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C H O O L JÖNKÖPING UNIVERSITY 
 
 
 
 
 
 
 
 Master
Thesis
in
Business
Administration
 Authors:
 XU
HAN
 
 
 SARAH
NOLLER
 Tutor:

 VERONICA
GUSTAFSSON


International
Growth


Strategies
for
Start­Up
and


Micro
Companies



A 
 M o d e l 
 f o r 
 s o n a m i 
 A G 
 





Acknowledgements




First
 of
 all
 we
 would
 like
 to
 thank
 our
 tutor
 Veronica
 Gustafsson
 for
 her
 inspirational
 guidance
 and
 encouragement
 during
 our
 process
 of
 writing
 this
 Master
Thesis.




Secondly,
we
are
grateful
for
the
support
of
Clas
Wahlbin,
who
gave
us
advice
in
 the
latest
seminars.



We
 also
 would
 like
 to
 give
 special
 thanks
 to
 our
 thesis
 committee
 members,
 Sinsupa
 and
 Patima,
 for
 providing
 us
 with
 structured
 criticism.
 It
 helped
 a
 lot
 in
 enhancing
the
quality
of
our
work.



Furthermore
we
would
like
to
thank
Daniel
Lathan,
CEO
of
sonami
AG
for
making
 this
thesis
possible.



We
would
also
like
to
thank
Dr.
Magnus
Wessén
from
RheoMetal
AB,
Björn
Engvall
 from
 Separett
 AB,
 Richard
 Keller
 from
 DK‐tec
 GmbH
 and
 Thomas
 Schuster
 from
 KW
 automotive
 GmbH.
 Without
 your
 interesting
 and
 practical
 insight
 in
 your
 companies
 this
 thesis
 would
 not
 have
 been
 possible.
 Thank
 you
 very
 much
 for
 spending
us
some
of
your
time.


Xu’s
acknowledgement


I
 would
 like
 to
 say
 thank
 you
 to
 my
 co‐writer,
 Sarah
 Noller,
 who
 was
 the
 first
 person
 I
 got
 to
 know
 in
 class,
 who
 is
 a
 life
 time
 friend
 for
 me,
 who
 is
 always
 so
 supportive
for
a
totally
stranger
in
Europe.

 I
also
want
to
show
my
respect
to
my
mother
and
my
husband,
Jiao
Guijuan
and
 Cui
lianguang,
who
are
the
most
important
and
supportive
friends
in
the
world.
My
 mother
gave
me
life,
my
husband
gave
me
the
courage
to
live.
 Sarah’s
acknowledgement
 First
of
all
I
would
like
to
say
thanks
to
Xu,
a
wonderful
friend
and
co‐writer
of
this
 thesis.
Thanks
so
much
for
being
there
for
me
–
you
are
a
great
person.
 I
also
would
like
to
thank
my
parents
for
supporting
me
during
the
whole
time
of
 my
studies.
Furthermore
I
would
like
to
say
thanks
to
my
brother,
who
in
fact
is
 the
best
brother
in
the
world!
Thanks
for
being
there
and
for
supporting
me
during
 the
last
years.



Finally
 I
 would
 like
 to
 give
 special
 thanks
 to
 a
 wonderful
 friend,
 who
 always
 encourages
me
and
believes
in
me.
Heike,
we
have
known
each
other
for
so
many
 years.
Thanks
for
always
being
there
for
me,
for
endless
telephone
conversations,
 open
 doors
 and
 especially
 for
 supporting
 and
 encouraging
 me
 that
 much
 during
 the
writing
of
this
Master
Thesis.


Abstract


sonami
AG
is
a
company
that
is
located
in
the
Principality
of
Liechtenstein.
It
was
 founded
in
2007.
Since
then
it
didn’t
gain
many
customers
and
it
is
questionable
 how
long
the
company
will
be
able
to
survive
with
having
that
few
customers.
In
 order
 to
 get
 rid
 of
 the
 current
 situation
 and
 to
 achieve
 a
 sustainable
 expansion
 strategy
in
the
long
run
sonami
asked
us
for
help.
The
question
thus
is;
how
would
 an
international
expansion
strategy
look
like.



In
order
to
answer
this
question
a
case
study
approach
was
used.
Four
successful
 micro
 companies
 were
 interviewed
 and
 asked
 about
 their
 international
 strategy
 and
their
recommendations
for
expanding
abroad.



In
 addition
 internationalization
 literature
 has
 been
 reviewed.
 Furthermore
 the
 concept
 of
 strategy,
 strategic
 planning
 and
 strategic
 management
 has
 been
 discussed.



In
 the
 end
 a
 framework
 for
 sonami
 was
 developed.
 Different
 approaches,
 mixed
 with
 different
 recommendations
 and
 insights
 of
 the
 case
 studies
 were
 used
 to
 develop
it.



The
result
is
that
sonami
has
major
problems
internally,
which
should
be
solved
 before
 entering
 any
 international
 path.
 Our
 developed
 framework
 names
 several
 pre‐requisites
that
need
to
be
fulfilled
before
moving
on
to
the
next
step.
We
have
 tried
to
generate
a
deliberate
strategy
for
sonami.
We
also
recommended
sonami
 to
take
advantage
of
opportunities
given.
This
would
however
mean
that
sonami
 would
then
follow
an
emergent
strategy.

 
 


Non­discrimination
declaration





We
hereby
declare
that
this
Master
Thesis
does
not
discriminate
between
male
and
 female,
 in
 the
 course
 of
 its
 comments,
 only
 for
 the
 purpose
 of
 supporting
 the
 readability.
 If
 spoken
 of
 ‘he’
 the
 authors
 always
 mean
 ‘he
 or
 she’
 in
 particular
 context.




































































Table




of




Contents




1




Introduction...1




2




Background ...1




3




Purpose...2




4




Micro
companies
and
start­ups
in
Europe...3


 4.1
 Micro
companies
in
Europe ...3
 4.2
 Export
behaviour
of
micro
enterprises ...3
 4.3
 Expansion
to
foreign
markets...5


5




Frame
of
Reference...6


 5.1
 Internationalization
Literature ...6
 5.1.1
 The
Stage
Models ...8
 5.1.2
 Network
theory ...8
 5.1.3
 Born
global
theory...9
 5.1.4
 International
Entrepreneurship...10
 5.2
 Reasons
for
going
international...11
 5.3
 Organizational
factors...12
 5.3.1
 Learning
and
knowledge ...12
 5.3.2
 Culture ...13
 5.4
 Change
Management...13
 5.5
 International
expansion
strategy ...14
 5.6
 Growth
opportunities...16
 5.7
 ‘The
strategy
topic’ ...18
 5.7.1
 Definition
of
Strategy ...18
 5.7.2
 Strategic
Planning...19
 5.7.3
 Strategic
Management...19
 5.7.4
 Entrepreneurship
and
strategy ...21
 5.7.5
 The
strategic
approach...21
 5.8
 Summary
of
the
frame
of
reference...24


6




Methodology ... 25


 6.1
 Research
approach ...25
 6.2
 Case
study
research...26
 6.3
 Data
collection ...26
 6.3.1
 Firm
search...27
 6.3.2
 Delimitations ...28


7




Empirical
Findings... 29


 7.1
 KW
automotive
GmbH...29
 7.1.1
 The
Organization...29
 7.1.2
 Internationalization
process...30
 7.1.3
 International
challenges ...31
 7.1.4
 Useful
hints
and
recommendation ...31
 7.2
 RheoMetal
AB...31
 7.2.1
 The
Organization...32
 7.2.2
 Internationalization
process...32


7.2.3
 International
challenges ...33
 7.2.4
 Useful
hints
and
recommendation ...33
 7.3
 DK‐tec
GmbH...33
 7.3.1
 The
Organization...33
 7.3.2
 Internationalization
process...34
 7.3.3
 International
challenges ...34
 7.4
 Separett
AB ...35
 7.4.1
 The
Organization...35
 7.4.2
 Internationalization
process...36
 7.4.3
 International
challenges ...36
 7.4.4
 Useful
hints
and
recommendation ...37
 7.5
 Summary
of
case
studies...37


8




Analysis... 38


 8.1
 Internationalisation
process ...39
 8.1.1
 Reasons
for
going
international ...39
 8.1.2
 Internationalization
process...40
 8.2
 Culture...41
 8.3
 Growth
strategies...41
 8.4
 International
strategy...42


9




A
model
for
sonami... 42




10




Conclusion... 47




11




References... 49




12




Appendices... 54


 
 
 
 
 
 
 
 
 
 
 
 
 


Table
of
figures
and
tables:

Figure
1:
Structure
of
enterprises
in
Europe...3
 Figure
2
Exporters
by
industry
segment
–
European
Commission ...4
 Figure
3
Relative
time‐burden
of
administrative
tasks
‐
European
Commission ...5
 Figure
4
A
model
of
the
elements
of
strategic
management ...20
 Figure
5:
A
framework
of
strategic
process
in
small
business ...22
 Figure
6:

An
interpretative
model
for
international
entrepreneurial
organizations.
 (Zucchella
and
Scabini,
2007)...24
 Figure
7:
Definition
of
SME
thresholds.
Source:
European
Commission...27
 Figure
8
Internationalization
process
of
KW
automotive
GmbH...30
 Figure
9
Organization
overview
of
Separett
AB...35
 Figure
10
A
model
for
sonami
‐
own
interpretation ...43
 Figure
11
SWOT
analysis
of
sonami
AG
‐
own
interpretation...44
 
 
 Table
1:
Sales
markets
of
young
firms...6
 Table
2
Literature
review
of
internationalization
(Naldi,
2008,
p.54)...7
 Table
3:
Proactive
and
reactive
reasons
for
going
international...12
 Table
4:
International
entry
strategies ...15
 Table
5
Summary
of
firms
interviewed ...38
 
 Abbreviations BOP
 Business
Opportunity
Project
 CEO
 Chief
Executive
Officer
 EO
 Entrepreneurial
Orientation
 IT

 Information
Technology
 OEM
 Original
Equipment
Manufacturer
 SME
 Small
and
Medium
sized
Enterprises
 TNC
 Trans
National
Company


1 Introduction




In
a
global
and
by
technology
driven
world,
leaders
need
great
skill
for
managing
a
 company
successfully.
Human
resources
and
money
moving
around
the
world
are
 only
 two
 examples
 of
 the
 effects
 of
 globalization
 on
 everyday
 business.
 Internationalization
 provides
 access
 to
 new
 markets,
 a
 broader
 customer
 base,
 highly
 motivated
 and
 trained
 human
 capital
 and
 might
 blaze
 the
 trail
 for
 competitive
 advantage.
 For
 that
 reason
 many
 companies,
 unless
 they
 operate
 internationally
already,
see
a
major
opportunity
in
going
global.






However,
entering
new
and
international
markets
can
be
both,
an
opportunity
and
 a
 challenge.
 It
 might
 give
 a
 business
 competitive
 advantage
 to
 local
 competitors
 but
 on
 the
 other
 hand
 the
 business
 will
 face
 international
 rivalry.
 Besides,
 an
 international
expansion
gives
access
to
more
customers
and
new
employees
but
it
 also
involves
the
difficult
task
of
handling
different
cultures
and
local
regulations.
 The
simple
question
therefore
is
–
what
to
do?
How
can
the
internationalization
of
 a
company
be
made
successful?






There
 are
 many
 ways
 of
 hitting
 the
 ‘international
 path’.
 However,
 there
 are
 also
 various
facts
that
influence
the
strategic
decision‐making
process.






Isaksen
 and
 Tidd
 (2006)
 argue
 that
 especially
 a
 strong
 leader
 is
 crucial
 for
 a
 company’s
 way
 to
 international
 regions.
 However,
 this
 is
 only
 one
 of
 the
 many
 facts,
 having
 an
 influence
 on
 internationalization.
 The
 facts
 influencing
 international
 growth
 strategies
 can
 be
 classified
 into
 external
 and
 internal
 facts.
 Externally
a
company
is
influenced
by
its
size,
the
industry
it
is
in,
the
type
of
the
 company.
Furthermore,
factors
such
as
country
characteristics
and
culture
of
the
 aimed‐on
 country
 play
 an
 important
 role
 when
 talking
 about
 expanding
 abroad.
 Internally,
 issues
 such
 as
 leadership
 style,
 faith
 in
 the
 company,
 change
 management
 and
 intercultural
 and
 internal
 culture
 management
 have
 great
 influence.




The
internationalization
process
is
also
influenced
by
the
technological
progress.
 Technology
 eases
 many
 processes.
 Businesses
 around
 the
 world
 are
 able
 to
 act
 internationally
 by
 having
 worldwide
 internet
 access.
 Nevertheless
 this
 fact
 can
 ease
up
the
internationalization
but
it
cannot
replace
it.






sonami
 AG
 based
 in
 Vaduz,
 Liechtenstein,
 is
 a
 start‐up
 company
 founded
 in
 February
2007.
One
of
its
goals
is
to
operate
globally.
However
it
is
hard
to
find
the
 perfect
 strategy
 for
 international
 expansion
 since
 at
 the
 moment,
 sonami
 has
 no
 deliberate
strategy
at
all.
Strategy
lives
inside
the
mind
of
the
CEO,
Daniel
Lathan.
 His
 vision
 is
 to
 grow
 both
 national
 and
 international
 and
 to
 get
 access
 to
 large
 hotel
 chains.
 sonami
 has
 an
 informal
 structure
 and
 as
 an
 ‘one‐man’
 company
 no
 hierarchies
exist.
The
following
Master
Thesis
tries
to
identify
a
framework
for
the
 international
growth
strategy
of
sonami
AG.




2 Background


Liechtenstein
 that
 was
 founded
 in
 2007.
 Daniel
 Lathan,
 CEO
 and
 founder
 of
 sonami,
holds
a
degree
in
industrial
engineering.
He
is
in
his
early
30s
and
has
a
lot
 of
working
experience
in
several
fields,
such
as
entrepreneurship,
engineering
and
 consulting.


sonami
specializes
in
transmitting
Live‐Streams
from
nature
24/7.
Together
with
 students
 of
 the
 University
 of
 Applied
 Sciences,
 Furtwangen,
 Germany,
 Daniel
 Lathan
developed
a
recording
station
that
is
able
to
transmit
sounds
from
nature
 live
to
an
Internet
platform
(www.sonami.li).
The
current
Live‐Stream,
of
a
forest
 stream
 in
 the
 Black
 Forest,
 can
 be
 listened
 to
 online
 and
 every
 person
 having
 Internet
can
access
it.
More
Live‐Streams
will
follow
in
the
near
future.






sonami
 focuses
 on
 two
 customer
 segments.
 First
 and
 most
 important,
 sonami
 focuses
on
business
customers,
such
as
hotels,
hospitals,
firms,
airlines
and
public
 buildings.
 Until
 now,
 the
 Live‐Stream
 of
 sonami
 is
 integrated
 in
 the
 spa
 area
 of
 some
hotels
and
a
fitness
studio.
sonami
not
only
provides
the
access
to
its
Live‐ Streams,
but
also
a
complete
package
of
sounds
and
the
necessary
equipment,
for
 example
loudspeakers
etc.

 Second,
sonami
focuses
on
private
customers.
sonami
provides
access
to
its
Live‐ Stream
online,
thus
everybody
having
Internet
connection
can
purchase
an
access
 in
order
to
listen
to
it.
The
Live‐Streams
of
sonami
are
said
to
have
a
relaxing
effect
 and
sonami
aims
on
bringing
nature
to
everyone.

 Since
its
foundation,
sonami
was
not
able
to
gain
many
customers
or
to
implement
 any
deliberate
strategy
that
would
lead
to
success.
sonami
still
consists
of
only
one
 permanent
employee,
which
is
Daniel
Lathan
himself.
Of
course
this
is
not
enough
 to
 expand
 globally,
 as
 one
 permanent
 employee
 is
 not
 able
 to
 manage
 the
 company,
 and
 do
 sales
 and
 marketing.
 In
 addition
 to
 the
 human
 resources
 problem,
 sonami
 also
 lacks
 financial
 resources.
 More
 customers
 could
 solve
 that
 problem.
One
of
the
visions
of
Daniel
is
to
get
access
to
a
huge
hotel
chain,
such
as
 the
Hilton
hotel
chain.
Daniel
has
thus
asked
for
help,
in
order
to
find
an
adequate
 growth
 strategy
 for
 sonami,
 especially
 overseas.
 His
 wish
 is
 to
 bring
 sonami
 to
 international
markets
and
to
have
a
significant
growth,
both
internal
and
external.

 sonami
followed

many
emergent
strategies
in
the
past
years,
however
it
was
not
 able
to
realize
and
finish
any
of
those
emergent
strategies.


3 Purpose



The
 purpose
 of
 this
 study
 is
 to
 find
 a
 suitable
 international
 growth
 strategy
 for
 start‐up
 companies
 and
 micro
 firms,
 an
 approach
 which
 will
 also
 be
 suitable
 for
 sonami
AG.


