4 Ws Intl Strategy Rf

Evaluation of the 4W’s of International Business Strategy:

Why, When, Where and for What Purpose do Businesses Seek International Markets as

Pertaining to New Hampshire Businesses?

Ryan Flynn

November 7, 2011

SNHU

Advisor: Dr. Massood Samii

ABSTRACT:

This paper explores the evolution of New Hampshire business' internationalization and

the development and implementation of the various strategies these businesses employ to

successfully operate in the international marketplace by asking four simple questions, referred to

as the 4 W’s of International Business Strategy: When, Where, Why, and What are the reasons

businesses decide to seek internationalization. A presentation of strategic theories and models

constitutes a brief literature review, evaluating prominent contemporary strategists Pankaj

Ghemawat, Mike Peng, Michael Porter and Massood Samii.

Businesses often internationalize as a result of external pressures rather than establishing

a predetermined course of action for internationalizing. Regardless of how a business enters

international markets, it is forced to develop a strategy for acting in the international

marketplace. After a company establishes an initial international presence, it will begin seeking

other opportunities. This argument will be proven by the survey responses.

Thesis

Internationalization occurs as a result of perceived necessity. Because a lack of

international experience may exist within a firm, or because the perceived risks and costs of

internationalization may be a hindrance or even a deterrent from internationalizing the firm, a

sound, robust market entry strategy is required to assess the risks, costs, and opportunities.

Table of Contents

Introduction ……………………………………………………………………………. 1

Reasons why Companies Internationalize: Why, When, Where and for What reason? 3

Market Entry: Activities and Methods of Internationalization ………………………. 4

Strategies of International Business ………………………………………………….. 5

Peng: The Strategy Tripod and Five Entrepreneurial Strategies ……………………. 6

Ghemawat: The CAGE Distance, ADDING Value, and AAA Frameworks ……….. 8

Conclusions for Literature Review ……………………………………………………. 12

Case Studies …………….…………………………………………………………….. 14

NEMO Equipment ……………………………………………………………. 14

Hitchiner Manufacturing .……………………………………………………. 19

Flynn Systems Corporation .…………………………………………………. 24

MultiNational Resources ..……………………………………………………. 28

Survey Results …………….………………………………………………………….. 33

Analysis ..……………………………………………………………………… 33

Survey Responses …………………………………………………………..… 39

Appendix A: Complete Graphs and Charts ………………………………………... 43

Introduction

International trade presents several complexities to a business or firm interested in

expanding beyond its domestic borders. This is especially true where new entrepreneurial

companies are “born global,” perhaps without ever considering the possibility of international

operations at the outset of establishing the new venture. This begs a series of four vital questions

that need to be answered to better understand how businesses use international markets to gain

prosperity. The four questions to answer are: Why did/does the firm (want to) enter international

markets? When did the firm decide to expand to international markets? Where did the firm start

in international markets – a local and/or similar country, or a foreign and different country and

culture? What were and are the experiences of operating internationally? Sooner or later, a firm

will need to develop a strategy to effectively and efficiently operate in the markets it has entered

in order to optimize its presence in those markets. Of course, these four basic yet vital questions,

if answered correctly, can open the gates to acquire more information about how firms develop

and implement strategies for operating in international markets.

Some firms happen to find themselves operating in international markets by chance,

while others wrestle with the prospect of moving some, several, or all aspects of their business

activities from purely domestic to international markets as part of their growth or sustainability

plans. While some find that the transition to international markets occurs rather naturally, as in

the case of “born global” firms, others will find it takes prolonged planning. It is well known that

that some motivators for moving to international markets include reducing costs, seeking new

markets (sales and development opportunities), seeking capital and increased competiveness. In

order to answer the 4 W’s -- Why, When, Where, and What—and to better identify the

Evaluation of the 4W’s of International Business Strategy
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motivators New Hampshire businesses have for seeking international markets, a series of

research activities have been undertaken with a sample of New Hampshire businesses.

New Hampshire is a diverse and attractive economy offering an interesting cross section

of firms and strategies. In this unique market, one can find small and medium sized

entrepreneurial firms born into international markets. Of the medium and large firms that have

started in New Hampshire, some have stayed domestic, while others have accessed international

markets, and others still, have attracted international investment directly to the state. It provides

an interesting research base from which we are able to evaluate the strategies employed to access

and operate in international markets. The sample is taken from a broad, quantifiable survey of

New Hampshire businesses and personal interviews with several New Hampshire businesses

ranging from textile makers to manufacturing, and high tech software companies. The

interviews are reflected as mini case studies which include Nemo Equipment, Hitchiner

Manufacturing, Flynn Systems Corporation and MNR.

Prior to the presentation of the research and case study analysis of the 4 W’s, this paper

will address the important question of what exactly strategy is and what it means. To accomplish

this, the paper will review the modern theories of business strategy through a brief evaluation of

the basic, common tools that contribute to a strategist’s tool-box, and will expand to include a

brief evaluation of Mike Peng’s Strategy Tripod and Five Entrepreneurial Strategies and Pankaj

Ghemawat’s CAGE Distance Framework, ADDING Value Scorecard and AAA Scorecard of

modern business strategy, assisting firms in developing stronger global positioning and

increasing a firm’s prosperity.

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Reasons why Companies Internationalize: Why, When, Where and for What reason?

The trade theory of absolute advantage presented by Adam Smith in 1776 and the theory

of competitive advantage presented by David Ricardo in 1817 have been modified to fit the

realities and needs of modern corporations. Businesses seeking to increase their profitability will

naturally begin to innovate and develop new approaches to positioning their company and their

products. Businesses may find that reducing costs by entering a market with a large pool of

cheap labor can reduce costs for manufacturing or service type activities. While others may find

that moving to international markets expands the horizons of existing, new or prospective

products and services that are either feigning in dominance in the home market, or have no

potential at market penetration, or are burdened by regulations not faced in some international

markets. While others still find internationalization by either pushing out into host country

markets or drawing foreign investment as a method for raising capital. Regardless of the reason,

the core motivation is to find new ways to increase revenue and profit and remain relevant and

competitive. In some cases, this may even reduce risk.

According to Mike Peng (2009), internationalizers are made up of three major groups:

enthusiastic, followers and slow. Enthusiastic internationalizers are leaders and see opportunities

and use various methods to increase profitability. Massood Samii (2011) indicates the methods

are typically based around knowledge acquisition, lowering costs, or increasing competitive

position through internationalization. Conversely, there are the followers. These are the

companies that follow their customers, distributors, suppliers and even competitors to the

international market place. Aside from the two poles of enthusiastic and followers, there are also

slow internationalizers. These typically are larger organizations with strong and dominant holds

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on domestic markets that are slow to enter the foreign market because they are waiting to exhaust

their domestic options.

Market Entry: Activities and Methods of Internationalization

According to Massood Samii (2011), once the decision to internationalize has been made,

it is time to decide which activities will be internationalized and where they will be located.

Then, it is up to the firm to decide how the business will be internationalized. See Figure 1

below. Ultimately, there are two approaches to internationalization: equity and non-equity. Mike

Peng describes the equity approach as based on FDI to the host country, where the

internationalizing firm will make some direct investment either through a joint venture, merger,

acquisition, a subsidiary, or just green field investment, or FDI in a project that will be wholly

owned and built from the ground up to the parent company’s exact specifications. The non-

equity approach is based on strictly importing or exporting, contractual agreements, i.e.

licensing, R&D contracts, turnkey projects, sales/marketing channel and distributorships.

Figure 1. Internationalization Tripod. Chapter 8. Massood Samii

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Strategies of International Business

The practice of strategy development and execution is something that cannot be taken

lightly. International business strategy has been heavily influenced by four fundamental ideas.

