Current Development in Exports - Term Paper Example

Compare and contrast the approaches to international market selection used by Small and Medium-sized Enterprises and Large-Scale Enterprises. Introduction Most of the literature on international business centres basically on large multinational corporations. Nevertheless, current development in exports has been fuelled by smaller enterprises that incline to have less resource and, as a consequence, are not flexible in selecting suitable markets and ways of entry (Alon, 2004). According to Knight (2001) small and medium-sized enterprises (SMEs) now are responsible for a considerable amount of exports from most of the developed countries. The reason is that these firms do not wait till they grow domestically before attempting international customers. Alon (1999), for instance, detected that in the retailing sector, newer firms will probably try to internationalize. The first and the foremost factor that has to be considered is the country in which the firm wants to enter. It is impossible and not practical to attempt entry into all the 192 nation states. In addition, not all countries provide the same market prospective. Thus companies will have to carefully select where and when to expend and expand their efforts and restricted resources (Alon, 2004). Similarities between SMEs for Selection of International Markets The present models for market selection and analysis have serious limitations as they link to small and medium capitalist and family enterprises. Small and Medium firms do not have much loose resources to dedicate to international research and elaboration. The vital resources include capital (money), knowledgeable personnel, international business attainments, management care, and knowledge about foreign markets. This only means that such firms do not have or possess limited resources to hire researchers or even utilize their own people (Alon, 2004). Very few SMEs could sell shares to outsiders due to lack of ways in which they were organized. This resulted in a position to increase equity on the exchanges and they could not gain from the amalgamation of commercial and banking services that large worldwide banks allowed for. The banks were also not in a position to offer them long term loans but could provide only short-term loans. Differences between selection of Small Scale Markets or Medium Scale Markets Several small companies have niche products which has a great potential in the emerging markets. But these markets also possess a greater degree of political risk and macroeconomic variations (Welsh and Alon, 2001). For instance, Turkey can be an excellent market for a small company in the microelectronics industry. This is because of Turkey's modernization attempts in the 1990s, the institution of a big military sector, and governmental backup for eminent technology (Murillo, 2000). In spite of its modest size and unbalanced political atmosphere, Israel also extends substantial potential for high-tech products because of its high degree of technical know-how and trading associations with the electronics industry in the United States and Europe. Alon and Welsh (2001) state that “SMEs in developing countries such as India, China, and Brazil. Because of their industrialization efforts, less developed and emerging nations often have pent-up demand for high-tech products from the industrialized world.” According to Gankema, Snuif, and Zwart (2000) SMEs follow five phases in their internationalization: (1) Domestic marketing, (2) Pre-exporting and evaluation, (3) Experimental involvement, (4) Active involvement, (5) Committed involvement. Jones (2001) claimed that “traditional models--such as the step-stage model of internationalization--are being challenged by a wide range of emerging patterns for SMEs, and that these firms are driven into the global arena as a response to international business influences, opportunities, threats, and imperatives. Increasingly, the SMEs' competitors, customers, suppliers, and employees have come from overseas. Thus, an international orientation has become a necessity rather than an option for many companies”. Brewer (2001) with the help of Australian case studies formulated a country-selection framework and he based it in four steps: (1) Launching a possible country-set by corporate policy and virtual exceptions, (2) Using sources to identify/prioritize countries, (3) Using sources to appraise the target country founded on market potential and competitiveness, and (4) Choosing target countries. Brewer states that the informants mentioned in identifying/prioritizing countries are manufacturing agents and outside researches. But if SMEs choose their international contacts simply depending on agents and researches will surely miss out on markets with great prospective. A practical approach to selecting international markets is favored. Hi-Tech (pseudonym) which was instituted in 1998 has a present sales volume of around $4.5 million per year and 65 workers. Around 80% of sales are to the U.S. government and military, 20% is to mercantile purchasers, including aerospace, the oil and gas industries, and satellite manufacturers. The firm wanted to expand to a foreign country and appointed researchers and sources to study the markets of India. Now at present the firm is able to increase its foreign sales to around 30% of total sales. Some researchers recommend that government programs which promote international business may sidetrack the SME's (Hi-Tech) awareness away from its core capacities in product introduction (Acs, Morck, and Yeung, 2001). This is as the SME's resources are inadequate and, by getting into the value chain of recognized multinational enterprises, it is at a competitive disfavor. The Department of Commerce provided useful information to Hi-Tech in this regard which helped the firm to expand. Tiessen, Wright, and Turner (2001) contended that a firm's international Web usage is a function of environ factors and organizational factors. Mutually these factors establish the intensity of cultural and linguistic adjustment and functional complexity. Hi-Tech has a Web site which renders both information and interaction, but it does not carry out any transaction over the net nor does it have any Web-enabled business. Had the firm taken web enabled business it would have made more sales than it presently makes. Karagozoglu and Lindell (1998) found that internationalization of high-technology SMEs was often a procedure of comprehended strategical chances in the host market accompanied by queries from abroad. Wolff and Pett (2000) studied and discovered that “the relative size of a small firm affects the competitive pattern of its exporting practices. The larger of the small firms have greater resource bases and are, thus, more competitive internationally, but no difference exists in their export intensity.” Chetty and Holm's (2000) emphasized that “An organization's network is partially responsible for the SMEs internationalization strategy.” They have in particular mentioned in their study, the