Factors Impacting Small-scale Business For Internationalisation

Rationale for the study

Discuss about the Factors impacting small-scale business for Internationalisation.

Factors impacting small-scale business for Internationalisation

In recent time, small business enterprises are facing the issue of going global as in international market; they are facing stern competition against the large market giant. Before entering the international market, the small business enterprises should do the market research where they can understand the situation of entering the market. Understanding the international customers is needed to tap into the expertise creating the blueprint of the products development and marketing strategy (Vahlne and Johnson 2017). The factors like unfamiliar cultures in the international market and the physical distance among the places are creating issues for the small business enterprises. In addition, small businesses need to learn about the prospective customers and the customer base of the organisation (Brandenburg and De Wit 2015). Small businesses of Australia shares almost 44% of the employment and in the foreign market, it can help to enlarge the business. The small business enterprises have been facing the issue of globalisation efforts of report, communication and track to impact heavily on the foreign market. Small business is facing the issue tariffs and export fees. The small businesses have small capital and financial planning is necessary in order to go global. This study aims to find out the factors that influence Australia based small businesses on internationalisation.    

This research will recognise the ways through which the small business enterprises can penetrate to the global market. In a previous time, it was easier to expand the business at the global scale (Knight 2015). In recent time, the domestic market is becoming saturated and in numbers of competitors is increasing by leaps and bound. Domestic market can boost the short-term sales and many of the foreign companies are entering the domestic market making the market red ocean for the small business enterprises. Therefore, the organisations can bring innovative product concept in order to be global. With the advent of globalisation, it has become very easy to reach the global market; however, organisations are facing the issue of entering the global market considering some of the factors. Small businesses need to draw up the budget of the internationalisation and they can make partnership in order to enter the international market (Piekkari et al. 2014). This study will try to focus on the factors like capital requirement, product specification market analysis and infrastructure to recognise the optimal situation for the small business enterprises for making the global expansion.

The context of the study

The aim of the research study is to explore the factors contributing in the internationalization of the small scale businesses and to find out the most important factors promoting the businesses to go global.

The objectives of the study are:

• To examine the feasibility of small-scale businesses in going global
• To recognise the factors essential for making the international expansion
• To find out the challenges facing by Australian small business enterprises in internationalisation
• To recommend some possible strategies for going global

1. What are challenges facing the Australian small business enterprises in internationalisationand how can they be addressed?
2. What could be some possible recommended strategies for going global of small business enterprises?
3. How can the potential outcome of the research benefit the small scale businesses in Australia to go global?

Concept of internationalisation 

Internationalisation of the business is the process of enhancing the involvement of the organisation in the international markets. The organisations must have an idea of international culture while trading in the international market. The organisations mainly appreciate the values, behaviour, beliefs and business strategies of various international markets in order to be able to internationalise successfully (Islam 2017). In addition, small business and entrepreneurs also have an ongoing concern for maintaining the quality of the products and services, innovation and commitment for corporate social responsibility.

Reasons small businesses take internationalisation strategy 

Small businesses want to have first-mover advantage and it is basically penetrating into the market and gaining all the advantages of being the first to be there. The small businesses are trying to be able to be the first in a new market as early adopters get a competitive advantage, as there are limited competitions. Small businesses can gain the growth as the small businesses start locally and they grow from the foundation. Internationalisation increases sales in consecutive manners and it helps to increase the customer base (Menzies 2017). The small businesses can have a small home market and by expanding the business internationally, it can have large international market through expansion from the very beginning. Additionally, small home market means the short supply of the customers and internationalisation provides large profitability along with long-term security to the small businesses (Cavusgil and Knight 2015). Expanding to the global market helps the small business to have greater economies of scale.  

Mercantilist theory

Mercantilism theory as developed during the 16^th century and it is one of the oldest theories of internationalisation. As stated by Vaggi and Groenewege (2016), a country’s wealth can be determined by the amount of its gold and silver it is having. The school of Mercantilist theorists believed that countries must increase its hold of gold by increasing its imports and exports. The country needs to focus on trade surplus that is the value of the exports needs to be greater than the value of imports. The country needs to avoid the trade deficit. Adam Smith coined the word Mercantilism and he proposed that the economies always try to enrich the wealth by restraining the imports and inspire the exports. Free trade can benefit both parties, both exporters and importer. In a country like Germany, Singapore and Japan follow this theory and small businesses are following neo-mercantilism theory. As opined by Burns (2016), in neo-mercantilism theory, small businesses maximise the benefits to the interest of higher prices for products traded abroad, the stability of supply and stability of price.

