Improving the competitiveness of the SME as a strategy toward ...

Improving the competitiveness of the SME as a strategy toward

its internationalisation

Panama CityMarch 8, 2007

Internationalisation of SME’s

Competitive Strategies for Internationalisation

Competitiveness of the SME

Competitiveness of MSME’s

A few common components of competitiveness strategies

• Macroeconomic policies

• Physical and digital infrastructure

• Efficacy, efficiency in public management

• Production capacity: Business management, establishment, quality, productivity, innovation, partnerships, chaining, groupings.

• Access to domestic and exports markets

• Business climate: Trade, financing, investments, support for the venture.

• Social wellbeing: Education, health, housing, social and civic security.

• International co-operation

• Generation of employment and reduction of poverty

• Strengthening of democratic governance.


MICROECONOMIC COMPETITIVENESS

INFLATION

PUBLIC DEFICIT

CURRENT ACCOUNT DEFICIT

INTEREST RATES

MACROECONOMIC STABILITY

INNOVATION

PRODUCTIVITY

TRAINING

Tenets of Competitiveness

( + )( - )

HIGH COUNTRY COSTS LOW COUNTRY RISK

Competitiveness of MSME’sMacro-Micro Solution and Balance

Country Costs

Productivity and Competitiveness

Investment Employment and

Income

Generation of Added Value

Country Risk

Macroeconomic Stability

Innovationand

Technological

Development

+


Strategic Factors of Production

Training

Quality

•

• Natural Resources

• Labour

• Machinery and Equipment

• Inputs and Components

• Capital

Industrial Economy 20th Century

•

• Enterprising Talent

• Human Capital

• Technology

• Intellectual Property

• Risk Capital

Knowledge Economy 21st Century

INNOVACIÓNINNOVATION


SME Entrepreneur: horizontal characterisation

BUSINESS CULTURE– They rely heavily on their experience and are resistant

to change– They are suspicious in general and toward their peers– They are unable to delegate and manage time:

“I do it all” HUMAN RESOURCE MANAGEMENT

– Lack of expertise in human resource management– Tendency toward paternalism with workers

BUSINESS MANAGEMENT– Lack of strategic business vision– Outdated knowledge / As a result of “Modernisation”– Lack of information in general

Source: FUNDES Market Study, 2003


Challenges of Competitiveness

Vs.

Exchange rateExchange rate Cheap labourCheap labour Proximity with Proximity with

the USAthe USA Network of Network of

FTA’sFTA’s Natural Natural

resourcesresources

Innovation and Innovation and Technological Technological DevelopmentDevelopment

LogisticsLogistics ProductivityProductivity Tariff StructureTariff Structure Qualified labourQualified labour

Situational Situational Competitiveness Competitiveness

Sustainable Sustainable CompetitivenessCompetitiveness


Major Problems of SME’s

1. Acquiring clients

2. Hiring qualified staff

3. Financing

4. Acquiring providers

5. Obtaining equipment

6. Adjusting their products to suit the client

7. Market information

8. Product quality

9. Productivity

10. Managing the business

SOURCE: Entrepreneurship in emerging economies, IDB, 2002


• Innovation• Design

• Creation

• Establishment of chains• Logistics

• Delivery time• Quality

• Product diversification

• Assembly• Manufacturing

Tech

nolo

gic

al in

ten

sit

y

What areas need to be developed?


The Importance of being InternationalisedThe Importance of being Internationalised

• The trend of global trade and financial The trend of global trade and financial liberalisation.liberalisation.

• The trade agreements in progress have made an The trade agreements in progress have made an impression impression on the trade map of the coming years.on the trade map of the coming years.

• The world system, driven by technologies, is The world system, driven by technologies, is becoming more becoming more and more dynamic.and more dynamic.

• Today, any type of information and knowledge is Today, any type of information and knowledge is virtually virtually within the reach of any organisation.within the reach of any organisation.

