FINAL REPORT -...

COMPETING EFFECTIVELY IN INTERNATIONAL

MARKETS

Identifying Need, Sharing Best Practice and Adding Value to the Eastern Region through Skills and

Knowledge Transfer

FINAL REPORT

Lester Lloyd-Reason and Terry Mughan

Global Enterprise Research Unit

Ashcroft International Business School

A project funded by the East of England Development Agency and carried out by

Anglia Ruskin University

Competing Effectively in International Markets

7/26/2016 Anglia Ruskin University 2003 2

TABLE OF CONTENTS

Section Page

1. Executive Summary 3

2. Full Report - Overview 7

3. Cross-Sectional Mapping of International Activity within

the Eastern Region

9

4. The Company Experience – In-Depth Studies of 80 Companies

12

4.1 4.2

4.3

4.4 4.5

4.6

Background and Methodology Characteristics of Firms Interviewed

Motivations and Drivers

Process Problems

Support

12 15

18

23 29

35

5. Sharing Best Practice 40

6. Skills and Knowledge 42 6.1

6.2 6.3

6.4 6.5

6.6

Introduction

Planning, Manning and Scanning Skills

Knowledge Skills and Knowledge Needs

The CEIM Study and the East of England Skills Strategy

42

42 44

47 48

53

7. Recommended Action Programmes 54

Appendix: Resources and References 56


7/26/2016 Anglia Ruskin University 3

1. EXECUTIVE SUMMARY

Aims and Objectives

This report summarises the key findings and issues to emerge from an 18-month research project

funded by the East of England Development Agency and carried out by Anglia Ruskin University1. It

involved a study of need and support for small and medium sized enterprises in the Eastern region in

the internationalisation of their business operations.

The aim of the project was to identify successful aspects of international business planning, resource

management, international networking, market intelligence gathering and global skills and knowledge

development that can be made transferable across business sectors via training, educational,

development and recruitment programmes.

Stages in the Research Process

There were four key stages of activity

A large scale telephone survey of 1200 firms throughout the eastern region to provide a map of

international activity within the region. The survey involved a stratified sample across sectors and

geographical location to reflect the characteristics of the six counties of the Eastern region.

Face-to-face interviews with 80 firms on their premises lasting between 1 and 2 hours with either

the owner-manager or the individual responsible for international action to gain insights into why

and how firms become involved in international activity, and of course, why they sometimes do

not, how they manage their international activity, what problems they encounter and where they

go to find solutions.

Face-to-face interviews with many of the key players within the business support community

within the region.

Analysis and review of the quantitative and qualitative data generated by these activities to

identify policy implications and recommended action programmes aimed to help better design

and target the efforts of the business support agencies and educational institutions in the East of

England and build economic growth through international excellence.

Categorisation of firms The sample of companies to be interviewed face-to-face was selected from the larger sample on the

basis of experience of international trade, skills and knowledge and the application of these to their

international activities. The key consideration was not the volume of international activity, but rather

how effective the application of their experiential learning had been in contributing to turnover

generated from international activities. In this respect, mode of activity, geographical location and

sector were regarded as secondary considerations.

On this basis, the companies to be interviewed were classified in five bands as follows:

1 ANGLIA RUSKIN UNIVERSITY would like to acknowledge the assistance of the University of Luton at the quantitative

stage of the project and the assistance of the Foundation for Small and Medium Enterprise Development, University of

Durham at the qualitative stage of the project.



A: The Curious

Have considered international activity, but have not yet taken action. Little awareness of

available support.

B: The Frustrated

Have previously been, or are occasionally involved in, international activity, but are no longer

actively pursuing this, often due to negative experiences. Little awareness of available support.

C: The Tentative

Have limited experience of international activity, have developed some skills but have some

major problems looking for solutions. Some experience of available support.

D: The Enthusiastic

Have considerable experience of international activity and are keen to grow this side of their

business but are experiencing barriers to that growth. Have developed a range of skills but

suspect that these need to be developed further. Largely aware of available support with some

experience of it, often positive.

E: The Successful

Have extensive experience of international activity with some major successes. Very high skills

and knowledge development, very aware of available support with a high degree of usage. Often

aware of skills and knowledge gaps and very keen to improve effectiveness in international

activity.

Key Findings

i) Quantitative study

Almost as many internationalised firms are involved in importing (61%) as exporting (77%).

Just under half (47%) of all internationalised firms are involved in two or more forms of

international activity, e.g. exporters who also import.

The most frequent mode of export was by agents or distributors (35%) followed by ‘own sales

office (20%) and ‘direct sales’ (13%). If ‘Internet’, ‘word of mouth’ and ‘through current

customers’ are added to the direct sales category this would then increase to 30%. This changes

the interpretation considerably and challenges the traditional view that intermediaries are the

most appropriate route to international markets for SMEs when considering market entry.

