Why SMEs in Developing Countries Shouldn’t be Discouraged from International Business

There are a lot of challenges in running a small or medium-sized enterprise (SME). You have to start from scratch, endure several unprofitable years, and much more. Unfortunately, it is often harder for SMEs in developing countries to succeed than ones operating in developed nations. Thus, adopting a proactive approach to internationaliz­ation is a must to boost sales, lower labor production costs, diversify operations, build better relations with clients, and gain a larger customer base.  

How SMEs Can Successfully Go International 

While many simply view internationali­zation as a solution to changing circumstances like the de­terioration of the margin, a stagnant market, or shifting demands, there are many other benefits as well. For example, by entering international markets, SMEs can exploit other markets' development and growth, take advantage of economies of scale and reach, and transfer activities in the value chain to competitive areas. Moreover, they can even gain more knowledge regarding markets and clients, the potential of competitors in a certain sector, and the cultural diversity of foreign teams and companies.  

So how can SMEs best create value during the globalization process? By following these three strategies:

1. The adaptation strategy entails increasing income and market share by customizing products and services to suit local needs. The key here is to arrive at the correct adaptation of the business model as well as the goods offered to the target market.
2. Under the aggregation strategy, it is important to overcome differences. Create regional and global operations to benefit off of economies of scale. Try to standardize goods and group together activities based on geographical zones to bring down costs as well.
3. Lastly, the arbitrage method consists of taking advantage of the differences between regional and national markets to transform them into opportunities for resource optimization. You should locate independent supply chain components in various locations to capitalize on the benefits of specialized production on a global scale.

In addition to these three strategies, it is also important to ask yourself, “What competitive advantage do I want to gain?" This will help you better determine which markets to enter and what other strategies and structures to adopt. While internationalizing can certainly get risky, it will most likely be worth it in the long run.

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