Two of which are the primary and common tools that have been used to build new ideas and

develop new, more sophisticated tools for the practice of international business strategy. The

common and primary basic tools employed in international business strategy development are

the S.W.O.T analysis, an internal and external survey of Strengths, Weaknesses, Opportunities

and Threats and the V.R.I.O. method, a complementary survey of Value, Rarity, Imitability, and

Organization. To enhance these tools, Michael Porter (Porter, 1980) developed the five forces

model of industry competition, dubbed Porter’s Five Forces. The model enables a business to

explore and identify risks and opportunities by responding to the five criteria in the Five Forces

framework. Those criteria are: Threat of new entrants, bargaining power of buyers, threat of

substitute products or services, bargaining power of suppliers, and the rivalry among existing

competitors. Porter’s framework, coupled with the VRIO and SWOT analysis, develop a robust

and convincing case for internationalization in targeted markets. Also, together they can provide

evidence to refrain from entering particular markets because limited visibility exists, and the firm

may not be able to compete on an even playing field. This tool is perhaps the most commonly

employed in addition to the S.W.O.T. analysis and V.R.I.O method in business strategy and

planning, but Porter’s tools also have some deficiencies, namely compensating for industry

factors such as clusters and complementary products and services. Due to these deficiencies,

more specialized theories and tools offered by Mike Peng and Pankaj Ghemawat further enhance

the practice and effectiveness of international business strategy.

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The Strategy Tripod developed by Mike Peng is a simple, streamlined, yet robust tool

that neatly complements the other tools. It leverages the time tested tools, SWOT, VRIO and

Porter’s 5 Forces to increase coverage of deeper international strategy issues. Peng’s model

enables users to evaluate the impact and the effectiveness of firms to operate in foreign markets

by framing strategy through the Strategy Tripod, see figure 2. The three elements of the tripod

seek to create both an introspective understanding and an external understanding of the markets

a firm intends to enter on the belief that a good international strategy rests on 3 legs, each of

which have to be developed in detail.

Figure 2. Peng’s Strategy Tripod

The base of the tripod consists of: Industry based competition, Firm-specific resources

and capabilities, Institutional conditions and transitions. Peng describes how he uses the other

tools, such as the VRIO, SWOT and Porter’s 5 Forces to manage the Strategy Tripod, and that

the other tools are necessary for building the basic framework of a good strategy. But, the

Strategy Tripod is a complementary framework that draws in elements of the other tools in a

more comprehensive manner. After addressing the criteria in the previous frameworks, a

strategist will have developed a strong understanding of the forces at play in the international

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market place. Evaluating industry based competition is a step that requires deep knowledge of

the market and the competitive forces at play both domestically and internationally. Developing

a strong response to this criterion is necessary to paint a detailed picture of the competitive

landscape. This is where elements of the SWOT and VRIO frameworks are helpful. Likewise,

in addressing the leg of firm specific resources and capabilities, a strategist will need to

determine the critical resources to sustainable business development and growth, and will also

need to determine the critical weaknesses. This will help determine where, geographically, the

business can be located. Finally, the evaluation of institutional conditions and transitions helps

the strategist develop crucial perspective on the political environment, as well as the macro and

micro-economic conditions and policy actions that will either facilitate or deter sustainability.

This aspect of the tripod will no doubt rely heavily on information collected during the Porter’s

Five forces exercise.

In addition to the Tripod, Peng presents the Five Entrepreneurial Strategies (Growth,

Innovation, Network, Financing/Governance, Harvest/Exit). He explains how to use these tools

in “dynamic environments” and when managing cultural differences, another critical element to

developing international strategies. The Five Entrepreneurial Strategies are useful for all types

of business, but target new firms that intend to launch straight into international markets, these

are “born global’ firms. The points of this strategy are different in that they apply to the

entrepreneur with an eye to starting an international business. The five strategy points are a

series of criteria for evaluating a combination of both governmental/administrative/institutional

infrastructure and industry competition and support. Peng identifies growth as the exciting part

of entrepreneurial ventures, and encourages the entrepreneurial strategist to investigate the

growth potential of new markets. Next is innovation. By assessing the growth potential of new

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markets, the entrepreneur should also evaluate supporting industries and innovative processes

and products in the target market(s). Network is a critical aspect of strategy because this is

where the entrepreneur looks for support and guidance – both financial and developmental and

growth. Financing and governance is also critical as it is the framework for structure of the

organization. It determines the sustainability of the organization, and requires a hard look at the

host country’s governmental structure and policies for business operations. Harvest and exit is a

requirement for long term planning and contingencies. This aspect of the strategy helps for goal

setting and will enable the strategist to identify milestones and opportunities. It also helps the

strategist know what to do when the time comes to exit the market. Another critical element of

internationalization is culture. Peng points to his contemporary, Pankaj Ghemawat, in his text as

a leader in cultural understanding.

Pankaj Ghemawat has developed a more complete tool set that further enables the

international strategist with a different and perhaps deeper perspective. The CAGE Distance

Framework, an evaluation of the impacts of Cultural distance, Administrative/Governmental

distance, Geographic distance, and Economic distance developed by Pankaj Ghemawat1 presents

a unique and interesting tool for international business strategy. Ghemawat claims the obstacle

that most firms face when they decide to internationalize is “distance.” In other words, the gap

that exists due to lack of understanding, comprehension, and willingness to accept, understand,

and work through the obstacles and barriers that exist between two starkly different cultures, and

even two relatively similar cultures. Developing an understanding and managing distance so that

it can be used as an advantage is Ghemawat’s reasoning for “rethinking” global strategy. This,

1
*Important to note about Ghemawat is that he believes the world is only semi-globalized at best. Claiming only 10% of the

world is truly using world markets to their full potential.

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in many ways, is an answer to Porter’s Five Forces Framework. Ghemawat’s primary argument

is through rethinking and understanding the varieties of distance, future strategists will have the

tools to foresee issues and scenarios before they arise; making their strategies more effective and

more efficient, thereby making the strategist more proficient in this practice. By first

acknowledging there is a gap between two countries, regardless of how similar they may appear,

the strategist can initiate a deeper investigation into the reasons for the distance in four very

specific, targeted areas critical to the sustainable internationalization of the firm. Ghemawat’s

additional major contributions are the ADDING Value Scorecard and the AAA Strategy Triangle.

The ADDING Value frame work is designed to explain actual business activities and

differentiators, really a robust expansion of the four key motivators for internationalization,

expounding on Porter’s Five Forces and Peng’s Tripod and 5 Entrepreneurial Strategies. The

acronym stands for: Adding volume, Decreasing costs, Differentiating, Improving industry

attractiveness, Normalizing risks, Generating and deploying knowledge and other resources.

This tool is used to dig deeper into the business activities by developing a comprehensive and

detailed picture that accounts for nearly all the elements of strategy development through one

simple framework. The ADDING Value Framework forces the strategist to dig and investigate

how, when, where and why it can add value by internationalizing. Each letter of the acronym

forces deeper investigation into a core element of business operations.

For example, A – adding volume, asks the strategist to identify not only the ways in

which the firm can grow, but what aspects of the new market will facilitate growth. Decreasing

costs is a common goal for firms, and it is necessary for the strategist to identify the various

ways internationalization will add value by decreasing costs. Differentiation is another key

aspect to internationalization, and this may be answered simply by being the first firm in an

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industry to seek international markets, or by offering a product tailored to international markets.

Improving industry attractiveness is a means for evaluating the overall industry, the operating

conditions, the supporting and competing industries, substitutes and threats, and the opportunities

to develop and grow. Identifying ways to improve the industry can greatly assist the strategist in

developing the other aspects of the framework, and also identify ways in which the firm can

improve its position within the industry. Normalizing risks is an element not found explicitly

described in the other strategy frameworks.

This element of strategy development is required to provide an opportunity to identify not

just the ways to minimize risks, but also to identify ways to capitalize on increasing risk and

optionality. Finally, generating and deploying knowledge and other resources is a way for the

strategist to identify channels for promoting the firm in a new market by leveraging the resources

of the host country(s) and expanding the firm’s reach. Consider this the yardstick of the strategy

development. This gives the strategist a way to measure knowledge (and other capabilities and

resources) development and transfer from the home market to the host market(s) and vice-versa.

