The document discusses international growth and expansion for small and medium enterprises (SMEs). It provides statistics showing that most SMEs do not engage in international business. The main internal and external impediments to internationalization for Belgian and European SMEs are discussed. It also shows that niche players tend to internationalize more quickly than mass product companies. Several reasons for why small firms may fail when expanding abroad are presented. The benefits and costs of internationalization are weighed, including transaction costs, risks, and whether the business model is suitable for foreign markets. The International Growth Radar is introduced as a tool to evaluate all these factors and determine attractiveness of international markets.

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INTERNATIONAL GROWTH RADAR
Prof. Leo Sleuwaegen and Sarah Demeulemeester

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Ondernemend Vlaanderen
Creatiever maken
Flanders DC - Missie
Creatief Vlaanderen
Ondernemender maken

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Most SMEs don’t go international

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Exporting SMEs as a per cent of all SMEs
24%
0%
10%
20%
30%
40%
50%
F P IS EL E FI NO UK I NL D B IR S CH A DK L LI Total
Source: EC 2003

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External impediments for Belgian and European SMEs
43
22
11
11
8
8
7
6
45
19
13
12
8
5
7
3
0 10 20 30 40 50
Never considered internationalisation
No external impediments
Current regulations and laws
Insufficient capital and financing
Insufficient information
Insufficient advise and support
Cultural and linguistic differences
Other
Belgium
EU
Source: EC 2003

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Internal impediments for Belgian and European SMEs
6 |
42
8
22
12
8
5
8
41
17
16
15
11
7
5
0 20 40 60
Never considered internationalisation
Quality or features of the product
No internal impediments
High cost of internationalisation proces
Price of good or service
Insufficient competencies of employees
Other
Belgium
EU
Source: EC 2003

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Fast internationalisation for niche players
7 |
Number of years before start of international activities
1.7
9.7
19.5
2.0
3.9
4.9
0
5
10
15
20
25
import export extra-EU export
mass product niche product
Source: Onkelinx, Sleuwaegen (2009)

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Number of export destinations
8 |
Number of export markets
29%
41%
18%
6% 6%
0%0%
14%
21%
36%
7%
21%
0%
10%
20%
30%
40%
50%
1 2-5 6-10 11-25 26-50 >50
mass product niche product
Source: Onkelinx, Sleuwaegen (2009)

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Why small firms fail in expanding abroad ?
1. Lack of foreign market information
2. Limited trading knowledge of personnel
3. Inappropriateness of price/quality for the
needs of the market
4. Low profit prospects
5. Existence of various financial constraints
6. Prevalence of fierce competition
7. Wrong perception of risks
8. Various legal/institutional constraints
9 |

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The case for going international !
10 |

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We have to
internationalize or
die.
It is too risky to depend
on the home market
alone.
Only a few
players will
survive…
Eat or be
eaten!
Bigger is
better!
It is key to have global access to
clients.
Our home market
is too small…

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BENEFITS
Adding value?
COSTS
Lack of Resources/
Infrastructure
Transaction Costs
Risks
Political Risks; Economic Risks;
Legal /Commercial Risks;
Business model risk
OVERALL
ATTRACTIVENESS
Why go international and where?

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The International Growth Radar brings it all
together !
13 |

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G
Ghemawat - HBS
NET BENEFITS

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Risks
 Political risk
 Economic risk
 Legal/commercial risk
 Business model risk
 Does the business model fit the foreign country?

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The business model canvas
The Business Model Canvas (Osterwalder & Pigneur, 2010)

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Expansion of an existing product offering to a foreign
country
 Risk to move to far from the core business
 Risk to jeopardize the company business model (Porter
1996, Ghemawat 2007)
 Risk of “liability of foreignness”, which puts the firm at a
competitive disadvantage vis-à-vis local firms (Zaheer, 1995)

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 Global Competitiveness Report
http://www.weforum.org/reports/global-competitiveness-report-2014-2015
 Political and commercial risks per country
http://www.delcredereducroire.be/nl/landenrisicos/
 CIA World Factbook
https://www.cia.gov/library/publications/the-world-factbook/
 Website of Worldbank, Heritage Foundation, OECD, Eurostat, …
http://www.heritage.org/index/ranking
Interesting links

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INTERNATIONAL GROWTH RADAR
Dr. Jan Bormans @jbormans

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 Rol adviseurs
 800 bedrijven
 Complementaire aanpak: “zin doen krijgen” en “inzichten geven”

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 Ga naar www.internationalegroeiradar.be
 Username: creativitytalk
 Paswoord: creativitytalk
Just do it …

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Just do it …

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Hoe bereik je
je klanten?
Wat doe je?
Wat heb je
nodig?
Wat is de
aard van het
contact met
je klanten?
Waaruit haal
je jouw
inkomsten?
Wie zijn jouw
klanten?
Waar ligt de
waarde van
jouw
aanbod?
Wie zijn jouw
partners?
Wat zijn de
belangrijkste
kosten?

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Biotech & Co:
Genetic testing kits

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Biotech & Co.
Why expand internationally?
• To substantially raise sales volume to recoup the high (R&D) costs the company incurs
in developing new products
• To be first-tier suppliers to major clinical research labs in the world and co-create new
products with these labs
• In both countries: same customer segment (i.e. clinical research laboratories)

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INTERNATIONAL GROWTH RADAR