Saimaa University of Applied Sciences Faculty of Business Administration, Lappeenranta Degree Programme International Business Henri Kangasmäki Internationalization process of a small-sized e- commerce company, Case Company: Handstand- Kloetze Thesis 2019
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Saimaa University of Applied Sciences Faculty of Business Administration, Lappeenranta Degree Programme International Business
Henri Kangasmäki
Internationalization process of a small-sized e-commerce company, Case Company: Handstand-Kloetze Thesis 2019
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Abstract Henri Kangasmäki Internationalization process of a small-sized e-commerce company, 51 pages, 1 appendix Saimaa University of Applied Sciences Faculty of Business Administration, Lappeenranta Degree Programme in International Business Thesis 2019 Instructor: Ms. Minna Ikävalko, Principal Lecturer, Saimaa University of Applied Sciences
The purpose of the thesis was to examine the internationalization process of a small-sized firm and provide a foundation of fundamental aspects of internationalization for the case company. Also, the thesis should aid the case company in the internationalization decision-making process.
The information of the theory part was gathered from literature, scientific articles, and reliable internet websites. Empirical data for this thesis was collected from an unstructured telephone interview with the entrepreneur of the case company and questionnaire conducted among the circus schools in Finland.
The literature review provided an understanding of the firm´s initial process of internationalization and a framework for conducting market research. In the empirical part of the thesis, the case company´s internal and external data were examined and analyzed.
The market research showed that the case company has demand in the Finnish market. Also, it provided a better understanding of the potential target customers. However, the scope of the market research was limited due to the narrow nature of the Bachelor´s thesis. Therefore, more aspects of internationalization are recommended to observe for the case company before entering the Finnish market. Further research was suggested for the case company.
Ultimately, the thesis succeeded in its purpose, and initial insights of internationalization processes were given to the case company. The decision of continuing the internationalization process is merely left for the case company´s entrepreneur.
Keywords: internationalization, e-commerce, SME (small- and medium-sized enterprises), market research, handstand
1.1 Objectives and delimitations .................................................................. 5 1.2 Research questions ............................................................................... 6 1.3 Theoretical framework ........................................................................... 6 1.4 Research method .................................................................................. 7 1.5 The case company ................................................................................ 8
1.6 Structure of the thesis ............................................................................ 9
2 Literature review ........................................................................................... 9
2.2 Motives and triggers of internationalization .......................................... 11
Proactive and reactive motives ..................................................... 12 International triggers ...................................................................... 16
2.3 International barriers & risks ................................................................ 17 2.4 Internationalization approaches of SMEs............................................. 20
3 Fundamentals of international market research ......................................... 24
Information needed in market research ......................................... 26
Primary data acquiring methods of market research ..................... 27 4 Market research – The Finnish market for handstand equipment .............. 29
4.1 Data collection of market research ...................................................... 29 4.2 Motives and triggers of the case company to internationalize .............. 30 4.3 Internal data analysis of the market research ...................................... 31
Case company´s general data ...................................................... 32 SWOT-analysis of the case company in the Finnish Market ......... 32
4.4 External data analysis of the market research ..................................... 34 Results of the questionnaire .......................................................... 34 Data illustration.............................................................................. 35
4.5 Conclusion of the questionnaire ........................................................... 41 4.6 Limitations of the market research ....................................................... 43
4.7 Recommendations ............................................................................... 43 5 Summary and discussion ........................................................................... 44
Figures .............................................................................................................. 47 Tables ............................................................................................................... 48 List of References ............................................................................................. 49
Figure 9. Factors influencing to purchasing-decision.
Figure 10. shows that the majority of the target group purchases the products
from the internet. Due to half of the target group creates equipment by
themselves. Therefore, Figure 10. may give a wrong impression. Moreover, it can
be concluded that the internet is the most used channel to purchase products.
Figure 10. Purchasing channel
59%
29%
6% 6%
12%
35%
65%
47% 47%
35%
0% 0%
41% 41%
47%
0% 0% 0% 0% 0%
Quality Price Fast delivery Domesticity ofsupplier
Domesticity ofproduct
Factors influencing to purchasing-decision
Very important Important Not important Not important at all
10; 59 %
2; 12 %
5; 29 %
Channel to purchase products
The Internet Directly from supplier Self-made
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Competitor analysis is shown in Figure 10. It was based on the answers to the
question: “Which producers’ products do you use?” Surprisingly, this showed that
the majority of the target group creates their product by themselves or ordered
from a local carpenter. Only two individuals of the target group were using
products from aa circus equipment provider. In addition, those suppliers are
multinational firms, and the answers of the open-ended question posited that
domestic handstand equipment suppliers do not exist in the Finnish market.
