

  4. Language barriers

  5. Political instability

  6. Insecurity

  7. Adverse weather

  1. List the opportunities that you intend to capitalize on as you venture into international markets

  1. Untapped market segments

  2. Unique product line

  3. Lack of competition

  4. Minimal regulatory bottlenecks

  5. International media platforms

  1. What is required of your company in order to capitalize on these opportunities?

  1. Technical capacity

  2. More capital

  3. License agreements

  4. Export channel

  1. What does your company lack (resources and competencies) that limit its capacity to capitalize on these opportunities?

  1. Experienced personnel

  2. Equipment

  3. International agent/ distributor

  1. Give suggestions of what should be done to overcome the limitations in 17 above.

  1. Alternative financing

  2. Recruitment of experienced personnel

  3. Training existing personnel

  4. An international distributor/ agent

Thank you for participating in this study