In addition to the ADDING Value framework, there is Ghemawat’s final significant tool for the

international strategist, the AAA Strategy Triangle, see figure 3.

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Figure 3. AAA Strategy Triangle.

The A, AA and AAA scorecards help strategists better identify how a firm enters and

operates in a foreign market. The A’s stand for Adaptation, Aggregation or Arbitrage. A single

“A” based strategy will utilize just one strategic entry method. This mode of entry is typically a

first step to internationalization, where the firm is interested in testing the waters of

internationalization, or where only one aspect of the AAA scorecard is truly necessary to

establish a presence in an international market. “AA” strategies incorporate two AAs, making

them more dynamic, more flexible, and less risky. Typically this is where a firm is increasing its

market presence and/or looking for additional means of adding value and reducing costs, or

capitalizing on risks. While AAA strategies actually optimizes all three to create a deeper, more

robust market entry strategy for the firm making a total commitment to development and growth

in international markets.

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Conclusions

The field of international business strategy has developed slowly and methodically over

the past thirty years. This is in part due to the low-level of internationalization of firms. Porter’s

contributions are, no doubt, significant and have paved the way for other strategists to expound

on the Five Forces model of industry competitiveness. The theories and frameworks developed

as a result of international business theory and practical application are significant contributions

and necessary guides for new start-ups and existing businesses alike. Through the application of

at least one framework, there is evidence enough that a business can better understand the

internationalization process.

As businesses perceive a need to internationalize, it is critical they avoid the two largest

mistakes: overzealous growth without clear understanding of internationalization, and being

paralyzed, or at least responding too slowly because of a fear of internationalization. The tools

outlined and discussed in this text provide simple frameworks with which businesses can fairly

evaluate the risks, costs, and opportunities of establishing international operations. For small and

medium sized firms either “born global” or rapidly drawn into the international marketplace as a

result of customer demand, it may seem that developing an international strategy is irrelevant

since business opportunities are clear and present. For the established firm, it may seem that

strategy development is marginal because internationalization may start with an experimental

process of licensing or distributorship. However, complete strategy development is vital to

success over time, and must be built into the international business plan for all firms seeking

international markets. As Porter, Peng, and Ghemawat all prove in their frameworks, a thorough

assessment of the market will rapidly expose the risks and opportunities a firm can expect to

face. This will ensure success over the long term.

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References:

Samii, M. (2011) International Business SD
Porter, Michael E. (1980) Competitive Strategy, New York, Free Press.
Peng, Mike W. (2009) Global Strategy 2ND Edition. Mason, OH: South-Western Cengage
Learning.
Ghemawat, P. (2007). Rethinking Global Strategy: Crossing borders in a world where differences
still matter. Cambridge, MA: Harvard Business School Press.

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CASE STUDIES

Case Study: NEMO Equipment http://www.nemoequipment.com/
Interview: Special thanks to Nicole Chretien, Director of Customer Service; Tom Reynolds,
Director of Operations; Ryan Mateyko, Director of Sales Strategy; and Kate Ketscheck, Director
of Marketing and Public Relations

World-wide leader in innovative tent and outdoor gear design, NEMO Equipment is a
small design, research and development firm based out of Nashua, New Hampshire. NEMO
Equipment, designer of tents and other stitching intensive products, does not manufacture or sew
a stich of fabric for production and sales in the United States. New Hampshire’s, textile
industry is all but a fading memory. Some small, niche and specialty products still exist in the
U.S., but design firms like NEMO Equipment are the new face of success in textile production.

In 2002, Cam Brensinger founded NEMO Equipment with the intention of delivering
high-level design and engineering to the outdoor industry. Nashua, NH was an ideal location
due to the proximity to Boston and the Boston design community, and also offered a favorable
business climate for small businesses and start-up ventures in the state. Delivering quality is one
of NEMO’s highest values, which is stated directly on the website and is also the mantra of the
employees. The designs and finished products are innovative and of the highest quality, as was
demonstrated during a visit to the design center in Nashua, NH. From the outset and sale of the
first tent in 2006, the designs and quality were certainly innovative and captured great interest
and some high-profile customers including team NIKE/Balance Bar and the U.S. Navy SEALs.
As customer service director, Nicole Chretien stated, “The tents are consistently selected for
some of the most extreme conditions, and consistently out-perform other tents in their class.”
She conveyed a story of a professional snowboarder on a back country expedition in British
Colombia with other riders using larger brand equipment, and the NEMO tent was the envy of
the group for its strength, light-weight, and reliability in extreme wind and snow conditions.

In eight years, NEMO has grown to be a profitable company with strong networks of
production and distribution for the Asian and Austral-Asia markets, experiencing growth during

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the recession. NEMO offers two types of products: tents and sleeping pads and pillows.
Leveraging its numerous features, awards, and accolades from outdoor industry publications and
industry organizations, NEMO equipment is effectively using its strength as a patterned design
and research and development firm to optimize its operations. Given the exacting precision and
the demanding quality standards NEMO strives to deliver to its customers, it has developed a
strong, reliable production network capable of matching NEMO’s design standards with high
quality materials and manufacturing processes.

Internationalization
Upon entering the Nashua, NH mill building NEMO headquarters, something seems
amiss. The old tables on which the looms once rested are in instead an antique Singer sewing
machine is bolted to a now design desk. But, not a single stich for production products is made in
this facility. Instead, a 3D printer and a giant room, half the length of a football field, filled with
proprietary tools and products is what one sees.

Why, What reason?: According to Tom Reynolds and Ryan Mateyko, Director of
Operations and Director of Sales Strategy, respectively, domestic production costs for tents and
other outdoor equipment is prohibitive for large companies with deep reach and pockets, let
alone a small company focused on high quality and already using expensive materials and
processes. In fact, as Tom, Ryan, and Nicole point out, material production and stitching of
outdoor equipment, i.e. tents, backpacks, and sleeping bags has not been done, on a large scale,
in the United States since the 1950’s because of the soaring labor costs; and foreign countries
have offered abundant and inexpensive labor which has attracted U.S. businesses away from the
U.S. Moreover, they point out the quality of the stitching and access to a variety of materials is
far greater than what can be found in the U.S. That is a result of the stitching and textile
production industry shifting away from the U.S. over 60 years ago.

Where, What reason?: As a result, nearly all of outdoor equipment manufacturing is
done in the Pacific Rim, including NEMO Equipment’s. Just as suggested by Adam Smith and
David Ricardo in the theories of absolute and comparative advantages, different countries in the
Pacific Rim have developed highly specialized and efficient approaches to manufacturing very

15

specific pieces of outdoor equipment. And, as a result, clusters of manufacturers and textile
development have emerged2. For example, tent textile manufacturers and stitching companies
have developed a strong cluster in China. It is here that most of the world’s tent material and
stitching is sourced. There are varying levels of material and production, ranging from the basic
to the highly specialized and innovative that top tier and niche brands, such as NEMO use.

When, for What reason?: Because of the specialization and competition, it is easy to
keep costs down, and quality up. NEMO Equipment was able to access these networks of
manufacturers from the outset of its manufacturing operations. However, one major drawback to
Pacific Rim production is that shipping times and costs are not always definite, and can change
with little notice. Other difficulties include a lack of oversight and on-the-fly changes in the
event something needs to be addressed. And, there is always the looming fear that a design can
be copied and reproduced without consent or licensing. Yet, the low costs and specialization
provide a highly competitive manufacturing environment, enabling the design firms, such as
NEMO, to take advantage of the experience in the market place and to pass along the savings to
their customers.

In addition to the manufacturing benefits NEMO realizes through Pacific Rim
production, they are also able to leverage drop shipping from their high quality manufacturers.
Much of the finished product is returned to the Nashua, NH headquarters for distribution to retail
stores throughout the U.S. and Canada. However, orders destined for large distributors, such as
REI can receive large quantity drop-shipments direct from the manufacturer. Also, as a means of
reducing costs and carbon-footprint, NEMO can also ship directly from the manufacturer to its
largest market outside the U.S. : Japan and Australia/New Zealand. Having the advantage of
Chinese production brings NEMO closer to the Japanese and Australian markets, and to some
degree the European market.

