Internationalization and entry strategies for SMEs in Sub-Saharan Africa

Internationalization and entry strategies for SMEs in Sub-Saharan AfricaA study on foreign market selection and entry by Zeldah SchramaMarch 12, 2015

Recommendations for Future Research

Research Methodology

Findings 2: Theoretical Blueprint

Findings 1: Doing Business in SSA

Introduction

Findings 3: Empirical Blueprint

Findings 4: New SME BlueprintPR

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Zeldah Schrama

INTRODUCTION

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How can SMEs set a clear strategy and roadmap for entering the Sub-Saharan African

market?

RESEARCH OBJECTIVE

Zeldah Schrama

Zeldah Schrama

KEY RESEARCH QUESTIONS

What are the considerations for choosing a target market and an entry mode strategy?

What are the key risks and challenges that foreign companies will face when entering the SSA market?

What does academic literature say about internationalization strategies for SMEs?

What metrics should be used in assessing foreign markets?

Zeldah Schrama

Zeldah Schrama

RESEARCH METHODOLO

GYZeldah Schrama

Zeldah Schrama

Qualitative study with prescriptive approach

RESEARCH METHOD

Choice of design

“Inductive approach emphasizes the richness, texture and feeling for the raw data collection and is concerned with the generation of new theory emerging from the data”

Glaser and Strauss (1967)

Target population1. Small enterprises have less than 50 employees and an

annual turnover and/or balance sheet total below €10 mln

2. Medium sized enterprises have less than 250 employees and an annual turnover below €50 mln and/or a balance sheet total below €43 mln

EU Commission (2005)

“

”

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3. Africa Experience / Ambition

FINAL SAMPLE

1 3

Sikuphi Investments

2

2 Consulting Companies

2 Western HQ Companies

1 SSA HQ Company

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DATA COLLECTION METHOD

Semi-structured telephonic interviews for 45-60 minutes 1. Respondents were selected on their participation and

involvement in the internationalization of their company2. Interviews took place either after hours or at the most

convenient time to avoid procedural bias.

Reporting bias was countered by an accurate recording of the interview notes and peer debriefing

Main sections of the interviews

1. Company characteristics/operations2. Doing business in SSA3. Process of internationalization

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DOING BUSINESS

IN SSA

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1/

4

2/4

RISK

Literature

Operational RiskStrategic Risk

Sustainability Risk

Selecting markets is a stage based process

Psychic distance

Resource-based theoryCybernetic approach

Network theory

Empirical Research Information, infrastructure Systems, social structures,

contracts Not applicable

Process-driven? Entrepreneur-specific

Demand-led

Firm-specific factors Industry norms Country factors

Regulatory requirements

DOING BUSINESS IN SSA

Conclusion: Africa is as equally risky as other regions that are publicly perceived to be more stable /less risky!

3/4

MARKET SELECTIO

N

4/4

MARKET ENTRY

Conclusion: Potential for growth, growing middle class, following clients and personal interest of management

Conclusion: Potential for growth, growing middle class and personal interest of management

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THEORETICAL BLUEPRINT

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LITERATURE

Uppsala model & Innovation-related theory

Johanson and Wiedersheim-Paul (1975) found empirical evidence for an “establishment chain” of international penetration

Network theory (Johansen and Mattson, 1998)

New venture theory (Bell, 1995) : ‘Born Globals’

Stage 1 No regular exports

Stage 2 Export via

agents

Stage 3 Overseas subsidiary

Stage 4 Overseas

production

1. Highlights the importance of the entrepreneur2. Preference of early and active internationalization

1. Networks predict, steer and facilitate international activities

2. Network relationships and strategic alliances are key resources associated with early exporting

THEORETICAL Blueprint

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EMPIRICAL BLUEPRINT

EMPIRICAL Blueprint

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E SME BLUEPRINT

Zeldah SchramaZeldah Schrama

“By combining multiple observers, theories, methods, and empirical materials, researchers can hope to overcome the weakness or intrinsic biases and the problems that come from single-method, single-observer, single-theory studies. Often the purpose of triangulation in specific contexts is to obtain confirmation of findings through convergence of different perspectives. The point at which the perspectives converge is seen to represent reality.” Jacob (2001)

New PROPOSED SME Blueprint

**Stage 4 **

Level of control

Low High Diffusion

Zeldah Schrama

FUTURE RESEARCH

RECOMMENDATIONS

Zeldah Schrama

Role of network relationships for SMEs in SSA

SME franchising models specific to SSA

FUTURE RESEARCH