Figure 10. Competitor analysis.
In addition, none of the target group had heard about the case company before.
4.5 Conclusion of the questionnaire
The main goal of the questionnaire was to identify if there is a market for the case
company´s products. The two other important aspects of the questionnaire were
to understand the customer behavior of the potential customers and identify the
competitors of the market.
By measuring the results of the questionnaire with qualitative measurements, it
can be concluded that there is a market in Finland for the case company.
Therefore, the questionnaire successfully achieved its primary goal. However, the
potential market size cannot be identified based on this research. Accurate
identification of the market size would require comprehensive quantitative
9,00; 57 %
1,00; 6 %
1,00; 6 %
4,00; 25 %
1,00; 6 %
Competitor anlysis
Self-made Gymnova Unicycle Local carpenter No idea
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research, and even then, the market size may be impossible to identify
accurately. However, if the case company intends to identify the potential market
more than this research provided, it is suggested to do further investigations.
Another important aspect the questionnaire aimed to identify was the customer
behavior of the potential customers. The most significant finding was that the
majority of the questionnaire participants purchase/would purchase equipment
from the internet. Therefore, this suggests that most of the potential customers
would purchase equipment from an e-commerce store rather than a brick and
mortar store. Another major finding was the low level of competition. The findings
from the secondary data research also confirmed this statement. Thus, only one
e-commerce store selling handstand equipment in Finland was found on the
internet. The findings also suggest that the potential customers value the quality
of the product the most, even over the price. In addition, the domesticity of the
product, the domesticity of the supplier and even fast delivery time, were valued
relatively unimportant. Surprisingly, the majority of the target group was making
the equipment by themselves. This would refer that there is a market in Finland,
however, it cannot be defined how many of those participants prefer self-made
products over the store-bought. Therefore, statements cannot be provided based
on this finding.
In summary:
• The demand exists in the Finnish market
• The competition in the Finnish market is low or non-existing
• Online platforms are preferred for purchasing equipment
• Potential customers value quality products
• The domesticity of the product or producer was relatively unimportant
• Fast delivery was relatively insignificant, but it could have possibly a
positive impact
• Producer´s flexibility to tailor custom equipment may be an important
feature
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4.6 Limitations of the market research
Due to the narrow scope of the Bachelor´s thesis and limited time frame,
delimitations had to be set on the market research. Therefore, subjectively less
essential aspects in the case company´s point of view were delimited from the
research. In a more comprehensive market research, analysis of market entry
strategies and macroeconomics of the target market would have added value to
the research.
4.7 Recommendations
Since the market research showed that there is a demand in the Finnish market,
the case company should continue to investigate how to internationalize to
Finland. The market research conducted for this thesis had limitations and
typically, a market research is more comprehensive. Therefore, if the case
company intends to internationalize to Finland, it would be suggested to observe
the following aspects, before internationalizing:
• Macroeconomics of Finland
• Barriers and risks between Germany and Finland
• Legislation and regulation between Germany and Finland
• Strategy to enter the market
• Target customers of selected market
• International marketing
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5 Summary and discussion
The goal of the thesis was to examine the internationalization process of a small-
sized firm and the main research question was: How can a small-sized German
e-commerce company internationalize to Finland?
Now by understanding what the concept of internationalization refers to, a small-
sized German e-commerce company can internationalize to Finland by simply
expanding part of its business operations to Finland and have legal rights to do
so. These business operations can be selling, buying, producing, etc. However,
the answer to the main research question is relatively narrow. Therefore, the sub-
questions were created to support and provide more depth into the main research
question.
The first sub-question was:
What are the main motives of SMEs to internationalize?
At first, this thesis started by observing the main motives of SMEs to
internationalize. The literature review suggested that different proactive and
reactive motives push SMEs towards internationalization. The results of the
empirical part showed that there was a connection between the literature review
and the case company´s motives to internationalization. However, the reliability
of this finding was low due to the telephone interview was conducted only to case
the company´s founder. Therefore, the finding is only relevant for the case
company´s point of view and the statement of SMEs motives to internationalize
in general, would be highly unreliable and nonvalid.