2
Because one city or country develops specialization in a particular element of a piece of equipment, it does not
necessarily follow that the city and/or country specializes in other pieces of equipment or the equipment as a whole
unit, in the case of tents. For example, the best tent poles are made in Korea and Taiwan, but the tent fabric and
stitching is done in China for the best quality and price. However, sleeping pads are stitched entirely in Taiwan, and
backpacks are produced in Vietnam. This specialization is attractive

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At this point, NEMO relies solely on direct and wholesaling to its retail-outlet customers,
and incorporates some channel partners for sales in Asia, as that market is too far out of direct
reach. The Asian sales representatives better understand the needs and wants of the markets, as
well as the culture of the markets, enabling NEMO to focus on delivering the best possible
products to those markets, while focusing on developing their North American and European
markets.

Foreign currency risk
Exposure to foreign currency movement is always a concern when a firm has investments
of one form or another in a foreign country. NEMO limits its exposure to foreign currency risk
exposure because it does not have direct investments in other countries, and is able to
denominate payments in U.S. dollars. Despite having off-shore production, it is not directly
exposed to fluctuations as contracts are signed and executed in dollars over periods of time. This
is a nice luxury for a small company spread around the world. Relying on UPS freight logistics
also helps keep costs in dollars, at the NEMO accounting end.

Strategy
NEMO Equipment has established an effective international strategy by keeping costs to
a minimum and leveraging the over 60 years of development in off-shore outdoor equipment
manufacturing clusters. Born global, NEMO is a follower in the internationalization approach it
has pursued, following other, larger outdoor equipment manufacturers to their manufacturing
clusters. However, it has also found ways to rapidly overcome the CAGE distances described by
Ghemawat (2007), and is successfully outsourcing its development (Ghemawat, 2007). By
understanding the competitive forces at play between various manufacturers in China, Taiwan,
and Vietnam as well as the competitive forces within the outdoor equipment industry, NEMO
rapidly and readily identified the opportunities on which it could capitalize. Understanding
institutional challenges and making transitions into the Pacific Rim manufacturing were all part
of the initial business plan and development strategy. By addressing all of these elements in the
early planning stages, NEMO moved forward with its internationalization plans effectively, and
develop itself into a top performer in the industry. In retrospect, it appears that NEMO
effectively managed at least the basics of Peng’s Strategy Tripod (2009). The next stages of

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NEMO’s internationalization may include some foreign direct investment in sales and support
offices, which will complicate their strategy and increase the exposure to different forms of risk.
However, in NEMO’s short time, it has been highly effective at reducing its exposure to
international risk, while capitalizing on opportunities provided by the larger firms in the industry
absorbing more of the risk in the market place.

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Case Study: Hitchiner Manufacturing http://www.hitchiner.com/
Interview: Special thanks to John H. Morison III, Chairman; Marc Riquleme, Vice President,
Sales and Marketing; Tim Sullivan, Vice President Corporate Affairs and Services

Company and description/bio
Leveraging his knowledge from his experience at the War Production Board working
with a 5,000 year old lost wax metal casting process, A. Fred Hitchiner saw an opportunity to
commercialize the process for use in jet engine blades. Because of its high-precision, the casting
process was ideal for the new developments in post-war aeronautics and other precision casting
needs. Hitchiner founded the company, Hitchiner Manufacturing on Long Island, NY in 1946,
and quickly relocated to Manchester, New Hampshire to reduce costs.

Soon after the relocation, and as a result of Hitchiner’s specialty limited-production
approach, he soon found himself in financial difficulty. By 1949, Hitchiner had taken on an
investor and restructured the company so that he was left to sell the process and service to his
customers, while George Abbott Morison and his son John H. Morison were responsible for
managing and expanding business operations. George Morison had invited his son, John, who
had been working in South America back to partner in the Hitchiner venture. It is important to
note because South America and Latin America are critical to Hitchiner Manufacturing’s
internationalization story.

By 1956 the Morison management team had catapulted Hitchiner Manufacturing to a pre-
eminent place in investment casting and lost wax casting with sales reaching over $2 million.
John H. Morison said of the organization, “Private ownership has been a key to the company’s
growth and, more important, to serving the purposes for which my father and I acquired the
company in 1949 – to provide healthy employment opportunities and build a sound economic
base in the State of New Hampshire.” A sentiment also shared in an interview with John H.
Morison III, who also spent time working in South America.

While Hitchiner Manufacturing rapidly established itself in the thin wall investment
casting and lost wax casting market as a formidable leader in innovative processes by the early

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1960’s, it was attracting attention from manufacturers of high quality, high tolerance metal
products. This helped draw Hitchiner to international markets and attract the attention of up-and-
coming firms in need of a high quality, high tolerance, precision process for shaping metal.
Internationalization for Hitchiner Manufacturing reflects nearly all methods of
internationalizations ranging from joint ventures to licensing, to reseller agreements, and to
foreign direct investment. Hitchiner Manufacturing maintains international operations to some
extent in Latin America, Europe and Japan.

Why, What reason?: Hitchiner Manufacturing had begun exploring international markets
because it was constantly pursuing new growth markets. Starting with purely domestic markets
in 1949, it established a global footprint by the 1960’s. Selling a proprietary manufacturing
process and service, rather than its own product, forced Hitchiner sales teams to locate and
develop new channels of business. As a result, foreign manufacturers were sold on the value and
quality improvements in the more expensive Hitchiner process. Some of these new converts
became interested in adopting the technology and the process for their own foundries. Again,
not having an actual product, Hitchiner was able to license and sell its process and technology to
execute the process. Licensing started in the 1960’s with Nokia in Finland. Through the 1960’s
and 1970’s Hitchiner expanded to companies in France, the U.K., Australia, even Japan with
Nido Steel; and in the 1980’s, the Morison’s returned to their South American past and
established a joint venture with a Brazilian company. In just over 10 years of its founding,
Hitchiner Manufacturing had laid the ground work and had developed into a truly global
organization from its humble New Hampshire roots.

When, What reason?: Hitchiner Manufacturing had truly been internationalized since the
1960’s, but it was in 1986 that the internationalization strategy experienced a major
development: expansion into Mexico via joint venture. According to John Morison III, Hitchiner
Manufacturing was producing nearly every single golf club head in the world during the 1970’s
and into the 1980’s. Comparatively, golf clubs are more expensive to produce than other high
precision parts, requiring in some cases up to 150 touches by a human before completion, versus
other products, such as jet engine blades, requiring only a handful of touches by a human.

20

Because of the intensive labor, and added costs, Hitchiner began looking at alternative
production facilities. They launched Hitchiner S.A. de C.V. in Santiago Tianguistenco, Mexico,
signing a joint venture with a Mexican firm while other competitors were seeking Pacific Rim
manufacturing. Not convinced Pacific Rim manufacturing was the best possible way forward.
Hitchiner leadership invested heavily in modern, high quality tools and training to bring the
Mexican venture up to speed enough to support U.S. production with the same exacting quality,
but with reduced labor costs. Ultimately, Hitchiner S.A. de C.V. bought out their partner, and
now invests directly in Mexico.

