Internationalization of SMEs

Many Kenyan SMES searching for sales internationally; USA and Europe usually come to mind yet the East Africa Community (EAC), COMESA, SADC are much closer and easier to access.

Most SMEs are desperately to make sales by all means weather domestic or foreign to fuel their growth. Few SMEs are setting up foreign subsidiaries in foreign countries due to majorly lack of financing and information. Such daring internationalization strategy is mostly deployed by banks such as Equity Bank, KCB and other well resourced companies such as Seven Seas.

SMEs looking to expand to foreign markets can opt for a low risk strategy of direct export by using distributors, agents or a trusted local partner before setting up a foreign branch or subsidiary.

Similarly larger companies prefer to enter new countries indirectly avoiding making significant investment upfront opting to make investment in tandem to growth in sales.

SMEs seeking internationalization using such a low risks model must first do a robust research about the legal framework of the target country but most importantly potential local partner or distributor. A bad choice of such a partner is the top reason for failure in internalization followed by lack of understanding of market and competition among others.

Generally as a rule of thumb; before internationalization, SMEs must be effectively running with stable human and financial resource.

Finally SMEs must perform due diligence and or market feasibility ensuring deep understanding of international business trends not forgetting to get into contact with international trade forums and associations.

This is a simplistic approach to internationalization; if you are looking to expand your organizations operations either locally or internationally get in touch with Viffa team or allow us to share our deep insight in operations management.