Literature
on
the
international
growth
of
micro‐companies
and
start‐up
firms
vary
 a
 lot.
 Many
 models
 have
 been
 developed
 and
 frameworks
 have
 been
 created.
 Nevertheless,
 we
 find
 none
 of
 the
 in
 the
 literature
 part
 mentioned
 models
 fully
 appropriate
for
sonami
and
micro
firms
respectively.
Our
aim
thus
is
to
develop
a
 framework
that
first
and
foremost
suits
sonami.
However,
we
suspect
this
to
be
a
 bold
venture,
as
strategies
of
micro
companies
are
as
different
as
night
and
day.

 In
order
to
investigate
this
topic,
we
thus
would
like
to
pose
the
following
research
 questions:


• Why
do
start‐up/micro‐companies
start
to
go
international?
 • How
do
start‐up
and
micro
firms
start
their
international
path?
 • How
does
the
strategy,
if
one
exists
at
all,
look
like
that
is
followed?
 • How
does
the
‘perfect’
framework
for
the
international
growth
strategy
of
 sonami
look
like? 


4 Micro
companies
and
start­ups
in
Europe



This
section
will
give
some
data
about
micro
enterprises
and
start‐ups
in
Europe.


4.1 Micro
companies
in
Europe



SMEs
seem
to
play
an
important
role
in
Europe’s
business
economy
(see
figure
1).
 They
account
for
97.7%
of
the
number
of
enterprises.
89.1%
are
micro
companies.
 They
 employ
 around
 70%
 of
 persons
 and
 account
 around
 60%
 value
 added
 in
 Europe
(Schmiemann,
2002).





Figure
 1:
 Structure
 of
 enterprises
 in
 Europe;
 Source:
 Structural
 Business
 Statistics
 (theme
 4/SBS/sizclass),
Eurostat;
in
Schiemann
(2002).



4.2 Export
behaviour
of
micro
enterprises


It
 is
 reported
 that
 only
 8%
 of
 SMEs
 have
 a
 turnover
 from
 exports.
 Furthermore,
 micro
 enterprises
 in
 particular,
 have
 an
 export
 rate
 of
 7%,
 generating
 a
 5%
 proportion
 of
 income
 from
 exports.
 This
 is
 not
 very
 much,
 compared
 to
 small
 enterprises
 with
 an
 export
 rate
 of
 13%
 and
 thus
 7.9%
 income
 from
 exports.
 Medium
sized
enterprises
have
an
export
rate
of
24%,
which
gives
them
14.9%
of
 income
from
exports
(the
treble
compared
to
micro
companies).
(Eurobarometer
 Team‐
European
Commission,
Nov.
2006
–
Jan.
2007).



Figure
2
Exporters
by
industry
segment
–
European
Commission
 
 The
question
is,
why
do
micro
companies
have
less
exports
than
SMEs?
From
our
 point
of
view,
the
scarcity
of
resources
is
a
possible
explanation.
Fewer
employees
 have
to
care
about
more
duties.
The
Eurobarometer
Team‐
European
Commission
 (Nov.
2006
–
Jan.
2007)
also
found
out
that
the
main
constraint
for
exporting
is
the
 lack
of
foreign
market
knowledge
(accounted
for
13%).
However,
what
we
think
is
 also
 an
 important
 fact
 is
 that
 micro
 companies
 spent
 9%
 of
 their
 time
 with
 bureaucratic
 duties
 –
 see
 figure
 3
 (The
 Eurobarometer
 Team‐
 European
 Commission
(Nov.
2006
–
Jan.
2007).
This
makes
clear
that
micro
companies
have
 to
do
more
work
instead
of
being
able
to
concentrate
on
the
core
duties.



Figure
3
Relative
time‐burden
of
administrative
tasks
‐
European
Commission


4.3 Expansion
to
foreign
markets


Why
do
companies
go
abroad?
According
to
the
Wirtschaftsspiegel
09/2005
of
the
 IHK
 Nord
 Westfalen
 92%
 of
 the
 companies
 aim
 on
 opening
 up
 a
 new
 market
 abroad.
According
to
their
survey,
‘going
international
2005’,
the
choice
of
which
 market
 to
 enter
 is
 facilitated
 by
 proximity
 and
 the
 dynamic
 of
 the
 market
 to
 be
 entered.
Important
factors
for
being
successful
are
seen
in
(1)
the
product
quality,
 (2)
 trustworthy
 partners
 and
 (3)
 market
 knowledge.
 The
 reason
 why
 those
 enterprises
started
their
international
path
was
the
opening
up
of
new
markets
for
 sales,
 the
 opening
 up
 of
 new
 markets
 for
 purchasing
 and
 the
 proximity
 to
 customers
(Wirtschaftsspiegel
09/2005).
 
 Sales
market
 
 Local/regional
 market

 National
market
 International
 market
within
 the
EU
 International
 market
outside
 the
EU
 Average
 79,1%
 25,2%
 6,9%
 3,1%
 Austria
 72.0%
 31.5%
 22.2%
 7.3%
 Bulgaria
 87.0%
 15.5%
 4.4%
 2.7%
 Denmark
 82.0%
 44.5%
 14.2%
 8.8%
 Estonia
 2.8%
 4.1%
 14.3%
 7.7%
 Italy
 86.5%
 21.3%
 5.1%
 3.0%


Latvia
 66.0%
 38.0%
 11.1%
 5.7%
 Lithuania
 61.1%
 44.6%
 20.1%
 10.8%
 Luxemburg
 33.0%
 51.3%
 48.8%
 12.1%
 Portugal
 60.6%
 45.8%
 9.9%
 1.8%
 Romania
 81.7%
 10.2%
 3.7%
 1.4%
 Sweden
 73.9%
 32.4%
 10.3%
 6.3%
 Slovakia
 71.4%
 30.2%
 8.9%
 1.4%
 Slovenia
 79.8%
 85.2%
 26.6%
 14.3%
 Czech
Republic
 70.3%
 33.1%
 4.9%
 1.9%
 France
 77.0%
 16.2%
 6.8%
 ­
 Table
1:
Sales
markets
of
young
firms.;
EUROSTAT.
–
FOBS
survey
2005.
–
from
the
Austrian
bureau
 of
 statistics
 (www.statistik.at)
 Data
 for
 France
 were
 added
 by
 the
 Austrian
 bureau
 of
 statistics.
 Translated
by
the
authors.

 Table
1
indicates
that
most
young
enterprises
focus
on
the
local/regional
market
 or
the
national
market
rather
than
on
the
international
market.
However,
it
seems
 that
this
strongly
depends
on
the
several
countries.
Whereas
Luxemburg,
Slovenia
 and
Austria
for
example
focus
quite
strongly
on
the
international
market
(within
 the
EU),
Bulgaria,
Italy
and
Romania
focus
more
on
the
national/regional
markets.


5 Frame
of
Reference


Much
 research
 has
 been
 done
 in
 the
 field
 of
 internationalization
 and
 growth
 strategies.
Many
authors
have
investigated
in
life
cycle
models,
stage
models
and
 so
 on.
 Our
 literatures
 cover
 the
 fields
 of
 international
 literature,
 international
 expansion
 strategies,
 growth
 opportunities,
 change
 management,
 strategic
 management
and
processes.



5.1 Internationalization
Literature


A
lot
of
attention
has
been
drawn
to
literature
concerning
the
internationalization
 process
of
small
firms.
Naldi
(2008,
p.
54)
compared
different
internationalization
 literature.
It
mainly
included
three
directions.
Why,
what
and
how
(See
table
2).



Direction
 Key
words
 Internationalization
 theories
 Underlying
 theories
 Explanatory
 variable
 Why
 literature
 Firm
foreign
 market
entry
 models
 ‐Hymer’s
framework
 ‐Internationalization
 theory
 ‐Eclectic
framework
 ‐Industrial
 organization
 ‐Transaction
costs
 
 
 Transaction
 characteristic,
 stemming
from
 firm
specific
 resources
such
as
 knowledge



 
 Organizational
 capabilities
 ‐Resource‐based
 view
 ‐Dynamic
 capabilities
 Firm
know‐how
 Uppsala
model
 ‐Penrose’
theory
 ‐Behavioural
theory
 Market
knowledge
 gained
through
 experience
in
 international
 market
 How
 literature
 Internationalizatio n
process
 Network
theory
 ‐Social
exchange
 theory
 ‐Resource
 dependency
theory
 ‐Behavioural
theory
 Social
and
 cognitive
 established
among
 network
members
 What


literature
 The
phenomenon
of
international
 new
ventures


International
new


venture
perspective
 ‐Entrepreneurship
literature
 ‐Resource‐based
 view
 Entrepreneur’s
 knowledge

 Technological
 know‐how

 Learning
 advantages
of
 newness
 Table
2
Literature
review
of
internationalization
(Naldi,
2008,
p.54)


In
 our
 Master
 Thesis
 we
 would
 like
 to
 discuss
 only
 some
 of
 the
 several
 internationalization
models
and
processes
and
we
tried
to
focus
on
the
ones
that
 we
think
are
most
relevant
to
start‐up
and
micro‐firms.