Where, What reason? When asked why they decided against China and other Pacific
Rim opportunities, John Morison III and Marc Riquelme, Vice President of Sales and Marketing,
explained that the decision to expand in the Americas was simple because it is a true cost
savings. They stated there is too much risk and exposure in China and other Pacific Rim markets
coming from a variety of directions, and the cost savings on paper are not actual savings. At the
top of the list of reasons to not enter Asia were lack of direct oversight and shipping. The nature
of the Hitchiner process requires shipping of proprietary alloys for production, and the waste to
be returned to the factory of origin and melted down for recycling. Shipping costs coupled with,
perceived and real, unreliable delivery, decreased security and a magnified distance barrier –
cultural, administrative, geographic, and economic – really made the proposition of entering the
Pacific Rim less attractive than staying and developing a high quality facility in Mexico. Both
Morison and Riquelme are confident this decision has enabled Hitchiner to further the quality
gap between it and its competitors using Pacific Rim manufacturing. So much so, they have
noticed some customers coming back to the U.S. and even embracing Mexican production as a
quality upgrade, with the added benefit of close proximity to the United States, predictable
delivery schedules, more direct control and input over product development and production, and
secure manufacturing with stronger protections for patents and proprietary designs.

Foreign currency exposure risk plays a critical role in Hitchiner Manufacturing’s
international business. Because Hitchiner has operations in Mexico, Europe, and Japan, with
customers world-wide, terms are often negotiated in foreign currencies. Fluctuations in currency

21

can have dramatic impacts on the cost of goods and services being delivered to the customer.
While aggressive hedging strategies are not actively employed to mitigate the currency exposure,
some hedging is employed. Ultimately, being acutely aware of the fluctuations of the currencies
and the effects currencies have on raw materials from one country, production in the U.S. and/or
Mexico; shipping to foreign ports, and distribution in another country over extended periods of
time, invites risk to making or losing a deal based on fluctuations of the home and foreign
currencies. Of course, that is all part of risk inherent in transacting international business.

Strategy
Hitchiner manufacturing’s strategy has developed to include every method of
internationalization identified by Peng (2009), and has successfully, if unknowingly employed
Ghemawat’s CAGE Distance frame work (2007), to gauge the types of internationalization
strategy appropriate for different periods in its development and different locations around the
world (Peng, 2009; Ghemawat, 2007). Given the proprietary process and Hitchiner’s
commitment to quality, a higher level of control over the process was and is necessary to ensure
their continued success. As a young company and to this day, licensing and reseller agreements
have played an important role in Hitchiner’s ability to develop overseas revenue. It certainly
provided the groundwork to begin expanding operations into new markets. Then, of course
were the joint-ventures with the Brazilian and Mexican companies for actual manufacturing
production. The success of the joint-venture in Mexico, led Hitchiner to foreign direct
investment. From Hitchiner’s perspective, investing in Mexico made near perfect sense.
Retrospectively, the CAGE Distance framework clearly explains the decision (Ghemawat, 2007).
In the mid-1980’s getting to the Pacific Rim to establish a manufacturing facility of exacting
quality was a rather complex proposition. Shipping costs were high, infrastructure was poor, and
security, safety, control, and reliability were all questionable. Travel costs were high and the
cultural and language barriers were also high. Rather than investing in the Pacific Rim, on the
other side of the world with limited oversight and investment security, Mexico offered an
appealing alternative. Culturally, Mexico is certainly different than the U.S., but Morison II and
III had experience with South American businesses, reducing that distance. Administratively,
Mexico’s government was coming more in tune with U.S. as NAFTA discussions loomed and
trade between the two countries was increasing. Geographically, the two countries are

22

neighbors, which reduced travel times and enabled Hitchiner leadership to keep better watch
over the production and their investment, ensuring that their investment would flourish into a
lower cost, high quality facility that could handle more of the human labor intensive products.
Finally, economically, while Mexico is an emerging market and has its own struggles, its
economic distance is not too far from the U.S. to surprise keen investors.

Overall, Hitchiner’s internationalization and growth strategy has been very consistent,
following in line with their corporate mission, “To be the performance leader in investment
castings by extending the benefits of counter gravity casting via continuous process
improvement, unmatched operations efficiency and exceptional customer service.” Over five
decades, Hitchiner has proven its success in international markets through careful consideration
and resisting the temptation to follow its competitors for a couple of cents savings. As a result,
Hitchiner truly has established a sustainable growth plan that makes it the pre-eminent thin-wall
investment casting and counter gravity casting manufacturer in the world.

23

Case Study: FSC www.flynn.com
Interview: Special thanks to Hank Flynn, Owner and President

Founded in 1986, Flynn Systems Corporation [FSC] is a small specialty software
developer serving the needs of the niche Automatic Test Generation and JTAG/boundary-scan
test and programming communities in the greater electronic test and measurement industry.
Flynn Systems Corporation was founded by Hank Flynn in Nashua, N.H. as a response to a need
for inexpensive, thorough, robust and well supported tests by manufacturers of electronic
devices. Realizing the need for accurate, robust, and flexible tests, Flynn left behind a career in
engineering and marketing with several large multinational corporations to establish his new
venture.

By the mid 1980’s Flynn had developed a strong international network of design and test
engineers. Leveraging that network was a key to the success of the company. Given the small
ecosystem in which FSC lived, it was necessary for the company to immediately tap into a
customer base outside the U.S. in order to increase its market size. FSC was also being drawn to
the international market by its customers.

Through trade shows and customer inroads, it became apparent that FSC needed support
and representation in Europe. By 1990 FSC had established a reseller agreement with Seriem, a
French communications manufacturer. Later in the 1990’s, Flynn took on resellers in Germany
and Sweden. International markets account for nearly 30% of the business conducted by the
company, and FSC now has reseller agreements with sales and support teams in Germany,
France, India, China, Israel, and Russia.

Why, What reason?: FSC was developed in response to a known need for its type of
customized products and services from international connections identified through Flynn’s
network. France and Germany were two areas in which Flynn had spent significant time with
past companies, and maintained his connections to management teams in the US and abroad. As

24

customers have transitioned stages of projects from design and development in the US and
Europe to manufacturing stages in China and Malaysia, FSC has been pulled along.

When, Where, What reason?: Internationalization started almost immediately with sales
to GenRad, Teradyne, Digital Test Equipment and their customers. The first foray into
international representation occurred in 1990/1991 with the French company, Seriem. Signing a
reseller agreement, Seriem began selling FSC’s test tools and services to mostly French and
German Europe based corporations. As FSC’s products developed and evolved, a Swedish
customer, Kontest, approached FSC to enter into a reseller agreement for Scandinavian
electronics developers in 1998. FSC maintained the two relationships, then continued
development of new tools and services to meet changing needs. This brought the transition of
ATE Care from a valued customer to a valued reseller in early 2000. ATE Care recognized the
opportunity to complement their platform, and was eager to offer a product and service in
Germany and German speaking countries to compete with expensive European based tools.

While the relationships were developing and maturing, the paradigm of communication
was shifting from mailers, trade shows, magazine ads, phones, and face-to-face visits towards
internet advertising and telephone contact and follow up. By 2003, internet marketing had
become a central tool for FSC, reaching out to the world and any potential engineers shopping
for information and the types of boundary scan tools and services offered by FSC. This further
enabled the FSC direct sales method in the regions without an active reseller. During this time,
China and Russia also came online as strong and more trusted markets for proprietary electronics
manufacturing, as well as research and development.

In late 2008 and early 2009 FSC expanded beyond a traditional reseller agreement, and
entered into a strategic partnership which was part joint venture with 70/30 terms and a licensing
agreement with an Israeli test and development firm, StarTest, interested in bundling FSC’s
proprietary tools with their own tools to deliver complete solutions to the Israeli and Russian
markets. This was really a first for FSC, having been leery of the Russian market for a very long
time. This new partnership represented an interesting opportunity to enter a new and rapidly
developing market through the guidance of a trusted partner.

25

The most recent development in FSC’s internationalization has been to add a reseller for
China and Hong Kong, Keyware Technology, Co. This addition provides representation for
another rapidly growing test and development market. Given the unique cultural and language
characteristics of the Chinese market, adding Chinese some aspect sales and support is a
necessary strategic move to better connect with existing and potential Chinese customers.

What benefit?: Internationalization has enabled FSC to remain competitive in its industry
and connect with new customers around the world. While the U.S. remains its largest market,
having and maintaining a global sales network grants FSC to new markets and customers who
otherwise may not be aware of the tools and services offered by FSC. Because the competitive
landscape is global for boundary scan industry, it is important for FSC to have some presence in
major and developing markets around the world.