The majority of experienced and inexperienced internationalised businesses self generate

solutions to their problems (87%). Amongst exporters, networks of suppliers were used by 23%

of firms interviewed and 31% said they used business support organisations, mainly

BusinessLink and the DTI (including TPUK). Just 5% of importers had used business support

organisations.



ii) Qualitative Study

Planning (the way in which the firm plans its involvement in foreign markets), manning (the way

the firm organises or develops its resources to service foreign markets) and scanning (the way in

which the firm informs itself about those markets) are the areas of skills and knowledge required

by all firms active in international markets.

The configuration of these skills, and the support designed to improve them, varies according to

experience, sector and size.

All firms benefit from strategic planning and management development.

All firms benefit from the development of international skills (foreign languages and/or

intercultural awareness). It is the development of these skills within successful firms that

facilitates the transfer of business acumen from domestic to international markets.

Firms new to international activity (the Curious and the Frustrated) are very receptive to, and

appreciative of, current support provision.

Successful firms have specific skills and knowledge needs which are not all met by current

provision.

We identify an intermediate set of firms (the Tentative) whose international activity is static, who

have lost the initial enthusiasm for international activity and who need tailored support which is

not currently available.

Demand Transformation: There is a need to distinguish between what companies want and what

they need. They want information, money and solutions to precise, small problems. They need

to learn to plan, to broaden their management mindset and to build better manning and scanning

skills.

Skills and knowledge development for international trade takes place via the processes of

exporting, importing, inward investment and international research arrangements.

Best practice in firms often emanates from patterns of trading involving one or all of these

elements.

Recommended Action Programmes BEST PRACTICE GUIDES

High quality brochures focussing on examples of best practice in the region containing diagnostic

tools. These could include: ‘How to’ guides to provide simple process understanding, written/on-

line case studies from successful firms within the region, problems solving techniques and a

directory of support agencies.



INTERNATIONAL SME MANAGER DEVELOPMENT

Flexible courses with optional accreditation focusing on the Planning, Manning and Scanning

skills needs as identified.

INTERNATIONAL PARTNERSHIP PROGRAMME

A region wide scheme facilitating international network building and market development,

possibly keyed in to research and innovation projects such as the 6th Framework and Teaching

Company Schemes.

INTERNATIONAL MENTORING PROGRAMME

There are two possible models here. One would bring high-quality graduates (viz STEP) into

SMEs to supply resources and knowledge advantage. The other has a business-to-business

dimension which could be mediated by the International Trade Advisers. A pilot scheme,

GRADEX, is currently running with the support of EEDA/AUEE.

WORKSHOP PROGRAMMES

To bring together small groups of managers of international SMEs to share common problems

and to develop solutions. These could be devised in consultation with Trade Partners UK to

ensure that provision is properly targeted to complement existing programmes. Funding for these

could be sought from BusinessLink or the Learning and Skills Council.

TRACKER STUDY

A study with a five-year time frame to track 50 firms throughout the region as they undertake

their international activities. This would allow rich insights into the skills and learning needs of

international firms as they progress from the Curious stage onwards. This would permit a better

understanding of the reason why some firms exit international markets, some get stuck at the

Tentative stage and others become successful.

PASSPORT PLUS

The Passport to Export programme has been of benefit to many firms interviewed for this study

and will continue to assist the Curious and the Frustrated to become involved in international

activity. The focus for this project has been to assist the Eastern region in the objective of

building a stock of world class firms capable of competing effectively in international markets.

In order to help achieve this objective we would recommend the development of a ‘Passport Plus’

programme targeted at the Tentative and the Enthusiastic to help improve their ability to compete

in international markets. If one of the regional objectives is to improve the competitiveness of

firms in their international activity, and hence increase GDP within the region, our research

overwhelmingly suggests that it is the Tentative and Enthusiastic groups which offer the

opportunity to make the biggest impact within the Eastern region.



2. FULL REPORT - OVERVIEW

2.1 The project was conceived in two phases. The current International Trade Strategy for the

Eastern region comments that ‘We do not yet have solid, coherent data on the international

activities of SMEs within the region.’ Phase One aimed to address this lack of understanding

through a detailed mapping of the international activity of small and medium sized enterprises

(SMEs) within each of the six counties of the region. This was achieved through a large

telephone survey of 1200 enterprises throughout the region during the course of which a semi-

structured questionnaire was administered. A full regional report and six county reports were

presented to EEDA in November 2002 and in this report we present a summary of this mapping

in section three.

2.2 Phase Two sought to identify successful aspects of international business planning, resource

management, international networking, market intelligence gathering and global skills and

knowledge development that can be made transferable across business sectors via training,

educational, development and recruitment programmes. We aimed to gain insights into why and

how firms become involved in international activity, and of course, why they sometimes do not,

how they manage their international activity, what problems they encounter and where they go to

generate solutions. To achieve this we conducted interviews lasting between 1 and 2 hours with

either the owner-manager or the individual responsible for international action on their premises.