The second sub-question was:
What are the key factors a small-sized e-commerce company should consider
before internationalization?
After reviewing the main motives of SMEs to internationalize, the thesis focused
on examining the key factors SMEs should consider when expanding
internationally. In the literature review, three aspects were examined in relation
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to this sub-question: risk & barriers of internationalization, theories of
internationalization and foundations market research.
First, an examination of the risks and barriers of internationalization showed that
many different aspects could hinder a firm´s international operations. When a firm
internationalizes to a new market, it will face a wide range of general and country-
specific barriers and risks. The literature review posited that technology
development has allowed SMEs to create new strategies to overcome some of
the risks and barriers. Especially, e-commerce and online/e-business firms have
a great competitive position in this aspect. It can be concluded that barriers and
risks are an important factor, which is suggested to investigate by a small-sized
e-commerce firm before expanding internationally.
Second, the observation of three popular internationalization theories did not
significantly provide insight into this sub-question. However, these theories can
provide a basic knowledge of how firms internationalize. A firm, which is
considering internationalizing, can identify itself from these theories and follow
those steps in their internationalization process. Therefore, observation of the
internationalization theories can provide a framework for an internationalization
strategy. Based on theories observed, if the case company will internationalize to
Finland it would follow “the stage model” theory, however, if it would continue
internationalization rapidly to new markets after expanding to Finland, it would
follow the “born global again” -theory.
Finally, the market research received the most attention of these three aspects.
In the literature review, the fundamentals of market research were observed,
which provided a solid foundation to conduct a market research in the empirical
part of this thesis. Arguably, conducting a market research before
internationalization is the most crucial factor a small-sized firm should not only
consider but also execute before internationalization. A market research can
provide valuable information when done correctly. Therefore, there is an
underlying risk if a market research is done incorrectly. For example, based on
an incorrectly conducted market research, the outcome of the internationalization
can be catastrophic for a firm. In addition, a market research can be tailored to
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provide information for specific aspects. For that reason, the researched problem
must be clarified properly.
In summary, this thesis provided general information on a small-sized e-
commerce firm´s internationalization process and valuable information for the
case company. The main focus was to aid the case company with the
internationalization process. Therefore, the general observation of the SMEs e-
commerce internationalization aspect was less comprehensive. The most
important findings of the thesis for the case company were the discovery of the
demand in the Finnish market and the deeper understanding of the potential
customers. Consequently, the findings of the thesis suggest that the case
company continue with its internationalization processes. The next steps of the
internationalization process were mentioned in the recommendations chapter.
The process of literature gathering showed that studies of the e-
commerce/online/e-business internationalization are minimal. Thus, further
research on this topic would be topical.
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Figures
Figure 1. Theoretical Framework, p.6 Figure 2. Two different pathways to internationalize; the stage model and the born global model. (Hollensen, 2011, p.89), p.23 Figure 3. Categorization of data for assessment of market potential in a country (Hollensen, 2011, p.176), p.27 Figure 4. The average circus school size by participants, p36 Figure 5. The percentage of handstand being practiced in circus schools, p.36 Figure 6. Handstand being part of circus shows, p.37 Figure 7. Usage of handstand equipment, p.38 Figure 8. A need for handstand equipment, p.38 Figure 9. Handstand equipment analysis, p.39 Figure 10. Factors influencing to purchasing-decision, p.40 Figure 11. Purchasing channel, p.40 Figure 12. Competitor analysis, p.41
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Tables
Table 1. Definition of micro-, small-, and medium-sized enterprises (SMEs) (European Commission, 2012), p.10 Table 2. Proactive- and reactive motives to internationalize (Hollensen, 2011, p.51), p.13 Table 3. Political-, general market- and commercial risks of internationalization, (Hollensen, 2011, p.64), p.18 Table 4. Five barriers faced by SMEs and how to overcome them (Narayanan, 2015, p.116), p.19 Table 5. Information for the major global marketing decision (Hollensen, 2011, p.175), p.25 Table 6. SWOT-analysis of Handstand-Kloetze in Finnish Market, p.33
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