Understanding and identifying foreign currency risk is critical for any international
operation. Minimizing exposure to foreign currency risk is critical for large and small firms
alike. When asked how they handle orders from international companies, the answer was that all
orders are transacted in US dollars. Early on in the company’s history, it became apparent that
selling goods and services in a variety of currencies was going to be too complex. FSC’s focus
was and is developing software solutions, and therefore, has requested all customers to make
payments in USD. This eliminates FSC from having to convert foreign currencies to USD and
from having to worry about fluctuations in relative dollar values during the net payment terms of
the sale.

Strategy
Born global, FSC’s internationalization strategy has been to develop and maintain a
global presence in critical areas where there is a high density user population. Through the use
of customers-cum-reseller, reseller agreements with strategic partners – those where the FSC
product offerings complement the partners’ offering, joint venture engineering projects, and
licensing agreements to resellers, FSC has been successful in establishing a presence in
international markets. As a small software company, FSC does not stand to gain much, if

26

anything, by equity approaches, but rather realizes great benefit from non-equity approaches,
such as those described above.

FSC displays all three of Peng’s (2009) market entry types: enthusiastic, follower and
slow (Peng, 2009). While enthusiastic to embrace and enter international markets, FSC is more
so a follower when it comes to establishing a market presence vis-à-vis reseller agreements,
strategic partnerships, and licensing agreements. It is typically led into markets by customers
shopping and price comparing, and has been slow to penetrate many markets compared to its
competitors. However, it has been effective at establishing and managing international
relationships with distributors and customers through its transitions from a legacy product to a
developing product. By overcoming cultural distances and displaying openness to various
cultures, FSC has been able to slowly, but effectively navigate the channels of distribution
without becoming encumbered by the administrative obstacles of direct investment and equity
approaches to investment in foreign countries (Ghemawat, 2007). FSC’s strategy of maintaining
a safe distance and taking conservative steps towards internationalization, while conducting all
business in U.S. dollars has been ultimately effective. Further, it has enabled FSC to continue
servicing international markets with minimal overhead costs and very limited exposure to
transactional risks, and has kept FSC shielded from political and economic forces.

27

Case Study: MNR http://mnres.com/home.html
Interview: Special thanks to Christopher Wolfe, Owner and President

Exeter, NH based MultiNational Resources (MNR) was founded in the early 1990’s by
Christopher Wolfe in response to what he calls a “push-pull” scenario. After a buy-out and
change in strategic direction by his employer, Wolfe found strategic opportunity where former
customers were contacting him directly to maintain the connections Wolfe had developed with
the Chinese and Taiwanese manufacturers. That was the “push” part of the equation. At the
same time, Wolfe’s Chinese and Taiwanese manufacturer and distributor contacts were
contacting him to seek out leads and ways to continue selling the products they had been
manufacturing previously. Wolfe found himself in the middle of a great opportunity to leverage
his knowledge of Asian resources, Electro-Mechanical Design and Industry trends to create a
new company which provided high value added engineering together with low cost Asian
manufacturing.

MNR is a value-added engineering design and manufacturer of Human Machine Interface
(HMI) devices for original equipment manufacturers (OEMs). Examples of commonly used
HMI include cell-phones, remote controls, computer keyboards, keypads and I/O devices of all
kinds. These are critical to the effective operation of simple to complex machines alike that play
a fundamental role in our daily lives. Wolfe stated in an interview that the growing need to
connect the best aspects of U.S. engineering, research and development with the best attributes
of Asian production capabilities was really what got MNR going. Since its start in the early-late
1990’s, MNR has developed a strong presence in the HMI business. According to Wolfe, the
rapid developments and expansion of the cell phone market provided a lot of the early energy
and facilitated the rapid expansion of the business.

Boasting consolidated (with Taiwanese partner) revenue over $30 million, MNR has
successfully leveraged the best attributes of both U.S. research and development and Asian
production. Wolfe has maintained a privately owned operation with only six full-time
employees in the Exeter, NH headquarters, but over 400 employees in off-shore sites,

28

responsible for manufacturing, quality control, sales and distribution. This is a very interesting
example of a company using international markets to the fullest possible potential in order to
deliver customers the best possible products and service.

Why, What reason? Established as a small business focused on providing value added
engineering consulting services while connecting buyers in the U.S. and Europe with
manufacturers in China and Taiwan, MNR was born global, and forced to optimize international
relations. Wolfe explained that today, MNR supports over 250 customers in 28 countries on 5
continents, using a combination of direct investment, outsourcing and joint-venture reseller
channel partners. But, it started as a simple off-shoring operation. Wolfe had the advantage of
working directly with Asian manufacturers at his position with a major US electronics
contractor, and was able to easily bridge the cultural distance that others found too difficult.

Where, What reason? As original equipment manufacturers (OEM’s) are MNR’s main
customers, Wolfe’s ability to deliver high-value added engineering consulting services and pair
the proprietary design efforts with the right manufacturer saves customers money and energy in
development and sourcing. This capability was developed in the early stages of MNR’s launch,
as the development aspect of the business was the first to be internationalized. Most of MNR’s
customers were domestic U.S. companies looking for assistance in development and
manufacturing of HMI’s. Wolfe started by controlling design in the USA and outsourcing
production to vendors with whom he had developed relationships in his previous position. As
MNR’s business expanded, so did its interest in the vendors and the ability to obtain more
control over the processes and finished product. These levels of involvement led to MNR
gaining equity ownership with the vendors, and ultimately to the investment in and construction
of factories in China and Taiwan; ensuring MNR’s customers and designs were able to be
manufactured to the exacting standards on which MNR has and was building its reputation.
Now, MNR has manufacturing facilities in China and Taiwan.

When, What reason? The sales aspect of MNR followed a slightly different route to
internationalization. Where MNR was a leader in manufacturing internationalization, it was

29

more of a follower in the sales side of operations. MNR’s internationalization of the sales
operations was the result of MNR customers expanding to international markets, which drew
MNR to downstream customers as a response to filling additional needs and providing technical
service and knowledge for future developments. This organic process enabled MNR to carefully
select trusted technical sales people to interface with both domestic and international customers.
It also enabled MNR to better evaluate the competitive forces in the industry and identify the
best possible sales channels. Once MNR identified the sales channel resellers that best
represented MNR and the services it offered, MNR began investment into the channel partner
relationships. Now, MNR has sales offices in UK, serving Europe and Hong Kong, serving the
Asian markets.

What are the benefits?: Internationalization has enabled MNR to achieve its mission of
delivering the best possible engineering solutions at the lowest possible costs. Wolfe
commented, “by diversifying internationally we have successfully experienced a “smoothing” of
market variables as regions change (up/down/stagnant) they counter act each other, creating a
very smooth growth path and therefore saving the company from wild gyrations in sales and
profit.” According to Wolfe, MNR intends to maintain its internationalization efforts, as that is
the most effective and efficient way to remain the leader in the HMI industry. The type of
manufacturing and the human labor involved is not conducive to domestic markets, as domestic
labor costs are exponentially higher than what can be found in foreign markets.

With global operations and investments, MNR is certainly exposed to foreign currency
risks. However, MNR manages the risk by making all transactions in U.S. dollars. They offer
pricing with a foreign currency conversion, or in RMB (Chinese Yuan), leaving the opportunity
for future negotiations open in the event there are fluctuations in either currency quoted. But,
ultimately, all sales are completed in US dollars. Wolfe says they also will quote commodity
values when applicable. But, more often than not, their exposure to foreign currency fluctuations
is completely mitigated by conducting all operations in US dollars.