Additionally, we spoke to many of the key players within the business support community in the

region and held a workshop for firms where we could explore some of the key issues emerging

with some of the firms interviewed.

2.3 A number of studies into related areas have recently been completed both within the region and

nationally, and we have drawn upon these reports to help inform our findings. (See resources

section in Appendix I). These studies have either been quantitative or qualitative whereas this

study is rather rare in that it is both quantitative and qualitative. That is, the large telephone

survey of 1200 firms provided a coherent mapping of international activity within the region and

then the 80 face-to-face interviews allowed us to explore the underlying issues behind

international activity to provide valuable insights into the company experience. Rather than

simply report our observations, we have used the unique insights generated by our approach to

identify a set of policy implications which are presented at the end of each relevant section of the

report.

2.4 The CEIM project has thus aimed to help better design and target the efforts of the business

support agencies and educational institutions in the East of England and build economic growth

through international excellence. To this end, the Project leaders are working closely with

EEDA, Trade Partners UK and other sector groups to ensure the sustainability of this learning

throughout the region beyond the lifetime of the current project.



2.5 This report is divided up into five sections:

i) A quantitative cross-sectional mapping of international activity within the eastern region

ii) A qualitative investigation into the company experience divided into:

an analysis of the motivations and drivers for international activity

an analysis of the process by which firms manage their international activities

an analysis of the problems faced by internationalised firms

an analysis of where firms go for support and their rating of the level of support

received

iii) Examples of best practice from within the region

iv) Key issues emerging in terms of skills and knowledge development

v) A series of recommended action programmes aimed at helping firms within the region to

compete more effectively in international markets



3. CROSS-SECTIONAL MAPPING OF INTERNATIONAL ACTIVITY WITHIN

THE EASTERN REGION

3.1 Methodology

3.1.1 The mapping of international activity throughout the eastern region was achieved through a

large scale telephone survey undertaken between June 2002 and August 2002. During this

period 560 internationalised and 554 non-internationalised SMEs in the Eastern region

were interviewed. A further sample of 101 larger companies in the region were also

interviewed as a control group.

3.1.2 Telephone interviewing technique was used to collect data because of the rapidity of data

gathering, accuracy, and efficiency. The questionnaire was designed to determine the

extent and nature of international activity within the region. The questionnaire was fully

structured, with response categories defined prior to the study informed by literature

relevant to internationalisation. The questionnaire was pilot tested on a small number of

respondents to ensure understandability prior to the main survey.

3.1.3 The sample frame used was obtained from Business Link and listed known exporters and

non-exporters stratified by county and broad business area (primary, secondary and

tertiary). The listings were a random sample of organisations but in the final event nearly

all organisations recorded as exporters were approached during the survey. A target was

set of an achieved sample of 550 organisations in each of the two categories of

internationalised and non-internationalised. Samples of this size typically yield results

accurate to within four to five percentage points according to statistical theory. A further

sample of 101 larger internationalised organisations was also included in the study for

comparison (250+ employees). The final sample turned out to be 554 non-

internationalised, 560 internationalised and 101 larger companies. (See diagram 1 overleaf

for a mapping of firms interviewed)

3.1.4 Interviewers requested to speak with a senior executive within the organisation, usually at

Director level. The 12-page questionnaire took between 5 to 30 minutes to complete

depending on which of the sections were relevant to the respondent. Response rates varied

somewhat but within the internationalised group these were at a very creditable 22%

overall compared to mail surveys of this nature which often only achieve 12 to 15%

response rates. Those declining to be interviewed cited lack of time as the principal reason

together with an increasingly common reason of ‘having a policy not to engage in surveys’.

Respondents always had the option of refusing to answer questions in the survey if they felt

uncomfortable revealing certain information, or they may not be able to remember (or

never knew) some of the specific details. All responses that represent a "don't

know/refused" are omitted from the analysis of that particular question. As a result, the

number of responses for each question will vary. All "don't know/refused" responses were

treated as missing values.



Diagram 1: Mapping of telephone survey

3.1.5 A full report detailing the findings from this survey together with individual reports on each

of the six counties was supplied to EEDA in November 2002 in accordance with the project

schedule. We do not intend to replicate that information here but simply present our key

findings below.



3.2 Key findings from the regional mapping of international activity

Almost as many internationalised firms are involved in importing (61%) as exporting (77%).

Just under half of all internationalised firms are involved in two or more forms of international

activity, e.g. exporters who also import.

The two main reasons for not becoming involved in international activity are: (i) lack of

international opportunities in the particular sector and (ii) ‘benign’ conditions in the domestic

market.

Only 4.2% of non-internationalised firms had previously engaged in international activity but had

discontinued it, lack of profitability being cited as the main cause.

