Chapter 5: International Niche Marketing Strategies for Small- and Medium-Sized Enterprises

SME international marketing strategies
1.Exporting
2.International niche marketing
3.Domestically delivered or developed niche services
4.Direct marketing including e-commerce
5.Participation in the international supply chain
SME Exporting (why they do it)
reactive stimuli:

-adverse domestic market conditions
-opportunity to reduce inventory
-availability of production capacity
-favourable currency movements
-increase country markets and reduce market risks

proactive stimuli:

-attractive profit/growth opportunities
-ability to easily moody products for export marketers
-public policies for export promotion
-foreign country regulations
-possession of unique products
-economies resulting from additional orders

Barriers to internationalisation
-Shortage of working capital to finance exports
-Inadequate knowledge of overseas markets
-Inability to contact overseas customers including finding the right partner and distribution channels
-Lack of managerial time, skills and knowledge
Risk factors for SME internationalisation
SME’s have little influence over environmental change and recession

Can extend themselves financially by growing too quickly

International Nicke Marketing
firms become a strong force in a narrow specialised market of one or two segments across a number of country markets.

segments must be too small or specialised to attract large competitors.

Essentials of Niche Marketing
products/service must be highly differentiated, recognised by customers and other participants in the international supply chain and have clear positioning. To develop and sustain the niche the firm must:

-have good information about the segment needs
-have clear understanding of the important segmentation criteria
-understand the value of the product niche to the -targeted segment
-provide high levels of service
-carry out small scale innovations
-seek cost efficiency in the supply chain
-maintain a separate focus (E.g. by being content to remain relatively small)
-concentrate on profit rather than market share
-evaluate and apply appropriate market entry and marketing mix strategies to build market share in each country they wish to become involved in

Reasons for outsourcing
-reducing capital requirements of business
-Managing difficulty of developing quickly
-improving flexibility
-firms reluctant to take risks in non-core areas
-economies of scale of suppliers
-expertise of business support service providers
-downsizing may leave management resources stretched and unfocused
Disadvantages of outsourcing
-loss of know-how
-costs of managing outsourced supplies
market concentrators
typically smaller firms that focus their internationalisation on a small number of geographic markets
market expanders
typically larger firms that focus their internationalisation on a larger number of geographic markets
SME advantages from internationalisation
-opportunities for learning from working with MNE
-security through reliable and predictable ordering
-able to focus on production and technical issues instead of having to focus on changes to the market, customer and competition
SME disadvantages from internationalisation:
-need for dependence on one/two major customers
-internationalisation driven by demands of MNE
-continual pressure to improve product and operations
-weakening of external marketing capabilities
McKinsey 7S framework
1. Style: the management and operation style of the firm often reflects the personality, standards and values of the owner.
2. Skills: the skills needed to carry out the strategy vary between country. Levels of quality and education of staff may vary, so it is important to identify and build necessary skills.
3. Staff: people need to be capable, well trained, and given jobs fit for their talents. Recognition of contributions, criteria for advancement, and appraisal/disciplinary actions vary between countries.
4. Shared values: need for employees from all backgrounds to understand what the organization stands for, where it is going and share the same values.

Structure, Systems and Strategy focus on hardware and software.

Levels of internationalisation (5 exporter types)
1. Passive exporter: lacks international focus, and perceives export markets as having a high hassle factor. See their market as primarily home based.
2. Reactive exporter: sees export markets as a secondary to the domestic market but will put effort into dealing with key export accounts. Don’t invest in doing foreign business, but will follow up for repeat orders.
3. Experimental exporter: beginning to develop a commitment to exporting and starting to structure the organisation around international activities. Develop alliances with export partners, build better products/services by using info from their successful markets.
4. Proactive Exporter: focussed on key markets, and devotes substantial amounts of time and resources to entering and developing new markets.
5. Committed exporter: exporting is integral to the business and sees the domestic market as just another market.
Reasons for SME failure in international markets
-Failure to effectively scan the international environment
-Over dependence on one product
-Ease with which larger, more powerful competitors or a number of smaller local competitors can copy the idea
-Failure to respond to worldwide changes in customer needs
-Failure to plan financial resources
-Failure to plan for fluctuation in currency values
-Failure to manage and resource both market and operations expansion
-Prohibitive cost of enforcing patents and trademarks in foreign courts which may favour local firms