30

Strategy
Maintaining global operations from MNR’s Exeter, NH head-quarters provides deep
international reach and the ability for MNR to ensure the highest level of quality – both in
engineering services, and manufacturing – with the least amount of exposure and risk in foreign
markets. MNR has certainly developed a strong relationship with its Taiwanese partner that
relies on proven success and effective management and execution of MNR’s interest in its
investments in China and Taiwan. Because Wolfe was able to develop relationships through a
previous capacity, he was enabled to gain first hand understanding of the manufacturer and
production markets in China and Taiwan. The relationships he nurtured, which resulted in the
success of MNR have also been the channels by which he was able leverage his entrepreneurial
network to evaluate and harness the competitive forces in Asia. As an early starter in the Asian
HMI manufacturing market, he was also able to control developments in the manufacturing
industry to meet his and his customers’ needs. Coupled with a deep understanding of the
specific resources and capabilities required to excel, and the resources to fill his specific needs,
Wolfe was setting himself up for success in the HMI field. Additionally, Wolfe had enough
experience and knowledge of the market and obstacles he would be presented with to avoid the
pitfalls of internationalization. Maintaining global operations will further enable MNR to
develop new business in additional markets while bypassing some of the institutional problems
that can arise in foreign investment situations.

Moreover, Wolfe’s success is due in large part to his ability to close distance gaps that
others were unwilling to do on their own, or were unaware of processes and resources required to
reduce or eliminate particular distances. Wolfe was able to move right in and operate with the
Taiwanese and Chinese, as well as the Americans and Europeans. As the business developed, so
too did the relationships with the vendors and customers. These developments further improved
Wolfe and MNR’s position with vendors and customers alike. The most important relationships
are those with the vendors. Wolfe’s ability to overcome cultural distance with the Taiwanese
certainly led to his good fortune that has endured more than two decades. The relationship with
the Taiwanese has been the facilitator that has enabled MNR to limit the administrative and
economic distances faced by operating in Asia. The geographic distance has not been much of a
problem for Wolfe, as he describes it, because of the near vertical integration, exclusive design

31

and the close connection to the vendors in Asia, MNR has a fair amount of control over delivery
of finished goods.

Overall, MNR has developed and implemented a successful international strategy that
started at the very inception of the firm. In retrospect, it is clear that MNR has followed the Peng
Strategy Tripod and Ghemawat’s CAGE distance framework (Peng, 2009; Ghemawat, 2007),
and proven that both frameworks are effective in developing, establishing, and maintaining
international operations. The global strategy MNR has developed is certainly one that has been
effective and one that seems to provide the flexibility and structure that MNR requires.

32

SURVEY RESULTS

Method and Data

Data

The data analyzed in this study are returns from a 30 question survey distributed to 2100

businesses in New Hampshire, thanks to the New Hampshire International Trade Resource

Center (NHITRC) and the New Hampshire Manufacturing Extension Partnership (NHMEP).

The New Hampshire International Trade Resource Center (NHITRC) and New Hampshire

Manufacturing Extension Partnership (NHMEP) distributed the survey to their databases. The

NHITRC distributed the survey to 2000 people and the NHMEP distributed the survey to 100

people, for a total distribution of 2100 people during the month of August, 2011. There are 17

respondents at the time of writing, making the sample very small.

The survey consists of 30 questions, 20 of which pertain directly to international

operations and strategy. The key points the survey investigates are: When and why New

Hampshire companies decided enter foreign markets, what type of operations a company has in

the U.S. and foreign markets, whether or not there the New Hampshire based company is

investing in a foreign market or receiving investment from a foreign market, and identification of

the regions companies select for foreign operations.

These respondents represent a diverse sample of manufacturers, service providers, sales

and marketing organizations, agriculture, and high technology firms. The firms all have New

Hampshire operations, and are active in or are seeking to become active in some or all of the

world markets, such as Europe, Latin America, Asia, and Africa.

33

Method: Qualitative Survey

Returns from the survey are analyzed on question-by-question basis. The ten

inconsequential questions, such as name and contact information have been excluded from the

results and analysis.

Results

Company size: 57% of respondents worked at companies with over $10 million in revenue,

24% were in the $1 - $5 million range, and 29% are under $1million. Of those, only 6% of

respondents have 250 – 500 employees, while 83% of respondents are in the 1 – 100

employee category. And, only one company is a not for profit company.

Company Types: Manufacturers are the dominant group of respondents, accounting for

76% of respondents, while service businesses account for 24%. The breakdown for

manufacturers encompasses precision manufacturers (13%), green technology (7%), food

(7%), and biotechnology (7%). The remaining sectors include paper, printing, software,

geotechnical, natural cosmetics/USDA organic body care, telecommunications, building

products, and health security/access control. Respondents indicate that 73% of business

is derived from US government contracts, and the same percentage is derived from

foreign government contracts. Telecommunications respondents indicate that 80% of

their business is foreign government contracts, while only 5% is U.S. government

contracts. And, geotechnical firms indicate that 40% of their business is foreign

government contracts, while only 3% is domestic government contracts.

34

Service industry respondents account for 32 per cent of the total respondents and

include financial services (8%), management/strategy consulting (8%), education (8%),

and engineering (8%).

Only one respondent identified themselves as a research and development firm in the

engineering industry.

Internationalization: Of the 17 respondents, 16 replied that their firms include some level

international business, representing 94%. One respondent indicated while they do not

currently have any international activity, they are actively pursuing international sales.

Nearly one third (5 of 17) of the respondents indicate there business was “born global.” The

remaining twelve indicate their businesses entered international markets as a natural

progression of business demands and to remain competitive and/or seek new opportunities.

Of those twelve, only one entered because it was pulled into the international space.

Most respondents (76 per cent) are market leaders, delivering highly focused, unique

niche products and services. Four respondents operate on differentiation, that is low volume

and high margins, and just two operate on price, offering low prices and high volume.

International Activities: Eighty-two per cent of the respondents indicate that having

international operations increases their competitive advantage in their industry. The

remaining 18 per cent engage in international activities because it is necessary to remain

competitive within their industry. Almost half of the respondents, 9 of 17, import goods and

35

services. All 17 export goods and services. Interestingly, only 3 of 17 have international

investments, and only 2 of 17 have off-shore operations. Two companies receive foreign

investment, and only 3 are foreign owned. Of the 17 respondents, only two are actively

seeking investments in international markets.

The most significant international activity is sales and marketing, accounting for 76 per

cent of international business activity. The next most important international activity is

research and development at 35 per cent, followed by manufacturing at 29 per cent of

international operations. Customer support, service and warranty only accounts for 24 per

cent of international activity, and final production only represents 18 per cent of international

activity.

With regard to sales and marketing, 13 respondents identify sales and marketing as an

important aspect of their international strategy. Expanding into international sales and

marketing, responses cover a multitude of reasons, including strategic sales and marketing

relationships, capitalizing on a market’s potential upswing, and generally increasing revenue.

Research and development is the next most internationalized business activity. Reasons for

using international markets to conduct research and development and prototyping include

using other countries specialization in knowledge and tools to develop new and diverse

products, to relying on foreigners to know the market and regulations to best guide

development projects, to funding was offered in a foreign country. Most respondents

indicate they use a strategic partnership either a licensing agreement with a distributor or a

joint-venture.

36

Respondents who indicated manufacturing was internationalized cited closeness to

customers, reduced costs, and making products that are universally accepted as the primary

reasons for entering international markets. One respondent indicated that “the weak US

dollar makes buying American products attractive even with a VAT.”

Customer service and warranty activities in the international market were moved to

international markets to better serve international sales and marketing operations, and to be

closer to the customer. One respondent stated internationalized service is critical because

service is how they differentiate themselves from cut rate Asian manufacturers.

Why internationalize: Every respondent cites expanding markets and increasing sales was the

number one reason for entering international markets. Secondly, keeping up with

competitors and meeting customers demand accounts for 47 per cent of respondent’s

responses. Only five respondents indicate internationalization as a way to create a

competitive advantage, and interestingly only one respondent internationalized to reduce

costs.