• The number of competitors has increased and they The number of competitors has increased and they have have become more competitive. become more competitive.


What are the benefits of Market What are the benefits of Market Information?Information?

• Make use of information and technology in order to Make use of information and technology in order to identify opportunities and source partners and identify opportunities and source partners and purchasers.purchasers.

• Transfer knowledge and intelligence regarding Transfer knowledge and intelligence regarding international markets, in order to help exporters develop international markets, in order to help exporters develop contacts and strategies to expand their international contacts and strategies to expand their international business.business.

• Provide a link to exporters in international markets.Provide a link to exporters in international markets.


Commercial Activities included in Sectoral Strategies

• Market Study• Trade Mission for Market Prospects / Penetration• Advertising and Promotion• Invitation to Potential Clients• Showrooms or Product Sampling• Participation in International Fairs (Fairs that are outside the Official Pavilion)• Participation in / Holding of Seminars, Congresses, Conferences and Others• Visit to an International Fair

Activities for International Promotion


Become fearless Become fearless

BeginBegin

LearnLearn

HighlightHighlight

GrowGrow

Little support from the ICEX in the domain of the SME’s

Learning to Export Events

Learning to Export Events

Not familiar with aspects that are essential for the initial steps

Learning to Export

Programme

Learning to Export

Programme

Inability to create and develop an internationalisation strategy

PIPE Programme

PIPE Programme

Competitive shortcomings in key areas for export PIPEnet PIPEnet

Difficulties in implementing trade and logistics abroad

Spanish Points

Spanish Points

Development of Capabilities Experience of the ICEX of Spain


Learning to Export Event

• Areas of competitiveness

• Supportive Public Adm.

• Business meeting

Companies move to

the ApEx programme


First meeting at the company with the consultant

Synchronisation and downloading of the sectoral report

Review of sectoral information and preparation of the second meeting

Second meeting at the company with the consultant

Synchronisation and downloading of the draft final report

Formulation of the final report on the potential for internationalisation

Uploading of the final report to the server

Review of the final report by the ICEX and submission to the company

To be highlighted:Any information compiled in a computerised database Special reports are produced based on information on each company The system allows consultants to follow a standard methodology

Export Potential Assessment


After the Export Potential Assessment, companies are offered any of the following supports:

ICEX-ICO line of credit, up to 100,000 Euros at 0% interest for three years

ICEX-CESCE line of insurance, with coverage up to 100,000 Euros for one year at zero cost to the company

Advice from Garrigues on contracts and fiscal policyAdvice from Barrabés Internet on the Web and TechnologyAdvice from Positioning System on Communication and Trademarks Joint participation in the international fairs of the sectorEntry into the Part-time Agents Programme of the various autonomous

trade promotion organisationsParticipation in Export ConsortiumsParticipation in direct and inverse trade missions

Entry into the Foreign Promotion Commencement Programme (Programa de Iniciación a la Promoción Exterior - PIPE) of the Spanish Foreign Trade Institute

Export Potential Assessment

Ap

Ex P

rog

ram

me


Internationalisation Planand

Market Prospect

Consultant80 hours of attendance

6/8 months

Implementation Internationalisation Plan

Double Option

Without Collaborator

4/6 months40 hours Consultant

With Collaborator40 hours Consultant

+ Collaborator6/14 months

Export Potential AssessmentConsultant3 sessions

PHASE III

PHASE II

PHASE I

PIPE Programme > Phases


Concentration / Diversification Strategy Selection of Target Markets

STRATEGIC ACTIVITY REVIEW

Market Objectives Product / Market Positioning Market Access Strategy Segmentation

MARKET STRATEGY

Rules to be Followed Level of Required Information

INFORMATION SOURCING PLAN

Study on Different Access Strategies

MARKET ACCESS STRATEGY

Product Policy Price Policy Distribution Policy Communication Policy Service Quality Policy