The
 literature
 on
 internationalization
 processes
 of
 small
 firms
 contains
 many
 approaches.
Those
approaches
consist,
amongst
others,
of
chain
models,
network
 approaches,
 born
 global
 literature
 and
 international
 entrepreneurship.
 (Naldi,
 2008;
 Bell
 et
 al.,
 2004).
 Those
 processes
 differ
 in
 their
 basic
 approach
 but
 all
 of
 them
aim
on
a
successful
establishment
of
the
‘international
path’.
The
models
we
 are
 going
 to
 consider
 within
 this
 Master
 Thesis
 aim
 on
 the
 successful
 internationalization
of
micro
enterprises
and
small
and
medium
sized
enterprises
 (SME)
 respectively.
 However,
 we
 are
 not
 going
 to
 discuss
 all
 of
 the
 approaches
 mentioned
by
Naldi
(2008)
as
we
think
not
all
of
them
fully
fit
our
approach
to
find
 the
right
internationalization
strategy
for
micro
companies
and
start‐ups.
Hymer
 (1976)
 was
 the
 first
 one
 to
 focus
 his
 research
 on
 internationalization
 but
 he
 did
 not
focus
on
micro
firms.
The
internationalization
theory
(Buckley
&
Casson,
1985)
 and
 the
 eclectic
 framework
 (Dunning,
 1988)
 mainly
 targeted
 on
 foreign
 direct
 investment
in
multinational
enterprises,
which
are
large
in
size
and
rich
in
capital.
 The
resource
based‐view
is
not
that
appropriate
for
us,
as
micro
enterprises
have
 small
 personal
 resources,
 and
 few
 access
 to
 informal
 and
 formal
 networks
 (Mc
 Crea
 and
 Torres‐Baumgarten,
 2008).
 For
 that
 reason
 we
 focused
 on
 the
 four
 following
 approaches
 of
 internationalization
 literature:
 (1)
 stage
 models,
 (2)
 network
theory,
(3)
born
global
theory,
(4)
international
entrepreneurship.



5.1.1 The
Stage
Models


According
 to
 Bell
 et
 al.
 (2004,
 p.
 25)
 ‘much
 of
 the
 early
 literature
 on
 internationalization
 behaviour
 concludes
 that
 the
 process
 involves
 a
 series
 of
 incremental
 ‘stages’
 whereby
 firms
 gradually
 become
 involved
 in
 exporting
 and
 other
forms
of
international
business’.
 The
probably
most
known
stage
model
for
the
internationalization
of
small
firms
is
 the
Uppsala
Internationalization
Model
(Johanson
&
Vahlne,
1977,
1990;
Johanson
 &
Wiedersheim‐Paul,
1975).
 It
describes
four
stages
in
a
firm’s
gradual
development
process
(Moen
et
al.,
2004,
 p.
1237):
 ‘(1)
no
regular
export

 (2)
export
via
independent
representatives;

 (3)
establishment
of
an
overseas
sales
subsidiary;
and

 (4)
foreign
production/manufacturing’.


 The
internationalization
process
thus
takes
place
in
sequenced
steps.
However,
the
 Uppsala
model
has
been
discussed
a
lot
in
the
previous
years.
It
is
seen
as
a
model
 that
 focuses
 rather
 on
 transboundary
 performance
 than
 on
 entrepreneurship
 (Oviatt
 &
 McDougall,
 2005).
 From
 our
 point
 of
 view,
 most
 start‐ups
 and
 micro
 enterprises
 act
 entrepreneurially
 rather
 than
 following
 sequenced
 steps
 and
 a
 certain
strategy.
This
assumption
is
based
on
free
thoughts.
However,
getting
back
 to
 the
 Uppsala
 Model,
 many
 new
 ventures
 have
 been
 found
 to
 start
 their
 international
 path
 more
 quickly
 in
 recent
 years,
 than
 described
 by
 the
 Uppsala
 Model
(Moen
et
al.,
2004).

The
question
is,
if
the
Uppsala
Model
is
still
‘up
to
date’
 or
 should
 be
 revised?
 In
 fact,
 the
 stage
 models
 have
 been
 criticised
 quite
 often.
 Oviatt
and
McDougall
(2005)
point
out,
that
even
the
authors,
Johanson
and
Vahlne
 (2003)
 consider
 the
 idea
 of
 reconciling
 and
 integrating
 new
 and
 network‐based
 models.
For
that
reason,
we
would
now
like
to
focus
on
the
network
theory.



5.1.2 Network
theory


According
 to
 Moen
 et
 al
 (2004,
 p.
 1239),
 ‘the
 network
 theorists
 suggest
 that
 the
 internationalization
process
of
a
firm
occurs
in
a
more
complex
and
less
structured
 manner
than
earlier
internationalization
theories
imply’.



Network
 theory
 is
 based
 on
 the
 relationship
 of
 a
 firm
 with
 several
 stakeholders,
 such
 as
 e.g.
 customers,
 suppliers
 and
 competitors
 (Coviello
 and
 Munro,
 1995).
 These
relationships
may
influence
and
support
a
company
in
its
decision
when
and
 where
to
go
abroad.
A
certain
amount
of
networking
may
be
essential
for
a
firm’s
 growth
both
national
and
international.
All
kinds
of
contacts,
such
as
partners
on‐ site
 or
 partners
 abroad
 will
 support
 a
 company
 in
 its
 intention
 to
 grow.
 Those
 partners
 can
 reduce
 costs,
 through
 cooperation
 e.g.,
 ease
 up
 a
 market
 entry
 through
 market
 specific
 knowledge
 or
 help
 developing
 new
 and
 innovative
 products.



‘in
 the
 context
 of
 the
 entrepreneur
 seeking
 to
 develop
 international
 markets,
 network
 theory
 leads
 one
 to
 examine
 a
 variety
 of
 internationalization
 issues.
 These
 include,
 for
 example,
 the
 impact
 of
 network
relationships
on
foreign
market
selection
and
the
relative
influence
 of
 other
 firms
 (in
 both
 direct
 and
 indirect
 relationships)
 on
 new
 market
 entry
strategies’.



An
 intact
 network
 may
 thus
 be
 of
 great
 help
 and
 guide
 the
 way
 to
 a
 successful
 market
entry.
Customers
build
an
optimal
‘decision
helper’,
when
thinking
about
 which
 market
 to
 enter.
 They
 will
 then
 passively
 help
 the
 company
 to
 grow.
 An
 existing
 customer
 base
 can
 be
 seen
 as
 a
 booster
 for
 the
 company.
 Moen
 et
 al.
 (2004)
support
the
importance
of
customers
during
decision‐making.



As
 mentioned
 above,
 a
 solid
 network
 builds
 an
 important
 role
 in
 a
 firms
 internationalization
 process.
 It
 opens
 up
 new
 opportunities
 for
 the
 firm
 and
 its
 strategic
decisions
(Oviatt
and
McDougall,
2005).


Network
theory
is
seen
to
be
more
powerful
and
successful
than
decisions
made
 by
 managers
 (Coviello
 and
 Munro,
 1995).
 Customer
 and
 supplier
 relationships
 may
 thus
 lead
 to
 a
 more
 successful
 way
 than
 do
 the
 decisions
 of
 few
 people.
 In
 addition
it
is
concluded
that
network
relationships
‘(both
direct
and
indirect)
offer
 helpful
new
insights
and
require
to
be
incorporated
into
models
or
frameworks
of
 small
 firm
 internationalization’
 (Bell
 et
 al.,
 2004,
 p.
 26).
 This
 fact
 underlines
 the
 importance
of
networks.


As
a
summary
we
would
like
to
point
out
that
networks,
thus
relationships
with
 stakeholders,
offer
great
help
when
going
internationally.
They
support
decision‐ making
and
ease
up
the
market
entry
abroad.


5.1.3 Born
global
theory


The
 criticism
 on
 the
 stage
 models
 is
 partly
 due
 to
 the
 fact
 that
 many
 start‐ups
 internationalize
 quickly
 after
 their
 foundation,
 not
 following
 conventional
 stage
 models.
 They
 are
 described
 to
 be
 international
 from
 their
 inception
 (Oviatt
 and
 McDougall,
1994).
Different
authors
have
named
those
firms
differently.
They
are
 called
infant
multinationals,
international
new
ventures
and
born
globals
(Moen
et
 al.,
2004).


