Smes' Internationalization Strategies Based On a Typical Subsidiary's Evolutionary Life Cycle in Three Distinct Stages

Zusammenfassung

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Due to Globalization, MNEs have entered SMEs' competitive space and compete for their local and potential global markets. Within a game-theoretic perspective, this paper draws on a number of theoretical traditions to form a basis for assessing competitive intensity and competition. It presents a competitive typology at the top of which MNEs, with access to the highest portfolio of competitive and strategic advantages, compete locally and globally with large and small firms. The extensive network of sister-subsidiaries forms the competitive context for growth-oriented internationalizing SMEs. The paper examines a typical subsidiary's evolutionary path in order to derive counter-strategies for the competing SMEs that aspire to globalize effectively and strategically. It then formulates effective counter-strategies for such SMEs competing with the evolving competition, represented by an evolving subsidiary. Conclusions and implication point to lessons for SMEs' in quest for successful internationalization and competition, both locally and globally.

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Smes' Internationalization Strategies Based On a Typical Subsidiary's Evolutionary Life Cycle in Three Distinct Stages

Introduction

In the fragmented markets of the past, Multinational enterprises (MNEs) and small and medium-sized enterprises (SMEs) competed mainly with their own kinds. Regulatory and environmental barriers separated SME's economic, competitive and even strategic space, and shielded them from competing directly with MNEs in the same Markets (Dana/Etemad/Wright 2000 and 2001, Etemad/Wright/Dana 2001). As a result, the SME's environment was assumed to be local and artificially segregated from others (Etemad 2003, 2004a). Local SMEs came close to facing international competition and the competitive intensity of MNEs in their indigenous home markets when MNE's subsidiaries appeared on the local scene and began to compete with them directly in their local markets. Naturally, when SMEs ventured out of their home market, they faced the full impact of international competition. Due to globalization and the removal of barriers, globally-competitive entities can enter into the local markets and competitively challenge, if not transform, them (Levitt 1983, Ohmae 1985 and 1990). As a result, local firms residing in such markets have begun to feel global competition even at home. More than other firms, SMEs feel the ongoing change and are subjected to the associated competitive pressures. SMEs find it imperative to become at least as competitive as the global competitors in order to survive even in their own home markets. In other words, the rules of the game have changed (and are still changing) and all competitors, especially SMEs, must devise dynamically potent strategies to compete effectively, on an international scale, for survival.

The primary objective of this paper is to characterize competition and competitive context in terms of the competitive intensity of the environment, and the typical profile of competitors and their respective evolutionary paths, which collectively characterize international competition. The paper introduces a theoreticallybased analysis to derive a competitive typology of internationally-competing firms, consisting of ten distinct layers, to portray them within hierarchical metrics.

Following this introduction, a discussion of the levels of competition and competitiveness is presented. This discussion reviews the necessary logic for the structure of a basic typology of firms capable of competing internationally. This basic structure is then expanded into a hierarchical typology of competitive intensities, with ten layers (or types), at the top of which the global networks of MNEs reside and the local small independent firms populate the lowest level. The underlying characteristics of firms, at each level of this hierarchy, form the competitive metrics against which competition can be measured. Based on the hierarchy, the paper will then proceed to argue that the dynamic growth of an evolving subsidiary, in a typical multinational enterprise, offers a theoretical candidate for portraying the progression of competition and competitive intensity in internationalizing firms. As they evolve, these subsidiaries populate progressively higher levels in the hierarchy and compete at exceedingly higher competitive intensity, locally and globally. This suggests that, the evolutionary dynamics of a subsidiary's growth, from cradle to maturity, can be viewed as the longitudinal benchmark for SMEs, which aspire to compete locally and globally against them. The paper will then review the dynamic pattern of a typical subsidiary's growth, from a young entity to a strong and mature centre of excellence, in three distinct stages constituting the subsidiary's evolutionary life-cycle, in order to derives the corresponding counter-strategies that enable internationalizing SMEs to at least match, if not exceed, the competitiveness of the evolving subsidiary. The evolving characteristics of the subsidiary's stages of life cycle can also motivate the internationalizing SMEs to acquire the necessary strengths and cover potential weaknesses, should they aspire to compete with them locally and internationally. The paper offers conclusions and implications at the end.

Levels of Competition and Competitiveness

In highly dynamic and competitive environments, competitive logic dictates that a firm should identify the prevailing level of competition and prepare to compete at least at that level in order to survive in the short run. For the longer run, however, firms must strive to reach the highest competitive level possible to compete efficiently and effectively,...

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