MARKET PLAN

PIPE Programme > Phase II


ADAP

TATI

ON

ACTI

VATI

ON

EXPA

NSI

ON A

ND

IMPR

OVE

MEN

T

Without the possibility of export

Deficit in competitiveness

Growing or changing

New global market

Passive export

Active export

Complementary Services

PIPE Phase III

PIPE Phase II

ApEx Programme

Adaptation of solutions Trade

Implementation


SPANISH POINTS:Physical and virtual presence with which companies can conduct commercial and logistical operations while sharing costs

SPANISH POINTS:Physical and virtual presence with which companies can conduct commercial and logistical operations while sharing costs

SHOWROOMS LOGISTICAL CENTRE

BUSINESS CENTRE VIRTUAL MARKETPLACE

Spanish Points


Frequently mentioned crucial topics

Limitations of business competitiveness:Limitations of business competitiveness:

Low productivity and little diversificationLow productivity and little diversification Limited access to financing Limited access to financing Difficulties in accessing international marketsDifficulties in accessing international markets Insufficient trained staff and limited managerial capacityInsufficient trained staff and limited managerial capacity No controls on product quality and standardisationNo controls on product quality and standardisation Restricted capacity for innovation and technology Restricted capacity for innovation and technology

adaptation: Low investment in I+Dadaptation: Low investment in I+D High transportation and logistical costsHigh transportation and logistical costs Low social capital: fewer partnershipsLow social capital: fewer partnerships

SME’s in Latin America

Low productivity and little diversificationLow productivity and little diversification

Limitations of business competitiveness Limitations of business competitiveness

Source: Office of Public Policies and Competitiveness; Andean Development Corporation CAF Iberoamerican Seminar “Export to Win in relation to MERCOSUR”. July 2006

Limited access to financing Limited access to financing

Difficulties in accessing international marketsDifficulties in accessing international markets

Low social capital: fewer partnershipsLow social capital: fewer partnerships

Restricted capacity for innovation and technology adaptationRestricted capacity for innovation and technology adaptation

High transportation and logistical costsHigh transportation and logistical costs

No controls on product quality and standardisationNo controls on product quality and standardisation

Insufficient trained staff and limited managerial capacityInsufficient trained staff and limited managerial capacity

Competitive Strategies

Competitive Strategies in a Globalised World Competitive Strategies in a Globalised World

Development of Information and Development of Information and Communication Communication Technologies (ICT)Technologies (ICT)

Business PartnershipsBusiness Partnerships


“ICT’s – technology and connectivity infrastructure – constitute the material foundation of a new economy, which affects the entire production and organisational system

ICT’s are the material foundation of the new techno-economic paradigm of Flexible Networks that make reticular knowledge possible, as well as various forms of management, relationships and coordination, which are in turn expressed in different types of ventures: Networks and Clusters, MSME’s and Co-operatives”

Source: Dr. Saadia Sánchez; Director of the Information and Knowledge NetworkLatin American and Caribbean Economic System (SELA)

Information and Information and Communication TechnologiesCommunication Technologies


• ICT’s facilitate the exchange of information and ICT’s facilitate the exchange of information and knowledge knowledge in a globalised world.in a globalised world.

• Help improve communication among SME’s, Help improve communication among SME’s, business business networks and any partnership system.networks and any partnership system.

• And allow improved access to the innovations and And allow improved access to the innovations and intangible capabilities of companies.intangible capabilities of companies.