Those
firms
are
said
to
think
internationally
right
from
their
beginning
(Aspelund
 and
 Moen,
 2001).
 Jantunen
 et
 al.
 (2008)
 point
 out
 that
 the
 increased
 number
 of
 born
 globals
 arises
 mainly
 due
 to
 changes
 in
 the
 environment,
 such
 as
 market
 conditions,
 technological
 developments
 and
 the
 skills
 of
 the
 people.
 The
 technological
change
during
the
last
years
has
made
a
huge
contribution
to
making
 processes
easier,
especially
in
communication.
As
born
globals
are
said
to
be
rather
 network
 theory
 based
 (Jantunen
 et
 al.,
 2008),
 the
 technological
 change
 supports
 the
international
success
story.
Born
global
companies,
relying
on
networks
have
 the
 advantage
 that
 the
 technological
 change
 gives
 them
 the
 possibility
 to
 communicate
 quicker
 with
 customers.
 Internet
 access
 can
 be
 seen
 as
 a
 big
 information
 source,
 but
 also
 as
 communication
 supporter.
 It
 is
 much
 easier
 for
 born
globals
nowadays
to
internationalize.


Oviatt
 and
 McDougall
 (1994)
 continued
 their
 born‐global
 ventures
 research
 in
 1995.
 They
 used
 case
 study
 research
 to
 analyze
 that
 new
 ventures
 managed
 by
 managers
with
global
visions
and
with
unique
assets
were
able
to
internationalize
 quickly
and
successfully
(Oviatt
&
McDougall,
1995).
The
entrepreneur’s
attitude,
 education,
leadership
style,
experience
and
network
also
have
an
influence
on
the
 organisation
(Zucchella
and
Scabini,
2007).



Born
 globals
 are
 especially
 interesting
 as
 they
 internationalize
 right
 after
 their
 foundation.

For
them,
the
entry
in
a
new
market
is
more
than
an
addition
to
the
 domestic
 market.
 International
 visions
 are
 developed
 right
 from
 the
 beginning
 (Bell
et
al.,
2004).



5.1.4 International
Entrepreneurship


Oviatt
and
McDougall
(2005,
p.
540)
define
international
entrepreneurship
as
‘the
 discovery,
 enactment,
 evaluation,
 and
 exploitation
 of
 opportunities
 –
 across
 national
borders
–
to
create
future
goods
and
services’.
Companies
of
all
sizes
must
 be
able
to
recognize
opportunities
in
time.
New
opportunities
offer
new
chances
in
 both,
 the
 national
 and
 the
 international
 market.
 No
 company
 can
 afford
 to
 pass
 upon
a
golden
opportunity.
In
order
to
recognize
an
opportunity
and
to
have
the
 heart
to
do
so,
a
company
must
be
open
to
face
risks.



Oviatt
and
McDougall
(2005,
p.
539)
also
provide
their
definition
of
international
 entrepreneurship
from
previous
years:



‘International
 entrepreneurship
 is
 a
 combination
 of
 innovative,
 proactive,
 and
risk‐seeking
behavior
that
crosses
national
borders
and
is
intended
to
 create
value
in
organizations
(Oviatt
and
McDougall,
2000)’.


Innovativeness,
 proactiveness
 and
 risk‐seeking
 behaviour
 are
 part
 of
 the
 entrepreneurial
orientation
(EO)
described
by
Lumpkin
and
Dess
(1996,
p.
136).
 They
 categorise
 five
 dimensions
 of
 EO,
 which
 are
 (1)
 autonomy,
 (2)
 innovativeness,
 (3)
 risk
 taking,
 (4)
 proactiveness
 and
 (5)
 competitive
 aggressiveness.
These
dimensions
describe
how
entrepreneurship
is
carried
out
in
 firms,
 thus
 the
 methods
 and
 decisions
 made
 due
 to
 an
 entrepreneurial
 attitude
 (Lee
&
Peterson,
2000).
EO
is
also
linked
with
growth
and
performance
(Wolff
and
 Pett,
2007).
They
argue
that
a
firm
that
acts
more
entrepreneurially
growths
and
 performs
differently
than
others,
in
a
positive
way
to
be
more
precisely.
Relating
 this
 to
 the
 above
 mentioned
 opportunity
 recognition,
 a
 connection
 can
 be
 seen.
 Being
 willing
 to
 take
 risks
 helps
 to
 recognise
 new
 opportunities.
 A
 proactive
 behaviour
 and
 competitive
 aggressiveness
 support
 this
 approach.
 Jantunen
 et
 al.
 (2008)
even
claim
that
the
characteristics
of
EO
have
a
positive
impact
on
a
firm
 that
 explores
 and
 tries
 to
 access
 new
 markets.
 From
 our
 point
 of
 view
 this
 is
 correct.
 We
 believe
 that
 an
 entrepreneurial
 firm,
 acting
 with
 entrepreneurial
 characteristics
 is
 better
 of,
 as
 it
 recognises
 more
 opportunities,
 acts
 more
 pro‐ active
and
thus
grows
faster
and
more
successfully
in
both
markets,
national
and
 international.



International
 entrepreneurship
 is
 one
 important
 instrument
 in
 the
 international
 expansion
 approach
 of
 a
 firm.
 This
 approach
 is
 supported
 by
 the
 entrepreneur
 who
conducts
international
business
(McDougall
&
Oviatt,
2000).
The
role
of
the


entrepreneur
is
to
rely
on
hybrid
structures
(Madsen
and
Servais,
1997).
He
is
a
 person
 with
 great
 international
 experience,
 a
 stable
 network
 of
 contacts
 and
 a
 great
market
knowledge
(Madsen
&
Servais,
1997).


A
 firm
 that
 acts
 entrepreneurially,
 with
 an
 international
 operating
 and
 thinking
 entrepreneur
who
has
enough
knowledge
and
experience
is
different
from
a
non‐ entrepreneurial
 organization.
 The
 above‐mentioned
 characteristics
 bestow
 the
 enterprise
with
the
possibility
to
benefit
from
them.



5.2 Reasons
for
going
international


Companies
 nowadays
 have
 to
 prove
 themselves
 in
 a
 complex
 and
 global
 environment.
 Management
 has
 to
 adapt
 to
 internationalization
 and
 all
 parties
 involved
need
to
support
the
turned
in
way.
However,
globalization
provides
new
 opportunities
 ‐
 opportunities,
 many
 companies
 are
 eager
 to
 take
 and
 which
 encourage
them
to
start
their
international
operations
(Zahra
et
al.,
2001).
This
is
 not
 only
 the
 case
 for
 Transnational
 Corporations
 (TNCs),
 but
 also
 provides
 opportunities
 for
 start‐up
 and
 micro
 firms.
 Those
 can
 form
 partnerships
 more
 easily,
 find
 possible
 partners
 abroad
 and
 most
 important,
 sell
 and
 market
 their
 products
globally.
However,
globalization
also
challenges
micro
companies.
Wolff
 and
 Pett
 (2000)
 make
 clear
 that
 globalization
 with
 all
 its
 facets
 and
 the
 hence
 resulting
 international
 competition
 poses
 a
 problem
 for
 micro
 enterprises.
 They
 speak
of
a
pressing
into
the
international
markets
of
those
firms.
And,
competition
 is
 not
 the
 only
 reason.
 Aspelund
 and
 Moen
 (2001)
 make
 clear
 that
 international
 sales
 sometimes
 are
 the
 only
 way
 to
 survive.
 Such
 a
 ‘struggle
 for
 survival’
 is
 encouraged
by
the
better
access
to
markets
and
the
Information
Technology
(IT).
 All
kinds
of
communication
media,
such
as
the
telephone,
e‐mail,
Internet
and
so
 on
ease
up
international
operations.
Borderless
virtual
business
platforms
(Moen
 et
al.,
2004)
make
it
possible
for
everyone
to
access
any
information
in
real‐time.
 However,
the
development
of
IT
is
not
the
only
reason
why
companies,
especially
 start‐up
 and
 micro
 companies
 start
 to
 go
 internationally.
 Aspelund
 and
 Moen
 (2001)
argue
that
the
importance
of
the
small
business
sector
increased
as
a
result
 of
 the
 change
 from
 mass
 production
 to
 flexible
 specialization.
 Micro
 companies
 often
 see
 themselves
 and
 aim
 on
 niche
 markets
 and
 according
 to
 Aspelund
 and
 Moen
 (2001)
 the
 number
 of
 niche
 markets
 is
 increasing.
 Fact
 is
 that
 smaller
 companies
 can
 react
 more
 flexible
 to
 changes
 than
 larger
 companies
 can.
 As
 we
 live
 in
 an
 ever‐changing
 world
 with
 new
 trends
 occurring
 on
 a
 daily
 basis
 companies
must
be
able
to
adapt
quickly.
This
leads
us
to
the
assumption
that
the
 often
niche
market
serving
small
companies
have
an
advantage
in
the
globalized
 world
due
to
the
fact
that
they
are
more
flexible
in
daily
business.
This
advantage
 therefore
 supports
 small
 companies
 in
 their
 decision
 whether
 to
 expand
 international
or
not.