Where companies are internationalizing: New Hampshire companies are predominantly

investing in Europe (71%) and Asia(59%) is the second most sought after market. Latin

America and Caribbean countries represent only 29 per cent of international investment.

Other specific countries include Canada (12%) and Australia/New Zealand (12%), and the

Middle East (6%).

37

Conclusion and Findings

Internationalization, according to the results from this small sample, is a critical aspect of

New Hampshire businesses. The predominant responses to current and future

internationalization plans center around expansion of market size and sales opportunities. Every

respondent is interested in increasing sales in the international market, and 76 percent have taken

measures to establish some level of international sales presence through strategic alliance and/or

joint-venture. Interestingly, for a heavy bias on manufacturing, there is only one respondent

seeking international markets to increase market share based on price, and only one respondent

seeking internationalization to reduce costs. Otherwise, most respondents indicate selling high

quality, high value, low volume in niche markets is how they operate in international markets,

with most production done here in New Hampshire. This indicates New Hampshire businesses

have developed a unique advantage that positions them well for operating in international

markets. They are adding value and taking advantage of the market conditions here in New

Hampshire to position their companies and products in strategic areas around the world.

38

SURVEY RESULTS
For a complete list of results, please see Appendix A.

What is the approximate size of your company?
# Answer %
1 Less than $1 million 28%
2 $1 - 5 million 24%
3 $5 -10 million 10%
4 Greater than $10 million 38%

Approximately how many employees do you employ?
# Answer %
1 1 to 10 38%
2 10 to 50 17%
3 50 - 100 21%
4 100 - 150 7%
5 150 - 250 3%
6 250 - 500 3%
7 500 -1000 0%
8 1000+ 10%

Is your company a for profit or not-for-profit firm?

# Answer %
1 For profit 97%
2 Not for profit 3%

What is your business? Manufacturing, service, research and
development?

# Answer %
1 Manufacturing 66%
2 Service 41%
3 Research and Development 3%

If you are in a manufacturing business, is it (check all that apply):
# Answer %
1 Precision Manufacturing 16%
2 Green Technology 8%
3 Agriculture 0%
4 Food 4%
5 Bio Technology 4%

39

6 Chemical 0%
7 Other, please explain 52%
Approximately what percentage of your
8 business comes from U.S government
contracts? 68%
9 business comes from foreign
government contracts? 68%
10 N/A 24%

If you are in a service business, is it (check all that apply):
# Answer %
1 Financial Services 10%
2 Management/Strategy Consulting 5%
3 Logistics 5%
4 Education 5%
5 Engineering 14%
Approximately what percentage of
your business comes from U.S.
6 government contracts? 29%
Approximately what percentage of
your business comes from foreign
7 government contracts? 38%
8 Other? Please explain. 29%
9 N/A 48%

If you are in a research and development business, is it (check all that
apply):
# Answer %
2 Management/Strategy Consulting 0%
3 Engineering 15%
4 Other 0%
5 business comes from U.S. government
contracts? 0%
6 business comes from foreign government
contracts? 0%
7 N/A 85%

40

Does your company currently engage in any form of international
business? This includes importing and exporting goods and services,
off-shoring, in-shoring, or foreign direct investment.
# Answer %
1 Yes. Please continue with the survey. 95%
2 No. Please answer the next question only. 5%

Does having international operations give your company any
competitive advantage?
# Answer %
1 Yes 85%
2 No 15%

At what part of the value chain are businesses leveraging the
international marketplace, what were and are their expectations from
going international, what advantages do they have by being
international? Please check all that apply and provide some input in the
open boxes as to why you use international markets for these activities.
# Answer %
Research and Development/Design &
1 Prototyping 40%
2 Manufacturing 40%
3 Final production 25%
4 Sales & Marketing 70%
5 Support & Customer Service/Warranty 25%

Why did your company decide to go international?(Choose all that
apply)
# Answer %
1 To create a competitive advantage 40%
2 To reduce costs 15%
3 To keep up with our industry/competitors 55%
To expand markets/market share / increase
4 sales 90%

Why is the international marketplace attractive to your company?
(Choose all that apply)
# Answer %
1 It enables us to expand to new markets 95%
2 It enables us to reduce costs 20%
3 It is more efficient 0%
4 It provides increased opportunity for 75%

41

growth
5 It keeps us competitive 70%
6 It made us competitive 10%
7 It increases/improves innovation 45%

Where are your company’s international operations?
# Answer %
1 Asia 60%
2 Africa 20%
3 Europe 65%
4 Latin America/Caribbean 35%
5 Other 45%

Where is your company planning to invest (check all that apply)?
# Answer %
1 Asia 40%
2 Africa 5%
3 Europe 40%
4 Latin America/Caribbean 10%
5 Other 60%

Are these investments for (check all that apply):
# Answer %
1 Research and Development/Design and Prototyping 15%
2 Manufacturing 25%
3 Final Production 10%
4 Sales and Marketing 75%
5 Strategic Alliances/New Channel Partnerships 45%
6 Joint Ventures 15%
7 Support/Customer Service and Warranty 35%
8 Greenfield investment 0%

How do you compete within your industry (check all that apply)?
# Answer %
1 On price - low prices and high volume? 20%
On differentiation - low volume and high
2 margin? 25%
As a market leader - highly focused, unique
3 niche products/services? 80%

42

APPENDIX A.
COMPLETE SURVEY RESPONSES

What is the approximate size of your company?

# Answer %
Less than $1
1 29%
million
2 $1 - 5 million 24%
3 $5 -10 million 0%
Greater than $10
4 47%
million
Total 100%

Approximately how many employees do you employ?

43

# Answer %
1 1 - 10 35%
2 10 - 50 24%
3 50 - 100 24%
4 100 - 150 6%
5 150 - 250 6%
6 250 - 500 6%
7 500 -1000 0%
8 1000+ 0%
Total 100%

Is your company a for profit or not-for-profit firm?

# Answer %
1 For profit 94%
2 Not for profit 6%
Total 100%

What is your business? Manufacturing, service, research and development?

44

# Answer %
1 Manufacturing 76%
2 Service 24%
Research and
3 0%
Development

If you are in a manufacturing business, is it (check all that apply):

# Answer %
Precision
1 13%
Manufacturing
2 Green Technology 7%
3 Agriculture 0%
4 Food 7%
5 Bio Technology 7%
6 Chemical 0%
Other, please
7 67%
explain
Approximately
what percentage of
your business
8 73%
comes from U.S
government
contracts?
Approximately
what percentage of
your business
9 73%
comes from foreign
government
contracts?
10 N/A 13%

45

Other, please explain Approximately what percentage of Approximately what percentage of
your business comes from U.S your business comes from foreign
government contracts? government contracts?
not manufacturing
Paper 0 0
printing none none
Software 0 0
Geotechnical 3 40
Natural Cosmetics/USDA Organic
0 0
Body Care
Software 0% 0%
Telecommunications 5% 80%
Building Products 0 0
Health Security/Access Control
5 0
5 5
0 0

If you are in a service business, is it (check all that apply):

# Answer %
Management/Strategy
2 8%
Consulting
3 Logistics 0%
4 Education 8%
5 Engineering 8%
Approximately what
percentage of your
6 business comes from 23%
U.S. government
contracts?
Approximately what
percentage of your
foreign government
contracts?
8 Other? Please explain. 15%
11 N/A 69%

46

Approximately what percentage of your Approximately what percentage of your Other? Please explain.
business comes from U.S. government business comes from foreign
contracts? government contracts?
5% 2%
0% 0%
0 0 Import/Export Consulting
5
Distributor of heating equipment
manufactured outside of the US

If you are in a research and development business, is it (check all that apply):

# Answer %
Management/Strategy
2 0%
Consulting
3 Engineering 11%
4 Other 0%
Approximately what
percentage of your
U.S. government
contracts?
Approximately what
percentage of your
foreign government
contracts?
7 N/A 89%

Does your company currently engage in any form of international business? This includes importing and
exporting goods and services, off-shoring, in-shoring, or foreign direct investment.

47

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