Research aim and objectives

Uppsala model

The Uppsala model is a theory of internationalization, which describes the way the firms over time intensify their activities in foreign market. In this model, the key focus is on the process that the firms follow while expanding in the international market. This theory is based on the learning of the firs and their evolutionary view points. It is derived from the behavioural theory, described as the evolution of the nature of the firms according to the nature of the customers and markets in the country of expansion (Forsgren 2015). The firms first gather knowledge about the crucial factors in the target market before actually entering the market and after entering, they gather further knowledge and evolve accordingly not only to capture the market, but also to sustain in that market. According to Vahlne and Johanson (2013), this theory states that once the internationalization process is started, it will proceed regardless of the direction of the strategic decisions taken by the firms.

Monopolistic Advantage Theory

Stephen Hymer illustrates in this theory that the firms make use of their exclusive and specific assets to earn higher returns, which the competitors cannot replicate (Pitelis and Teece 2018). He highlights that the direct foreign investors get some extra benefits as monopolistic or proprietary advantage in the expanding market, which the local firms do not have. These could be technological innovation, superior knowledge of technology, production technique, marketing technique, finance or management or economies of scale (Knight and Liesch 2016). This makes the foreign investor is a monopolist in the expanding market. The businesses that want to expand in the international market must try to gain a monopolistic advantage in any such area, which will be beneficial for them to enter the new market along with retaining the existing market. The multinational firms mostly try to use this approach while expanding in the international market.

Small business enterprises can face the issue of an external factor of global financial crisis as internationalisation needs solid financial ability. The issue of the global financial condition should be addressed within the context of the global scenario. According to Cavusgil and Knight (2015), a global financial crisis can change the monetary system; therefore the direct expansion of the brand cannot be possible. The global financial crisis began in 2008 and after the crisis; small business enterprises got tons of opportunities. Moreover, the small business organisations can face the factors of the infrastructure of the business in the domestic market as well as the international market. The infrastructure of the business supports the government support and industry condition of the country. Organisations can be pulled into becoming the exporters as the other organisations in the same industry have established the relationship in the foreign market. As opined by Burns (2016), many of the knowledge-based organisations reach the competitive advantage due to the infrastructure factors as they have achieved the competitive advantage by following mutually supportive interaction. The congenital factors of psychic distance and entrepreneurial spirit of small business enterprises create an impression of the internationalisation strategy. The small business enterprises are influenced by external and internal situations and stimuli. The entrepreneurs may have a difference of knowledge and it is the key to make a judgement and coordinate resources to make a strategic decision.

Literature review

Multi-domestic strategy: The organisations need to sacrifice the efficiency for emphasising the responsiveness to local needs within the markets. As opined by Alden and Nariswari (2017), in multi-domestic strategy, organisations try to gain the local responsiveness through customising both marketing strategy and the product offering to match the national condition. For instance, Heinz takes local preferences in some of the international spheres.

Global strategy: The organisations can use global strategy when it sacrifices the local needs within each of the markets to favour of emphasising efficiency. Global strategy gains economies of scale by giving the same products and services to each market. Minor modification is done in order take the global strategy. For instance, Microsoft takes the global strategy as it offers similar products in each part of the world.

Transnational strategy: This is a middle ground between multi-domestic strategy and the global strategy (Menzies 2017). The organisation does a balance between the local preferences and desire of efficiency within the various countries. McDonald’s does the transnational strategy as it offers a different kind of food products to the same brand name.   

Research philosophy

Research philosophy is the belief through which the data about a subject is gathered, used and analysed for the research purpose (Lewis 2015). There are mainly three types of research philosophy; realism, interpretivism and positivism.

In this research, the researcher will select positivism research philosophy. Positivism research philosophy takes the factual knowledge that is gained through the observation. Positivism philosophy collects the data through the scientific process. The researcher will collect the data based on internationalisation factors of small businesses and the collection and interpretation of the data is the objective way. Positivism research philosophy depends on mainly quantifiable observation and it leads to the statistical analysis. The researcher will concentrate on facts of the small businesses’ internationalisation.   