Hodgetts
 &
 Kuratko
 (2001,
 p.
 437)
 distinguish
 between
 reactive
 (defensive)
 or
 proactive
(aggressive)
reasons
for
going
international.
Table
3
demonstrates
these
 reasons.



 


Proactive
reasons
 Reactive
reasons
 Increased
profit
 Competitive
pressures
 Unique
goods
or
services
 Declining
domestic
demand
 Technological
advantages
 Overcapacity
 Exclusive
market
information
 Proximity
to
customers
 Owner‐manager
desire
 Counterattack
foreign
competition
 Tax
benefits
 
 Economies
of
scale
 


Table
 3:
 Proactive
 and
 reactive
 reasons
 for
 going
 international
 –
 Hodgetts
 and
 Kuratko
 (2001,
 p.437)


Proactive
reasons
are
developed
from
one’s
own
initiative
while
reactive
reasons
 are
made
in
order
to
react
to
certain
circumstances.



International
expansion
gives
businesses
the
possibility
to
enter
new
markets,
get
 access
to
new
knowledge
but
also
assigns
them
with
the
tasks
of
handling
different
 cultures
 and
 customers.
 In
 the
 eyes
 of
 Deresky
 (2008)
 learning
 arising
 from
 internationalization
is
crucial
for
building
new
skills.
Companies
build
new
skills
 by
 taking
 stock
 of
 their
 new
 knowledge,
 relating
 it
 to
 their
 existing
 knowledge
 base,
and
deploying
it
in
pursuit
of
strategic
goals.


5.3 Organizational
factors


5.3.1 Learning
and
knowledge


According
 to
 Arie
 de
 Geus
 (1988,
 p.
 6),
 ‘the
 only
 competitive
 advantage
 the
 company
 of
 the
 future
 will
 have
 is
 its
 managers
 ability
 to
 learn
 faster
 than
 their
 competitors’.
We
totally
agree
on
this
point
of
view.
Knowing
today
what
happens
 tomorrow
is
important
for
a
firm
that
aims
on
gaining
competitive
advantage.
This
 seems
to
be
especially
important
for
small
firms
as
they
lack
resources.
Here
we
 believe
 that
 a
 firm
 may
 learn
 most
 from
 learning‐by‐doing.
 The
 gathered
 knowledge
 and
 thus,
 the
 lessons
 learned,
 will
 help
 the
 company
 to
 diminish
 failures
and
mistakes
in
the
future.
Regarding
the
internationalisation
process
the
 learning‐by‐doing
 aspect
 is
 seen
 to
 be
 really
 important
 (Andersson
 and
 Henrik,
 2008).
A
company
learns
out
of
its
previous
knowledge
and
experience.
The
role
of
 the
manager
is
believed
to
play
an
essential
role
as
he
develops
and
learns
through
 experiencing
 (Bell
 et
 al.,
 2004).
 Oviatt
 and
 McDougall
 (2005)
 point
 out
 that
 acquiring
 foreign
 market
 knowledge
 as
 well
 as
 organizational
 learning
 has
 been
 part
 of
 many
 studies.
 They
 also
 argue
 that
 the
 existing
 knowledge
 of
 a
 firm
 is
 important,
 as
 especially
 in
 small
 firms
 this
 knowledge
 might
 be
 ‘individualized’.
 Due
 to
 the
 fact
 that
 micro
 firms
 consist
 of
 fewer
 persons
 and
 thus
 less
 decision
 makers,
sometimes
only
one,
the
knowledge
is
concentrated
in
fewer
persons.
This
 leads
to
the
assumption
that
those
companies
benefit
from
the
learning
by
doing
 approach
as
not
as
much
knowledge
can
be
shared
as
compared
to
in
larger
firms.
 The
role
of
the
decision
maker
thus
is
to
act
entrepreneurially,
explore
new
ways
 of
doing
and
to
take
opportunities
in
order
to
learn.
This
is
especially
important
for
 firms
 seeking
 new
 opportunities
 abroad.
 Not
 taking
 advantages
 of
 given
 opportunities
might
complicate
the
further
action.




5.3.2 Culture


We
would
like
to
refer
to
Schein
(2004,
p.
1)
who
argues
that


‘Culture
is
both
a
dynamic
phenomenon
that
surrounds
us
at
all
times,
being
 constantly
enacted
and
created
by
our
interactions
with
others
and
shaped
 by
 leadership
 behavior,
 and
 a
 set
 of
 structures,
 routines,
 rules
 and
 norms
 that
guide
and
constrain
behavior’.


As
he
points
out,
leadership
behaviour
plays
an
important
role
in
the
culture
of
a
 firm.
 This
 is
 especially
 important
 for
 micro
 companies
 as
 due
 to
 less
 human
 resources
the
decisions
are
affected
to
a
greater
extend
by
the
leader’s
behaviour.
 But
it
is
not
only
the
leadership
style
that
affects
a
firm’s
culture.


Lamb
 and
 Liesch
 (2000)
 also
 describe
 the
 phenomena
 of
 culture.
 In
 their
 eyes
 culture
 has
 to
 do
 with
 beliefs
 and
 values.
 They
 further
 argue
 that
 the
 internationalization
 of
 a
 company
 represents
 the
 learned
 values
 that
 develop
 during
the
international
process.
Those
learned
and
shared
values
characterise
the
 respective
culture
of
the
several
firms.
It
is
thus
important
to
know
which
values
a
 company
has
and
should
have.
Most
companies
create
a
vision
that
also
refers
to
 their
culture.
A
culture
must
be
lived.

 However,
culture
not
only
varies
between
different
firms
but
also
from
country
to
 country.
Hofstede
(1984,
p.
60
ff.)
described
four
cultural
dimensions
in
his
study
 of
 a
 major
 multinational
 corporation,
 which
 are
 (1)
 power
 distance,
 (2)
 uncertainty
 avoidance,
 (3)
 individualism
 vs.
 collectivism
 and
 (4)
 masculinity
 vs.
 femininity.
 Hofstedes’
 study
 makes
 clear
 that
 there
 are
 cultural
 differences
 in
 different
 countries,
 and
 those
 differences
 need
 to
 be
 considered
 carefully.
 Especially
as
we
are
talking
about
internationalization,
a
firm
aiming
on
expanding
 globally
must
be
well
aware
of
the
fact
that
cultures
differ
and
that
problems
might
 appear
 due
 to
 that.
 Entering
 a
 new
 market
 cannot
 only
 be
 seen
 as
 expanding
 to
 another
 country.
 More
 important
 is
 that
 by
 entering
 a
 new
 market
 a
 firm
 automatically
enters
a
different
culture.
People
have
different
values
and
different
 believes,
different
levels
of
leaderships
and
autonomy.
An
expanding
firm
must
be
 well
aware
of
that.


5.4 Change
Management


Hofer
and
Charan
(1984,
p.
1)
argue
that
‘the
most
likely
cause
of
business
failure
 are
the
problems
encountered
in
the
transition
from
a
one‐person,
entrepreneurial
 style
of
management
to
a
functionally
organized
professional
management
team’.

 According
to
Wilson
and
Bates
(2003)
entrepreneurial
companies
usually
have
a
 focus
on
the
needs
of
a
small
number
of
customers,
informal
structures,
systems
 and
 management
 styles.
 Although
 customer
 retention
 is
 high
 and
 the
 communication
 is
 easy
 and
 smooth
 without
 any
 hierarchy
 during
 that
 period,
 it
 does
 not
 mean
 that
 they
 do
 not
 need
 formal
 systems
 and
 processes
 in
 the
 early
 years
(Wilson
and
Bates,
2003).
They
verify
the
former
argument
from
Hofer
and
 Charan
 after
 about
 20
 years.
 Although
 the
 failure
 is
 obvious,
 Hofer
 and
 Charan
 (1984)
 still
 think
 it
 is
 possible
 to
 make
 such
 a
 change
 and
 to
 do
 it
 successfully
 without
waiting
for
a
new
generation
of
management
team
to
take
over.