Information and Information and Communication TechnologiesCommunication Technologies

Raw MaterialRaw Material Transportation andTransportation andLogisticsLogistics

ManufacturingManufacturing DistributionDistributionTransportation andTransportation andLogisticsLogistics

Transportation andTransportation andLogisticsLogistics

RetailersRetailers

ConsumerConsumer

B2BB2B

B2CB2C

SME’sSME’s

The Internet can be incorporated into and involved The Internet can be incorporated into and involved in all activities of the trade processin all activities of the trade process

Internet-based Marketing Strategies

1. Establish strategic alliances

2. Advertising and promotion (Radio, press, TV, Internet)

3. Participate in professional and executive events

4. Electronic and physical newsletter

5. Registration in Internet search engines and directories

6. Analysis and recommendations on statistics pertaining to hits on the company’s Web Site

7. Obtain advice on the creation, development and updating of the content of the company’s Web Site

8. Consultation specialising in technology, business and services via the Internet

9. Analysis of Internet advancements made by companies in that field


PartnershipsPartnerships

ClustersClusters

Industrial DistrictsIndustrial Districts

Business NetworksBusiness Networks

Sub-contractors and ProvidersSub-contractors and Providers

Export Consortiums Export Consortiums


The New Economic Environment

INTERNATIONALISATIONINTERNATIONALISATIONOF THE ECONOMYOF THE ECONOMY

GLOBAL CONSUMER GLOBAL CONSUMER TRENDSTRENDS

PRESENCE OFPRESENCE OFECONOMIC CRISIS AND ECONOMIC CRISIS AND

RECESSIONRECESSION

THEY CREATE AN IMBALANCE THEY CREATE AN IMBALANCE IN THE ECONOMY THAT AFFECTS IN THE ECONOMY THAT AFFECTS

THE BUSINESS CLIMATETHE BUSINESS CLIMATEBRINGS MANY OPPORTUNITIES BRINGS MANY OPPORTUNITIES

THAT WE MUST LEARN TO THAT WE MUST LEARN TO TAKE ADVANTAGE OFTAKE ADVANTAGE OF

THE CONSUMER THE CONSUMER WANTS A VARIETY WANTS A VARIETY

OF PRODUCTSOF PRODUCTS


INDUSTRIAL INDUSTRIAL DISTRICTSDISTRICTS

OTHER OTHER STRUCTURES STRUCTURES FOR INTER-FOR INTER-BUSINESS CO-BUSINESS CO-OPERATIONOPERATION

CLUSTERCLUSTERSS

COMPANY COMPANY NETWORKSNETWORKS


Business NetworksBusiness Networks

A co-operation mechanism among companies

Where each participant maintains legal independence and managerial autonomy

With voluntary affiliation

To reap individual benefits through joint action

Source: Carlos López Cerdan and Antonio Maeso, 1999

HORIZONTAL NETWORKS(Among companies of the same link)

VERTICAL NETWORKSVERTICAL NETWORKS(Among companies of consecutive links) (Among companies of consecutive links)


Vertical-Horizontal Vertical-Horizontal RelationshipsRelationships

Shoe manufacturer

Shoe manufacturer

Shoe manufacturer

Shoe manufacturer

Client

Skin sellers

Tannery

Livestock farmer

Carriers

Distributors

Source: Carlos López Cerdan; COCAI - Mexico

SME’s do not have the resources or the capacity to adopt Individual

strategies

The integration and combination of Networks and Production Chains is not only a means of adding value, but it is

also a competitiveness and equity strategy.

Networks of independent companies are more flexible to market variations


Individual Producer

Networking Producer

Produces according to his/her conditions.

Produces generics (commodities).

Sells to whomever he/she can.

Has fewer possibilities for growth and sustainability. Can organise his/her production

according to plans of rotation and biodiversity.

Sells as one business to another (B to B)

Produces specialised raw materials.

Produces according to his/her client-consumer needs.

Source: Carlos López Cerdan; COCAI - Mexico

Latin American and Caribbean Economic System Latin American and Caribbean Economic System (SELA)(SELA)

IBERPYMEIBERPYME ProgrammeProgramme

Gonzalo CaprilesGonzalo [email protected]@sela.org

www.iberpymeonline.org

http://www.iberpymeonline.org/

Improving the competitiveness of the SME as a strategy toward ...

Documents

international business

international markets

benefits of market information

product quality

trade map

trade agreements

business meeting companies

international fairs