Some 50 respondents (8.8%) had considered internationalisation but had not proceeded. The four

most commonly cited reasons being: (i) complexity of internationalisation; (ii) the emergence of

new UK opportunities; (iii) lack of time and (iv) limited international opportunities.

The main export markets are: Germany (29%), France (25%) and the USA (23%).

The most frequent mode of export was by house or agents (35%) followed by ‘own sales office’

(20%) and ‘direct sales’ (13%). If ‘Internet’, ‘word of mouth’ and ‘through current customers’

are added to the direct sales category this would then increase to 30%. This changes the

interpretation considerably and challenges the traditional view that intermediaries are the most

appropriate route to international markets for SMEs when considering market entry.

The majority of experienced and inexperienced internationalised businesses self generate

solutions to their problems (87%). Amongst exporters, networks of suppliers were used by 23%

of firms interviewed and 31% said they used business support organisations, mainly

BusinessLink and the DTI (including TPUK). Just 5% of importers had used business support

organisations.



4. THE COMPANY EXPERIENCE: IN–DEPTH STUDIES OF 80 COMPANIES

4.1 Background and methodology

4.1.1 In phase two of the project, 80 companies were interviewed face-to-face on their own

premises between December 2002 and June 2003. The interviews, which were undertaken

by senior academics within the Business School, were semi-scripted and were recorded. In

all cases the person interviewed was the strategic decision maker for international activity

(usually the owner-manager). Each interview lasted between 1 and 2 hours.

4.1.2 Building on the findings from the telephone survey, the purpose of the interviews was to

obtain deeper data about company behaviour in international markets including managerial

traits, skills and knowledge needs, problem-solving and their views of support services.

The interview schedule included a mix of open questions where the interviewees were

encouraged to talk about their motivations and experiences in their international activities,

and closed questions concerning specific problem areas, where they looked to for support

and their opinion on the effectiveness of support provided.

4.1.3 The sample of companies to be interviewed was selected from the larger sample on the

basis of experience of international trade, skills and knowledge and the application of these

to their international activities. The key consideration was not the volume of international

activity, but rather how effective the application of their experiential learning had been in

contributing to turnover generated from international activities. In this respect, mode of

activity, geographical location and sector were regarded as secondary considerations. (See

diagram 2 below for a mapping of face-to-face interviews throughout the region.)

4.1.4 On this basis, the companies to be interviewed were classified in five bands as follows:

A: The Curious

Have considered international activity, but have not yet taken action. Little

awareness of available support.

B: The Frustrated

Have previously been, or are occasionally involved in, international activity, but are

no longer actively pursuing this, often due to negative experiences. Little awareness

of available support.

C: The Tentative

Have limited experience of international activity, have developed some skills but

have some major problems looking for solutions. Some experience of available

support.

D: The Enthusiastic

Have considerable experience of international activity and are keen to grow this side

of their business but are experiencing barriers to that growth. Have developed a

range of skills but suspect that these need to be developed. Largely aware of

available support with some experience, often positive.



E: The Successful

Have extensive experience of international activity with some major successes. Very

high skills and knowledge development, very aware of available support with a high

degree of usage. Often aware of skills and knowledge gaps and very keen to improve

effectiveness in international activity.

Diagram 2: Map of face-to-face interviews throughout the Eastern region

4.1.5 For the purposes of analysis, as indicated above, each interview was recorded and

transcribed generating in excess of 2,800 pages of transcript. In addition, following the

completion of each interview, a two page summary of the key points emerging from the

interview was produced providing a further 150 pages of text. Finally, three closed

questions providing tick box responses using the Lickert scale were used covering the

international mindset of the interviewee, specific problems experienced and support

providers used.



4.1.6 Data from 5 of the interviews was rejected as being unsuitable for our purposes and the

analysis presented below is therefore based on data collected from 75 firms. Analysis of

the qualitative data from the 2,800 pages of interview transcript, 150 pages of summary text

and 75 tick boxes was undertaken using a dedicated software package, N6. The software

uses word or phrase recognition and the text was coded down to three levels using four key

categories:

Motivation: What are the motivations and drivers for international activity?

Process: What form does this activity take and how does it impact on the firm?

Problems: What are the key problems encountered?

Solutions: Where do they go to find solutions to these problems?

4.1.7 Analysis was undertaken using both a dedicated qualitative analysis software package, N6

and the SPSS data set generated by the telephone survey across each of the five company

classifications. The key findings are presented below. First we provide the characteristics

of the firms interviewed and this is followed by an analysis according to the four categories

identified above; motivation and drivers; process; problems, and; solutions.



4.2 Characteristics of firms interviewed

4.2.1 This section of the report provides a brief summary of the main characteristics of the 75

firms by category, mode of international activity, size by number of employees and

turnover, age and first market destination.