The
 key
 characteristics
 of
 entrepreneurially
 managed
 firms
 that
 will
 need
 to
 be
 modified
 in
 the
 transition
 process
 are:
 (1)
 a
 highly
 centralized
 decision
 making
 system,
(2)
an
over‐dependence
on
one
or
two
key
individuals
for
its
survival
and
 growth,
 (3)
 an
 inadequate
 repertoire
 of
 managerial
 skills
 and
 training
 and
 (4)
 a
 paternalistic
atmosphere
(Hofer
and
Charan,
1984,
p.
4).
Those
steps
of
transition
 should
 be
 included
 in
 the
 firm’s
 strategy
 and
 modified
 to
 achieve
 growth,
 meanwhile,
 new
 strengths
 should
 be
 developed
 without
 neglecting
 the
 old
 ones.
 Wilson
and
Bates
(2003)
also
suggested
that
in
order
to
keep
pace
with
the
organic
 growth
 in
 the
 long
 run,
 the
 transition
 from
 small
 to
 medium‐sized
 requires
 the
 founder’s
ability
to
adopt
new
attitudes,
new
modes
of
behaviours
and
high‐level
 management
 skills
 to
 lead
 change,
 without
 dropping
 some
 of
 their
 essence
 entrepreneurial
orientation.



From
our
point
of
view
it
is
necessary
to
prepare
for
change
management
before
 implementing
 an
 international
 strategy.
 In
 the
 case
 of
 sonami,
 this
 might
 not
 be
 that
important
as
it
is
only
Daniel
himself.
However,
we
would
suggest
that
micro
 companies
and
start‐ups
with
more
than
three
employees
start
to
consider
change
 management
when
such
a
big
step
is
going
to
happen.



5.5 International
expansion
strategy


There
are
many
ways
to
expand
internationally
that
can
be
found
in
literature.
 Deresky
 (2008,
 p.
 230)
 describes
 various
 entry
 strategies
 when
 going
 international,
which
are
demonstrated
in
the
following
table.


Strategy
 Advantages
 Critical
Success
Factors


Exporting
 Low
risk
 No
long‐term
assets
 Easy
market
access
and
exit
 Choice
of
distributor
 Transportation
costs
 Tariffs
and
quotas
 Licensing
 No
asset
ownership
risk
 Fast
market
access

 Avoids
regulations
and
tariffs
 Quality
and
trustworthiness
of
 licenses
 Appropriablity
of
intellectual
 property
 Host‐country
royalty
limits

 Franchising
 Little
investment
or
risk
 Fast
market
access
 Small
business
expansion
 quality
control
of
franchises
and
 franchise
operations
 Contract
 Manufacturing/offshoring
 limited
cost
and
risk
 short‐term
commitment
 reliability
and
quality
of
local
 contractor
 operational
control
and
human
rights
 issues
 Service
Sector
 Outsourcing/
Turnkey
 operations
 lower
employment
costs
 access
to
high
skills
and
 quality
control
 domestic
client
acceptance


markets
 revenue
from
skills
and
 technology
where
FDI
 restricted
 reliable
infrastructure
 sufficient
local
supplies
and
labor

 repatriable
profits
 Management
Contracts/
 Joint
Ventures
 Low‐risk
access
to
further
 strategies

 Insider
access
to
markets
 Share
costs
and
risk
 Leverage
partner’s
skill
base
 technology,
local
contacts
 Opportunity
to
gain
longer‐term
 position
 Strategic
fit
and
complementarity
of
 partner,
markets,
products
 Ability
to
protect
technology
 Competitive
advantage
 Ability
to
share
control
 Cultural
adaptability
of
partners
 Wholly
owned


subsidiaries
 Realize
all
revenues
and
control
 Global
economies
of
scale
 Strategic
coordination
 Protect
technology
and
skill
 base
 Acquisition
provides
rapid
 market
entry
into
established
 market
 Ability
to
assess
and
control
 economic,
political,
and
currency
risk
 Ability
to
get
local
acceptance
 Repatriability
of

profits
 Table
4:
International
entry
strategies
(Deresky
2008,
p.
230).


The
 different
 types
 of
 entry
 strategies
 depend
 on
 the
 company
 and
 its
 portfolio.
 Not
 every
 entry
 strategy
 is
 suitable
 for
 every
 company.
 While
 exporting
 and
 licensing
 for
 example
 are
 mostly
 used
 by
 small
 companies,
 service
 sector
 outsourcing
is
often
used
by
large
companies.
Furthermore
Deresky
(2008,
p.
203)
 argues
that
‘the
choice
of
one
or
more
of
the
entry
strategies
will
depend
on
(1)
a
 critical
evaluation
of
the
advantages
(and
disadvantages)
of
each
in
relation
to
the
 firms
capabilities,
(2)
the
critical
environmental
factors,
and
(3)
the
contribution
 that
each
choice
would
make
to
the
overall
mission
and
objectives
of
the
company.

 The
question
is
how
to
start
the
international
path?
Which
strategy
is
best?
Joynt
 and
 Welch
 (1985)
 argue
 that
 exporting
 is
 one
 of
 the
 most
 common
 expansion
 strategies
 used.
 From
 our
 point
 of
 view,
 exporting
 seems
 to
 be
 a
 strategy
 that
 micro
 companies
 should
 aim
 on
 as
 it
 is
 not
 as
 risky
 as
 entering
 the
 market
 by
 building
 a
 subsidiary.
 This
 view
 is
 supported
 by
 Oviatt
 and
 McDougall
 (2005).
 However,
especially
in
micro
companies,
the
entrepreneur
plays
an
important
role
 as
 decision
 maker
 (Joynt
 and
 Welch,
 1985).
 Furthermore
 many
 scholars
 have
 noted
that
‘entry
formulation
is
essentially
a
‘top‐down’
process’
(Bell
et
al.,
2004).

 Joynt
and
Welch
(1985,
p.
65)
also
discuss
the
condition
of
passive
exporters
and
 active
 exporters.
 In
 their
 eyes
 passive
 exporters
 are
 ‘those
 who
 just
 react
 to
 orders’,
whereas
active
exporters
are
more
‘strategically
and
marketing
oriented’.
 We
 assume
 that
 start‐up
 and
 micro
 companies
 are
 passive
 exporters
 due
 to
 the
 fact
of
missing
or
not
enough
resources.



However,
 not
 only
 the
 entry
 strategy
 is
 important.
 Another
 important
 criteria
 is
 the
 time
 when
 entering
 the
 new
 market.
 Should
 a
 firm
 enter
 a
 market
 first?
 Or
 should
it
follow
others?



Ulf
Gerlach
(2001),
following
Robinson/Fornell
(1985)
argues
that
there
are
three
 possibilities
 for
 a
 market
 entry.
 Those
 are
 ‘pioneers’,
 ‘early
 followers’
 and
 ‘late
 followers’.
The
pioneers
are
the
first
movers
entering
a
new
market.
This
can
be
 seen
to
be
a
tough
decision,
as
the
market
is
still
unfathomed.
However,
it
might
 give
them
the
opportunity
to
create
advantage
compared
to
their
competitors.
The
 pioneers
are
followed
by
the
’early
followers’,
who
take
fewer
risks
in
entering
the
 new
 markets.
 Finally,
 the
 late
 followers
 follow.
 They
 have
 the
 least
 risk
 but
 the
 highest
 competitive
 pressure,
 as
 others
 have
 entered
 the
 market
 earlier.
 The
 question
of
which
strategy
is
the
best
cannot
be
answered
here,
as
this
depends
on
 the
circumstances
of
the
environment
and
the
company
respectively.



Kippenberger
 T.
 (1997)
 also
 discusses
 this
 fact
 and
 assesses
 that
 the
 main
 focus
 should
be
on
creating
a
new
strategic
position.
In
his
eyes
this
is
more
successful
 then
being
a
follower,
or
how
he
calls
it
an
‘imitator’.



5.6 Growth
opportunities


The
 product/market
 growth
 matrix,
 developed
 by
 Igor
 Ansoff
 (1957)
 demonstrates
 different
 opportunities
 for
 growth.
 It
 is
 divided
 in
 four
 quadrants;
 (1)
market
penetration,
(2)
market
development,
(3)
product
development
and
(4)
 diversification.


Market
 penetration:
 Saturation
 of
 an
 existing
 market
 by
 an
 existing
 product.
 Growth
 can
 occur
 by
 marketing
 the
 old
 product
 more/differently
 in
 the
 existing
 market.