collateral relationship of the international business adviser with the organization which may affect its internationalization. Critically examine the value of an internet-based business model in targeting less-developed country markets. Introduction The development of Internet based businesses, commonly known as dot coms is nothing but dramatic. It has overshadowed the historical development forms of other spheres of the industry. During the past many firms which do business through the Internet were able to come out with their own unique proposals to win in the business. For example Amazon.com established how it is potential to "dis-intermediate" the delivery chain and produce new value out of it. Companies such as Hotmail, and Netscape did business by rendering free products and services while AOL and Yahoo discovered new revenue flows for their businesses. It is progressively becoming clear that the suggestions used by these organisations in their business could jointly build the building chunks of a business model for an Internet based business. Several editions of these former enterprises and some new ones being introduced by recent Internet ventures have underlined the need for some hypothesis building in this area. According to Bacharach (1989) the need of theory is two fold that is to organise and to communicate clearly. Wallace (1971) delineated a taxonomic method to theory building, which widely comprises of observation, installation and deduction. The next step in theory building would be concept creation, suggestion establishment and proposal placement. E-business is in reality business activities which are carried over the internet. The last decade saw these fantastic information technology innovations. Firms like Charles Schwab, Wal-Mart, Dell, and Capital One were able to attain tangible advances in their operational competence and customer intimacy. They integrated e-business into their business and their achievement was made known to the world (Clemons and Hitt 2001). But the other side of the coin was that many firms which engaged in e-commerce were far behind on the technology curve and they were not able to derive any business value for themselves (Barua and Mukhopadhyay 2000). Baffled by the desegregated proof, investigators and practitioners are under pressure to establish whether e-business returns a value proposition pondered in firm performance, and, if so, what components add to e-business value. Business Models for Internet based e-commerce if Good for Emerging Economies Schlachter (1995) branded five potential revenue flows for a web site. These include contributions, shopping mall procedures, advertising, computer services and accessory ancillary business. The importance was to depict how revenue models which existed in the brick and mortar setting could be followed in a web based business as well. Fedwa (1996) acknowledged seven revenue generating business models. According to Panagariya [21, p.969]: “Given the cost savings offered by internet technology and relative ease with which it can be provided, they [i.e. LDCs] can now skip several stages of technological development through which developed countries had to go. Stated differently, developing countries are much farther inside the current technological frontier and, therefore, have larger potential benefits from moving to it”. An e-business model is merely the principles a company adopts in order to create a lucrative business on the Internet. The internet is the most perceptible symptom of the shift to a intercommunicated economy and has the prospective to transform the way in which firms operate and compete in Emerging Economies. Notionally, the internet renders lesser development countries (LDCs) with the essential property to become a global player by universal marketing and documenting. In reality for the LDCs, IT could prove to be a unique chance to jump whole phases of industrial development. For instance Singapore is an example of an LDC which has productively tapped the IT revolution by an all-inclusive knowledge-led growth policy and has consequently leapfrogged entire phases of development. There are problems in the emerging economies of the Middle East with regard to e-business. The main problems are poor technology infrastructures, low levels of education and literacy, and an extensive crack between the not reusable income of the comparatively hardly any "haves" and the more plentiful "have-nots." The least requirements are electricity, telephone lines, a terminal competent to interact across the communications lines. All these factors contribute to the digital divide which means people do not have access to ICT with adequate reliability or effortlessness, or even are not able to access it at all. Egypt and Jordan have been comparatively progressive in building Internet connections; but countries like Saudi Arabia have displayed more confrontation to permitting extensive contact to the Net. But at the same time Internet access is very restricted in Syria, and Libya and Iraq forbid any kind of Internet access. Bahrain and Tunisia explicitly check Internet traffic, and the United Arab Emirates and Yemen use substitute hosts that can preclude users from getting at "undesirable" sites. Iran permits access, but the level of the traffic supervising in that country is unsure (Alterman, 2000). Conclusions The study above contributes to some decisions about the purpose of Internet in the economic development of a developing country. The first vital study is that Internet is exploited by an intellect. This is in particular true in emerging economies due to their poor telecommunication infrastructure and English language problem. The word literate is significant here as it also means that other bright and/or responsive people may not possess the required skill in written language. In essence we can say that there is more room for an administrator than for an artist in net. The main problem is that there is a deficiency of solid agreement about e-commerce among managers in emerging economies who do not support e-commerce. Corporate culture in greater part of the enterprises does not encourage the introduction of information technology. Business coalitions and relationships are prevailed by very old personal “old-boys” links (Martinsons, 2002 and Zhao, 2003). In the future, researchers can make use of this study of the e-market process model to analyze the e-markets in other developing countries. They can also see how the exceptional business environ features of these countries bring fluctuations in value creation schemes for their e-markets. References 1. Acs, Z. J., Morck, R. K., and Yeung, B. (2001). 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Journal of Small Business Management, 34-47 26. World Bank (2001) World Development Indicators (Washington, DC, World Bank). 27. Zhao, J. (2003). “Analysis of Business to Business Electronic Markets in China: Theoretical and practical perspectives,” Proceedings of the 5th International Conference on Enterprise Information Systems, France, pp. 377-385. Read More