Table 1: Companies interviewed by category

Category Title No. of firms

A The Curious 7

B The Frustrated 5

C The Tentative 13

D The Enthusiastic 24

E The Successful 26

Sample size 75

4.2.2 As we can see from the table 1 above, the sample was weighted in favour of those firms

with greater levels of experience of international trade. Through the project we aim to

identify successful aspects of managerial skills and knowledge development that can be

made transferable across business sectors via training, educational, development and

recruitment programmes. Accordingly we interviewed a higher proportion of Enthusiastic

and Successful companies to capture the experiential learning within these firms.

4.2.3 It is also of critical importance that we understand the reasons why the Curious have not

taken those first steps to international activity, what it is that frustrates the Frustrated and

why are the Tentative so tentative, and so these firms are also represented in our sample to

help us understand the challenges facing theses types of companies.

Table 2: Type of international activity

Type of international activity Involvement (%)

Exporting 79

Importing 44

Other 9

4.2.4 The telephone survey clearly demonstrated the diverse nature of international activity

within the region. We have attempted to reflect that diversity in the range of enterprises

included in the second phase. This is illustrated in table 2 above where we can see that

whilst 79% of the firms interviewed were involved in exporting, 44% included importing

within their normal international business activity.

4.2.5 The higher sample figure here represents the fact that many of the firms interviewed were

involved in both exporting and importing.



Table 3: Size of firm by number of employees

No. of employees No. of firms (%)

1 - 5 3

6 - 25 46

26 - 49 19

50 - 149 20

150 - 250 10

100

4.2.6 The sample included a small number of micro firms and a small number of firms from the

top end of the medium scale, but the majority of firms surveyed employed between 6 and

50 employees.

Table 4: Size of firm by turnover

Annual turnover No. of firms (%)

0 - 0.5 10

0.6 - 1 17

1.1 - 2 21

2.1 - 5 20

5.1 - 10 15

10.1 - 20 12

>20 5

100

4.2.7 The sample included a small number of firms with turnover of less than £500,000 and a

similar number with a turnover in excess of £10m, but the majority of firms interviewed fell

between these two extremes.

Table 5: Age of firm

Age of firm No. of firms (%)

0 - 2 2

3 - 5 3

6 - 10 9

11 - 25 41

26 - 49 26

50 - 99 13

100+ 6

100

4.2.8 Three firms interviewed were younger than 5 years old and four were more than 100 years

old, but the majority were between 6 and 50 years old.



Table 6: International markets: first market destination

Markets International markets

USA 17%

France 11%

Germany 8%

Other Asia 8%

Italy 5%

Africa 4%

Other EU 4%

Belgium, Holland and Luxembourg 3%

Scandinavia 3%

Central and Eastern Europe 3%

Japan 3%

Other America 3%

Other European (non-EU) 3%

Canada, Australia & New Zealand 3%

Spain, Portugal & Greece 2%

Russia 2%

Sample Size 75

4.2.9 Many of the firms interviewed spoke of the enormous potential of the American market and

this is clearly demonstrated in the table above. In addition to the size of the potential

market, language emerged as an influencing factor for many of the firms interviewed.

France was the second most popular international market followed by Germany and other

Asia, representing the increasing influence of the Chinese market, particularly for many of

the importers interviewed.



4.3 Motivations and drivers to internationalisation

Introduction

4.3.1 First we sought to identify the main drivers and motivations to internationalisation and how

this differed across the five categories of firms interviewed. There is an established

literature on motivations and drivers within academic thinking and a number of frameworks

have been developed which group motivations into different categories. Ibeh (2000)2

provides a useful overview of this work and identifies four overall general categories:

Internal – proactive (e.g. desire to grow)

Internal – reactive (e.g. declining profit margins)

External – proactive (e.g. introduction of new legislation)

External – reactive (e.g. heightened competition).

4.3.2 Within the current project, the interviewed businesses were allowed to express their own

motivations and drivers underpinning international activities in response to an open

question concerning the mechanism by which the business has managed the ‘process’ of

internationalisation. This enabled the development of an emergent categorisation of

motivations and drivers arising out of a careful consideration of the perspective of the

owner-manager. The emergent categories outlined within Table 7 are grounded in the

language and discourse used by the owner-manager, as opposed to the constructs of the

project team.

Overview of findings and analysis by category of firm

4.3.3 We can see from Table 7 that three key motivators and drivers tend to underpin

international trade:

Response to an opportunity in the market or an enquiry from a potential customer.

Part of a wider business development/expansion plan and strategy.

Operating in an international market since starting the business due to the nature of

the product or service.

4.3.4 Seven other drivers and motivations emerged, but apart from issues related to limited or

saturated home markets and stagnation or decline in demand in the home market, less than

two businesses in ten identified these as the primary motivation or driver for international

activity.

2 Ibeh, K. (2000) ‘Internationalisation and the Small Firm’ in Carter, S. and Jones-Evans, D. (eds.) Enterprise and Small

Business, Financial Times Prentice Hall, Harlow.