Research approach 

The research approach is the procedure and it consists of the stages of broad assumption about detailed data collection method, interpretation and analysis (Taylor et al. 2015). There are mainly two types of approaches, inductive approach and deductive approach.

In this research, the researcher will select the deductive research approach, as there is sufficient amount of existing literature present about internationalisation. Deductive research approach does generalisation from the general to the specific. The logic is about deductive inference and the researcher will deduce the concept from the existing theories. The deductive approach will be helpful to collect the data and to evaluate proposals. The researcher will start from the theories and they will find compelling the test and its implication with the data.

Theoretical framework of internationalisation

Research design 

The research design is the systematic process of collecting the data (Mackey and Gass 2015). The research design is mainly three kinds, exploratory, explanatory and descriptive research design.

The researcher will adopt the exploratory research design for this study. The factors, promoting and discouraging internationalization of the small scale businesses will be explored in this study and through the research, the researcher will put forward general insights about the situation. The researcher will not be generating any new theory from the study, or offer any conclusive solution as in case of other types of research design (Silverman 2016). This process is most suitable as it mainly focuses on determining the nature of the research issue, which in this case is to examine the influential factors for international expansion of the small scale businesses. This will require qualitative analysis of the data, collected from a very small sample.

Data collection process 

In this research, both primary and secondary data will be used to meet the objectives of the study. Secondary data will be collected from the various secondary sources like books, journals, websites, articles, online magazines, government reports and organisational websites. In addition, primary data for this research will be collected through conducting the interview. The interview will be conducted via Skype. The researcher will make 8 open-ended questions in order to take the structured interviews of the participants. The researcher needs descriptive data in order to find out the factors of internationalisation of the small business enterprises. The researcher will call to the small business enterprises to take the permission of the Skype interview and the interview will be recorded.

Sampling technique 

The researcher will select the sample population as the operational managers of small business enterprises in Australia. It will be difficult to find out the small business enterprises’ managers. The researcher will take help of social networking sites in order to find out the managers. The operation managers of small business enterprises of Australia are the sample population. The sample size will be only three. The researcher will keep the sample size smaller in order to reduce the complexity of the data collection. The sampling technique of the research will be non-probability sampling, as the sample will be selected based on the subjective judgement rather than random selection.

Sample Population	Sample size	Sampling technique	Sample Frame
Operation managers of small business enterprises in Australia	3	Non-probability sampling	Through Skype

Table 1: Sampling technique

(Source: Developed by the researcher)

Data analysis 

In this research, the researcher will focus on qualitative data analysis. Qualitative data are descriptive or subjective data. Interview-based data will be analysed through thematic data analysis. The researcher will segregate the data by themes. There will be five themes in the data analysis section. Each of the themes will be backed by a table or graph. Thematic data analysis emphasises on examining, pinpointing and recording the data (Flick 2015). The themes will be developed to meet the existing research questions.

Research Ethics 

This research process will be associated with human participants. The ethics of the research are the norms that the researcher will follow throughout. The researcher will take permission from the university before conducting the research and him researcher will fill in the ethics form in order to conduct the interview process. The researcher will send emails with consent forms to the operation managers of the small business enterprises. The researcher will follow the Privacy Act 2014 of Australia and any kind of data breach will not be done. The data will be collected only for research purposes. The researcher will not do any kind of coercion and the researcher will maintain the confidentiality of the participants.

Foreseen limitations 

The limitations of the study will be a budgetary constraint, as the researcher may need some access to the journal articles, which are premium. The researcher may face the limitation of time constraint, as the researcher may not be able to continue the research process for long. In addition, the limitation of the study may be the sample size as the sample size is only 3. The researcher will not be able to collect the data through the interview from large numbers of people, as it is not feasible. It is not easy to make the managers agree to share their views on internationalisation. The researcher needs to handle a large amount of data for this research as secondary research and primary research both must be analysed.

Research Timeline

Activities	Week 1	Week 3	Week 5	Week 7	Week 9	Week 11	Week 12
Selection of research topic	?
Reviewing the problem statement		?
Literature review			?
Collection of data through interview				?
Data analysis					?
Drawing conclusion and recommendations						?
Final submission							?

Table 2: Gantt chart

(Source: Self-developed)

Acknowledgement

Abstract

Table of Contents

Chapter One: Introduction

Chapter Two: Literature Review

Chapter Three: Research Methodology

Chapter Four: Data analysis and findings

Chapter Five: Conclusions and Recommendation

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