Product
 development:
 growth
 through
 the
 development
 and
 launch
 of
 a
 new
 product
in
an
existing
market.
 


Market
 development:
 growth
 through
 opening
 up
 a
 new
 market
 with
 an
 existing
 product.


Diversification:
entering
a
new
market
with
a
new
product


Andersen
&
Kheam
(1998,
p.
170)
argue
that
the
Ansoff’s
growth
strategies
‘should
 be
 applicable
 for
 most
 types
 of
 firms,
 regardless
 of
 firm
 size
 and
 industry
 type’.
 However,
 it
 is
 a
 simple
 fact,
 that
 the
 Ansoff
 matrix
 only
 considers
 two
 factors,
 which
are
product
and
market
and
does
not
pay
attention
to
other
organizational
 and
environmental
factors.



In
the
eyes
of
Burns
(2005,
p.
217),
a
business
that
aims
on
growing,
‘should
build
 on
 its
 strengths
 and
 core
 competencies,
 shore
 up
 its
 weaknesses
 and
 develop
 a
 marketing
strategy
for
each
product/market
offering
that
reflect


• the
appropriate
generic
marketing
strategy


• the
stage
the
product/market
offering
is
at
in
its
life
cycle


For
that
reason
a
business
should
be
aware
of
its
strengths
and
weaknesses
when
 attempting
 to
 grow.
 In
 order
 to
 assess
 the
 internal
 and
 external
 strength
 and
 weaknesses,
 tools
 such
 as
 a
 SWOT
 analysis
 can
 be
 useful.
 After
 conducting
 the
 analysis,
a
company
will
be
well
aware
of
its
core
competencies
and
weaknesses.
 Considering
 a
 company’s
 products/services,
 the
 Boston
 matrix
 is
 a
 useful
 tool.
 It
 helps
to
classify
the
product
mix.




More
 important
 criteria
 of
 growth
 are
 mentioned
 by
 Smallbone
 et
 al.
 (1995).
 Amongst
others,
they
see
the
attributes
of
the
organization
and
the
entrepreneur
 as
important.


In
 their
 eyes,
 the
 characteristics
 of
 the
 entrepreneur,
 his
 style
 of
 leadership,
 the
 vision
he
lives,
the
trust
he
gives
and
the
goals
he
sets
are
very
important
criteria
 when
 talking
 about
 growth
 of
 small
 firms.
 As
 discussed
 above,
 leadership
 behaviour
has
a
positive
impact
on
a
firms’
growth.
Concerning
the
characteristics
 of
a
firm
we
discussed
the
EO
theory,
arguing
that
an
entrepreneurial
firm
should
 have
EO
as
characteristics
(Dess
and
Lumpkin,
1996).
We
see
the
third
point
as
a
 critical
 point,
 as
 this
 Master
 Thesis
 talks
 about
 micro
 enterprises
 and
 start‐up
 companies.
To
what
extend
those
have
a
certain
strategy,
how
it
could
like
or
if
at
 all
they
have
a
strategy
will
be
discussed
in
a
later
chapter.



Smallbone
et
al.
(1995,
p.
44)
point
out
that
‘as
other
authors
have
noted,
there
is
 no
 single
 theory
 which
 can
 adequately
 explain
 small
 business
 growth
 and
 little
 likelihood
of
such
a
theory
being
developed
in
the
future
(Gibb
and
Davies,
1990)’.
 This
thesis
aims
on
developing
an
international
growth
strategy
for
sonami
AG.
We
 nevertheless
hope
to
be
able
to
develop
such
a
growth
strategy,
even
though
it
is
 seen
to
be
hard.

 Perren
(1999,
p.
366)
describes
’four
interim
growth
drivers’
that
have
an
impact
 on
micro‐enterprise
development:

 • owner’s
growth
motivation
 • expertise
in
managing
growth
 • resource
access
and
 • demand
 He
also
argues
that
‘micro‐enterprise
development
has
been
shown
to
be
a
process
 of
 slow
 incremental
 iterative
 adaptation
 to
 emerging
 situations,
 rather
 than
 a
 sequence
 of
 radical
 clear
 steps
 or
 decision
 points’
 (1999,
 p.
 366).
 This
 gives
 reasons
 to
 believe
 that
 the
 growth
 of
 micro
 companies
 doesn’t
 follow
 one
 of
 the
 before
mentioned
stage
models.



To
 summarize
 this
 chapter
 we
 would
 like
 to
 mention
 that
 there
 exist
 many
 possible
 guidelines
 for
 the
 growth
 of
 micro‐firms
 and
 start‐up
 companies.
 The
 interesting
question
now
is,
which
one
to
follow,
if
there
exists
only
one
that
can
be
 followed.
Or
should
a
mixed
approach
of
all
the
recommendations
be
created?


5.7 ‘The
strategy
topic’


Strategy
is
an
important
issue
and
a
subject
to
much
discussion
in
literature.
Well
 known
 authors
 such
 as
 Porter,
 Mintzberg,
 Johnson,
 Ansoff
 and
 so
 on
 have
 discussed
strategy,
strategic
planning
and
management.
We
would
like
to
mention
 some
models
and
approaches
in
the
following
chapter,
give
some
insights
on
the
 discussion
of
strategic
planning
versus
strategic
management
and
try
to
find
out,
 how
strategy
looks
like
in
start‐up
and
micro
companies.



5.7.1 Definition
of
Strategy


Deresky
 (2008,
 p.
 208)
 describes
 strategy
 as
 ’the
 basic
 mean
 by
 which
 the
 company
competes
–
its
choice
of
business
or
businesses
in
which
to
operate
and
 the
ways
in
which
it
differentiates
itself
from
its
competitors
–
is
its
strategy’.
 The
 definition
 of
 Deresky
 (2008)
 is
 a
 relatively
 open
 definition.
 Johnson
 et
 al.
 (2006,
p.
9)
define
strategy
as
‘the
direction
and
scope
of
an
organisation
over
the
 long
 term,
 which
 achieves
 advantage
 in
 a
 changing
 environment
 through
 its
 configuration
of
resources
and
competences
with
the
aim
of
fulfilling
stakeholder
 expectations’.
 We
 prefer
 this
 definition
 as
 it
 sets
 emphasize
 on
 the
 role
 of
 the
 changing
environment
and
the
term
‘long
term’.
Why
this
seems
to
be
important
 will
 be
 discussed
 in
 chapter
 5.7.2
 Strategic
 Planning.
 Johnson
 et
 al.
 (2006,
 p.
 11)
 identify
different
levels
of
strategy,
which
are


1. Corporate
level
strategy

 2. Business
level
strategy

 3. Operational
strategy



This
 is
 an
 interesting
 angle
 for
 our
 research.
 In
 order
 to
 investigate
 the
 international
 growth
 strategy
 of
 a
 micro
 enterprise
 and
 especially
 for
 the
 formulation
of
the
strategy
for
sonami,
we
now
know
that
we
are
not
only
talking
 about
 the
 business
 level
 strategy,
 about
 how
 sonmai
 successfully
 competes
 overseas,
but
we
are
also
talking
about
the
corporate
level
strategy
(this
point,
of
 internal
and
external
strategies
will
be
discussed
later).
The
third
strategy
might
 not
be
that
appropriate
in
our
case,
as
most
micro
companies
lack
the
necessary
 resources
for
such
a
strategic
approach.




Mintzberg
 and
 Waters
 (1985)
 talk
 about
 emerging
 and
 deliberate
 strategies.
 Emerging
strategies
are
those
that
are
not
intended
on
but
that
are
nevertheless
 accomplished,
 while
 deliberate
 strategies
 are
 planned
 clearly
 and
 are
 realized.
 They
 identify
 eight
 different
 strategic
 approaches
 that
 range
 from
 planned
 strategies
 to
 imposed
 strategies.
 For
 this
 research
 the
 entrepreneurial
 strategy
 (Mintzberg
&
Waters,
1985)
seems
to
be
quite
interesting.
How
this
strategy
looks
 like
will
be
discussed
in
a
later
chapter.



Mintzberg,
 Lampel
 and
 Ahlstrand
 (2008,
 p.
 78
 et
 seq.)
 describe
 strategies
 for
 services/products,
markets,
strategic
positions
and
competition.
We
would
like
to
 name
 the
 market
 development
 strategy
 in
 the
 context
 of
 service/product
 strategies.
 From
 our
 point
 of
 view
 this
 strategy
 fits
 most
 micro
 companies
 and
 start‐ups
 best
 as
 they
 mostly
 are
 too
 small
 and
 miss
 important
 resources
 for