Table 7: Internationalisation and motivations and drivers of the interviewed businesses

Motivation Curious Frustrated Tentative Enthusiastic Successful Totals

Received or response to

opportunity/enquiry

2 2 5 2 5 16

Part of wider business

development and growth

strategy

1 - - 6 7 14

Operating in an international

market

- - - 7 5 12

Limited/Saturated home market - 1 1 6 2 10

Stagnation and decline in home

market

2 - 2 2 2 8

In response to an opportunity - - 1 - 5 6

Reducing profit margins - - 2 1 2 5

Other motivations and drivers - - - 4 1 5

Increasing competition - - - 2 1 3

Clients moving overseas - - 2 - - 2

Total no. of businesses 4 3 10 21 17 55 Note:

1. Motivations and drivers could not be ascertained for 20 interviewed businesses (A = 3, B = 2, C = 3, D = 5, E = 7)

due to non-response, unwillingness to disclose information or the interviewed business did not or had ceased

international activities.

4.3.5 Nearly 30 per cent of businesses started international trading activity in response to an

opportunity or an enquiry from a potential customer. As highlighted within section 4.4, this

tends to reflect a lack of distinction between domestic and international markets,

particularly amongst the Enthusiastic and the Successful. These two groups tend to deal

with domestic and non-domestic orders in much the same way with international activity

being perceived as simply one way of supporting business development:

‘We then developed this for fixed wing aircraft. About 10 years ago, British Airways

heard about this and asked for a demonstration. They liked the product and put in an

order. Other airlines heard about this and the business received orders from

Singapore Airlines, Continental and American Airlines in the USA’ (Software business,

Cambs).

4.3.6 The attitude of the owner-manager tends to determine whether or not an international

enquiry or order is regarded as a driver for international trade. We find that the Curious

and the Frustrated tend to receive and respond to orders in a reactive, tactical way whereas

the Enthusiastic and the Successful tended to be more strategic.

‘We started exporting about 10 years ago in response to an opportunity at a trade fair’

(Manufacturer, Cambs).



‘At trade fairs, agents started approaching us offering to market the product overseas,

mainly in the USA’ (Manufacturer, Norfolk).

4.3.7 The second key grouping of motivations and drivers related to internationalisation as a

business development and growth strategy. Approximately 25 per cent of interviewed

businesses highlighted that internationalisation activity was considered as part of the

process of developing and growing the business. Therefore, the decision of whether to

engage with international activity was an integral part of the planning and strategy process

within the business.

‘Part of our strategy was to broaden the portfolio and win additional customers at the same

time. It was clear from the beginning that international trade was to be a key factor in

achieving the turnover we were aiming at’ (Chemicals Distributor, Herts).

4.3.8 The way in which businesses start to trade internationally underpins the majority of

publicly-funded offerings within the region, in that SMEs are encouraged to develop action

plans and structured business plans as part of the process of accessing support. The key

target market for business support agencies are the Curious, the Frustrated and the

Tentative, but Table 7 shows that the main driver for these groups is the response to an

enquiry or order received by the business. Rather it is the Enthusiastic and the Successful

who identify the key driver to international trade as the outcome from the business planning

process. This raises an important issue concerning how different types of motivation and

drivers influence the subsequent approach and management of the internationalisation

process. (See Section 4.4 of the report.)

4.3.9 The nature of the product or service was identified as the key driver by just over 20 per cent

of the interviewed businesses. In the majority of cases, the business had been operating

internationally since its inception or initial stages of development. Such businesses are

increasingly labelled ‘born global’, a description appropriate to around one in three of the

Enthusiastic and Successful. The activities of these businesses included the manufacture of

scientific instrumentation, automotive manufacturing, business software development and

international recruitment. The nature of such product and service offerings ‘forced’ the

business to operate internationally as there were none or a minimal number of customers

within the home market.

‘The company was founded in 1986 as a born international venture as the nature of the

industry is fundamentally international’ (Engineering Business, Suffolk).

4.3.10 These experiences and insights demonstrate the intrinsically proactive nature of the ‘born

global’ motivation and driver, as it ‘pulls’ the owner-manager into international activity and

forces the business to confront the key issues such as the type of presence required in

overseas markets, how to sell in overseas markets and how to maintain an awareness of

developments in the related market at an early stage of the development of international

markets.



4.3.11 It is clear that there are a variety of motivations and drivers to international activity with

SMEs throughout the Eastern region being both pulled and pushed into internationalisation.

The nature of these drivers will influence the way in which international activities are

developed, the subsequent barriers and challenges faced and the type of support required.

The Curious, Frustrated and Tentative

4.3.12 There was a tendency for the Curious, Frustrated and Tentative to express largely reactive

motivations and drivers related to responding to, or receiving, orders and enquiries and/or a

stagnation in the home market. This translated into a largely tactical approach to

internationalisation via exporting:

‘When we started we looked around and the best quality at the price was Spain and so

we went over there walked around the food markets, approached some of the

producers and now we import all our poultry from there’ (Food Wholesaler, Norfolk).

