Success and failure in the internationalization process

There is often almost an obsession with trying to know in advance if a venture is going to be successful. Partly the attitude of an individual relates to their own perception of risk. Some decision makers are prepared to jump with only 50% certainty or less, while others are highly risk averse and will only jump when they think they have 95% certainty or more! Nothing ventured, nothing gained is not a bad maxim for business. If taking risks is not for you, try a. different career. On the other hand, there is some literature in entrepreneurship which suggests that entrepreneurs never take risks, because they have so carefully assimilated the information needed that they know they are onto a winner.

Of course nothing can guarantee success; not even a monopoly situation in the long-term, as many state owned businesses have found to their cost throughout the world. The environment does not stand still. Market awareness and knowledge is important, as Box 4.7 illustrates. However, the very best information gathering exercise is only as good as the interpretation or spin put upon it by the individuals concerned. There is perhaps a rather understated view, which says that marketing cannot guarantee success, but that an enterprise will fail less badly because of it. Marketers should be a little bolder than this at least!

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So what are the factors which influence success in the internationalization process and what should be done to guard against failure? Various studies have attempted to identify the elements which are crucial to the success of the export venture. These include:

■ Having a long-term view

■ Being committed to 'exporting'

■ Finding good representation

■ Paying attention to detail

■ Being focused on customer service

■ Being flexible and patient.

Much of the literature focuses on exporting success because, as we have seen before, this is the dominant internationalization activity for most businesses. Attention has been given to the degree of export experience, i.e. experienced exporters versus new exporters; or to how the export intensity (exports as a percentage of total turnover) relates to the level of internationalization, size of the firm or product type.

While smaller firms can be active exporters as we shall see in Chapter 5, the larger company does have the advantages of greater human resources and financial strength. There is an assumption then that they have more spare capacity to devote to internationalization activities while benefiting from economies of scale. At the same time they perceive less risk in international markets, which gives them added confidence. On the other hand Aaby and Slater (1989) in their review of the literature find contrary ev idence, which suggests that small firms are not inhibited by their size and can in fact benefit from it.

Often a broad distinction is made between products devoted to the consumer market and those serving the business to business or organizational market. Partly because of the cultural differences between international markets, goods for the consumer market are subject to greater scrutiny than those destined for the business market. This is especially true where the exported products are component parts to be incorporated or consumed in the production of another product. Thus the route to export success in the business market can be more straightforward. So then what are the key success factors?

Export success factors

Not surprisingly the marketing activities of a business have some influence on the success of a venture. Within the literature a number of factors have been identified; these include:

• Market selection

■ Product strategy

■ Packaging characteristics

■ Pricing strategy

■ Credit strategy

■ Communication strategy

■ Distribution strategy

■ After sales support

■ Experience of staff.

Other authors have identified firm-specific characteristics including:

■ Technology intensity

■ Planning process

■ International networks

■ Quality control

■ Financial strength.

Of course success is dependent on the context within which the business finds itself. Thus, the third group of success factors relate to the external environment, namely:

■ Friendly diplomatic relations

■ Trade pacts and agreements

■ Export subsidies and support (including information provision, tax breaks)

■ Low trade barriers (tariffs and other trading restrictions)

■ Stable political and trading environment

■ Good infrastructure.

Inevitably a number of models exist in the literature which attempt to pull together the determinants of export marketing performance. Cavusgil and Nason (1991) selected the following variables: organization characteristics, management characteristics, top management commitment, product and marketing strengths, suitability of product to the market. Aaby and Slater (1989) included technology, market knowledge, planning, marketing strategy, organizational size, commitment and expected profit. More succinct models of export determinants were proposed by Louter et al. (1991) and Holzmuller and Kasper (1991). The former included company, attitude, and strategy characteristics and the latter grouped the determinants into culture, business and manager characteristics.

Based on an extensive literature review, Valos and Baker (1996) attempted to identify tangible and intangible export performance determinants. While the study was based within the Australian context it clearly has a wider resonance. Thus the tangible determinants were:

■ Distribution - inadequate channel relationships prevent successful export marketing

■ Product - having a unique product, product packaging, willingness to adapt products, good quality, and good pre/after sales service

■ Customer contact - frequent customer contact assists export success

■ Control - having good management control systems

■ Research and development - provides new and innovative products

■ Technology - those able to apply technology are more successful

■ Supplier - having suppliers who perform reliably

■ Finance - under capitalization of activities hinders performance.

While the intangible factors were identified as: (i) Attitudinal

■ Management commitment - persistence and involvement are crucial

■ Perceived importance - exporting is seen as attractive, with the possibility of higher returns than in the domestic market

■ Export orientation - having an international outlook or vision

■ Confidence - being confident and having a positive attitude to risk.

(ii) Skill related factors included:

■ Management - education levels of the managers and the close interaction between managers and workers

■ Marketing - lack of, or poor, marketing planning and analysis can cause export failure

■ Export specific skills - foreign language skills, knowledge of export procedures and financing expertise, experience of living and working internationally.

(iii) Knowledge:

■ Knowledge - lack of foreign market knowledge affects export success. Success rarely comes automatically and in export marketing, as with many other activities, it requires careful planning, commitment and perhaps most importantly having a product or service that customers actually want. For the smaller firm making use of networks and knowing when and how to obtain advice and information can also be an important contributor to success. The people involved in any business must believe that the world is the market. For the entrepreneurs and the entrepreneurs within organizations, opportunities are there if you look for them and you should nurture an 'attack mentality'. Flexibility, especially in mode of market entry is important, so that a business is prepared to work with agents, distributors or enter into joint ventures to exploit opportunities. You may not succeed first time, but there will be plenty of advice on offer to assist you (Box 4.8) if you know where to find it.

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