Intensity and Risk
Internationalizing the Small and Medium Sized Firm – four cases
Another pattern, very closely linked to the former one, is the aggressiveness in the internationalization process. This can also be described as how much risk that is involved in the internationalization. As previously explained traditional literature mean that companies use a step-by-step approach when internationalizing (Johanson & Vahlne 1977). This is said to be especially true for SME’s. The main reason for this is the limited resources, both financial and managerial (Lindqvist 1991). The companies in our study internationalized when it was, having a historic perspective, very easy to raise capital for expansion. This fact made it possible for the companies to have a more aggressive approach to their international expansion than the traditional step-by-step approach. In the case of Avanza, they also tried to solve the limited managerial resources by using some of the raised capital to pay for consultants. As mentioned, this did not turn out to be an efficient solution.
Acting aggressively in the early stage of the internationalization process may not always be desirable. By skipping the step-by-step approach you also loose out on the process of improving and refining your business plan. In these young companies it is more the rule than the exception that the business plans changes along the way. This can be the result of that the business concept is not fully mature, the assumptions made when entering the new market proved to be wrong, the market condition changes etc. Projectplace experienced that their initial investments in advertising in a new market did not pay off as expected. According to them, the reason was that they did not exactly know the most efficient way how to reach out to customers on the new market. Furthermore, they miscalculated the maturity of the markets. This example shows on the fact that a more aggressive approach does not take advantages of the learning process when internationalizing to the same extent as a step-by-step approach.
Just as mentioned in the discussion about the pace of internationalization, the owners and the general hype played an important role when choosing the more aggressive approach.