The Enthusiastic and Successful

4.3.13 The Enthusiastic and the Successful expressed more proactive and ‘pull’ related

motivations and drivers (e.g. internationalisation as a vehicle for developing the business).

However, there are a number of subtle, but crucial differences in the motivations and

drivers to internationalisation between these two groups of firms. For the Enthusiastic, the

main driver was a limited or saturated home market or the nature of the product or service

offering. For such firms, international trade was seen as the only way to help secure the

future of the business. In comparison, the Successful tended to focus on drivers to

internationalisation as a way of developing and growing the business and/or responding to

opportunities or enquiries within the market. That is, international activity for these firms

tends to be more a matter of strategic choice and highlights the fact that motivations and

drivers to internationalisation can, and do, change over time as the business decides to

engage with or continue to trade internationally.



Policy Implications

There are a wide variety of motivations and drivers underpinning international activity

which influence the approach to internationalisation.

The less experienced internationalised businesses are far more reactive/tactical than the more

experienced.

The ability to respond to enquiries is an important driver to international activities for both

inexperienced and successful internationalised businesses.

Not all the successfully internationalised businesses were pulled into international activities as

part of developing the business. Some were operating internationally due to the nature of the

product or service or the nature of the home market.

Motivations and drivers underpinning internationalisation strategies are not static over-time.

Smaller businesses that have been largely ‘pushed’ into considering exporting and other

forms of internationalisation are the least likely to contact business support agencies within

the region. Their lack of awareness of the process of internationalisation means that they are

likely to need assistance and guidance with understanding the process, when the basic

problems are going to occur and the areas of likely additional cost.

In contrast, those businesses that have proactively considered, and been pulled into

internationalisation are more likely to approach agencies with specific needs and

requirements. These businesses will be looking for assistance with particular stages of the

process, such as researching a specific market or developing a sales office or distributor

network, and confirmation that they have been undertaking the necessary activities as part of

the process (i.e. confirmation and enhancement of process skills).



4.4 THE PROCESS OF INTERNATIONALISATION

Introduction

4.4.1 In this section we seek to understand the process by which the firms interviewed manage

their international activities. The way in which a company manages business emanating

from non-domestic markets can be understood in a variety of ways. The approach of the

company will generally be influenced by its extant culture (particularly the character of the

owner/manager), the reasons and ways in which it engaged with foreign markets in the first

place and the relative importance of export sales vis-à-vis overall sales in the company

portfolio.

4.4.2 As already explained, this study did not seek to test any particular theory or model of SME

behaviour but rather set out to obtain and present as loyal a picture as possible of the ways

in which companies behave, based on a qualitative interview process whereby the

interviewee was invited to respond to open questions and describe his company. Data

obtained about individual companies nonetheless has been assembled and analysed laterally

to identify company types with regard to key elements of the management process. This

‘bottom-up’ categorisation of company behaviour therefore has the advantage of being

based in SME reality whilst producing portraits which are in their collected features and

characteristics only ever a partial representation of any individual company. Similarly, the

types and the descriptions presented here can to some extent be understood as a reflection

of existing theories and models since it is impossible to distance ourselves from prior

research in our attempts to be faithful to the integrity of the single firm experience and in

our attempts to describe it.

4.4.3 Within the analytical framework adopted for this study (Motivations, Process, Problems,

Support) Process may be seen as a unique element in that it describes the entirety of the

experience rather than occasional events or matters of limited temporal significance or

impact. We asked companies how and why they became involved in international markets,

how they manage this involvement, how it impacts on the company in terms of resources

and skills and how the company attempts to understand and relate to the markets with

which they are trading or intending to trade.

4.4.4 Three key elements emerge in the way the firm manages the Process of international

activity:

i) Planning The way in which the firm plans its involvement in foreign markets. It comprises

financial and legal matters as well as production, resources and logistics. Some

companies (a minority) will undertake careful preparations and analysis of its own

readiness and suitability for a particular exporting venture in a foreign market

including the drafting of a business plan. Other companies (the majority) simply

respond to an opportunity to export with a view to generating revenue without too

much thought as to the implications of this action or how to undertake it in a

sustainable way.



ii) Manning The way the firm organises or develops its resources to service foreign markets.

These resources may be physical and human. Some adaptation of products and

manufacturing process may be needed to meet the needs of overseas clients. The

need to communicate with those clients will generate a demand for skills such as

foreign language competence. These may be met by recruitment, training or

consultancy measures.

ii) Scanning The way in which the firm informs itself about those markets. Market information is

one of the more obvious elements of exporting activity. More and more channels of

communication requiring varying levels of skills and investment are now available.

Many of these can be carried out at a distance but the most valuable form of

knowledge, market intelligence, is usually obtained through a wide variety of sources

such as personal relationships and visits to the market or other events such as trade

fairs.


Table 8: Behavioural analysis in terms of Planning, Manning and Scanning.

TYPE OF

BEHAVIOUR

Curious Frustrated Tentative Enthusiastic Successful Total

Responds to circumstances 5 3 8 6 3 25

Plans for circumstances 2 3 6 18 22 51

Absorbs exports within existing

resources

5 5 14 11 3 38

Invests in resources for exporting 2 0 0 13 22 37

Relies on incoming information 6 2 11 5 5 29

Scans the markets for information 1 3 3 19 20 46

Total No Companies 7 6 14 24 25 76

The Curious

4.4.5 As they are at an early stage of exposure to international trade, these companies exhibit few

pro-active instincts and tend simply to respond to information and opportunities. Any

international activities they undertake tend to be on a no or reduced risk basis whereby they

might exploit a lead given to them by a support provider or other contact. They will be

parsimonious in their allocation of time and resources to that lead, whilst expressing

interest in further such opportunities which will help them assess the appropriateness of

their product and the potential in the market.

‘This is a very dynamic business with tremendous expansion plans in the UK and overseas.

Yet we have been reactive towards our international clients’ (Healthcare company,

Suffolk).



The Frustrated

4.4.6 These companies have usually identified one or two potential markets for their products

and remain tempted by them. Having estimated the cost of developing these markets, they

have usually decided that it is beyond their means actively to pursue them. They therefore

remain on the lookout for low-investment, high return opportunities that will supplement

domestic revenue and profits.

‘Word of mouth brings in the majority of customers. We do very little advertising because

we do not know where to place it’ (Manufacturer, Beds).

The Tentative

4.4.7 These companies have become expert in one-off responsive exporting. It is infrequent and

often troublesome but occasionally lucrative, so they carry on. Some flirt with the idea of

not bothering when the big orders dry up for a while. They can be wasteful of support

providers’ time as they appear interested only to baulk at the idea when any kind of

investment is proposed. Some of these companies only export to satisfy the demands of

larger clients who pull them into foreign markets. They tend to rely on word of mouth

business. Alternatively, a personal contact has helped them secure worthwhile one-off

business but they lack the ability to transfer this success to other clients independently.

They lack proximity to the markets and fail to appreciate the importance of skills and

relationships.

‘Our international activity consists of being asked by overseas companies to service

machinery containing our parts that have been sold abroad’ (Manufacturer, Cambs).

The Enthusiastic

4.4.8 These companies have managed to break the back of the resources/opportunities dilemma

that characterises the previous group. They have realised that they are no longer afraid of

uncertainty and actively pursue new opportunities. Key people will frequently travel to

foreign markets and return with ideas as to how better satisfy overseas clients. They

communicate well with their markets. A major weakness resides in their dependence on

distributors who may not be performing so well for them and the ensuing low profit

margins which prevent them from investing in more efficient market operations. They are

often too busy generating revenue to think smartly and strategically. Shifts in strategy may

also be hindered by reliance on traditional management methods.

‘Our normal approach is simply to find a distributor but there are few good ones in our

sector and those that do exist guard client relations very carefully. This means that the

company is usually in the dark about market conditions and client needs’ (Electronics

company, Cambs).



The Successful

4.4.9 These companies tend to be proactive across all three areas of behaviour. International

markets play a central part in their business strategy and they exhibit a proactive approach

to overseas market development. They manage to sharpen their industry-based networking

skills whilst being open and receptive to other relationships and opportunities. Trade fairs

are exploited intelligently and where distributors are used, they are monitored and assessed

using networks and web-based tools. A positive attitude to growth is complemented by an

awareness of the importance of training and skills, particularly language and finance.

‘He sees himself as a bridge-builder between the company and its distributors and

extensive travelling (3 weeks per month) supports his relationship-building activities. The

internationalisation process is based on trust’ (Adhesives manufacturer, Norfolk).

4.4.10 If we examine this range of portraits vertically (i.e. look at the issues and trends that

emerge across and between the five categories), we can see a number of issues, trends and

tendencies which make interesting reading.

4.4.11 The way in which international activity is managed by a company will reflect the culture,

structure and resources of that company. In keeping with British business culture

generally, SMEs tend to be pragmatic organisations concerned primarily with short-term

figures and profit considerations. In this context, some of the companies we interviewed

see export opportunities as a means of ensuring revenue by benefiting from different

demand and product cycles from those that prevail in the domestic economy. Export

customers and markets are therefore only there to meet the needs of the company. The

company is not really interested in meeting the on-going needs of the client or of the market

at large. It is this mentality that gives rise to the under-performance and stasis already

referred to. Companies which do not reach the Enthusiastic/Successful status are

frequently uninterested in export markets in a pro-active sense. They are interested in

servicing a limited number of export clients.

4.4.12 This mentality determines the way in which they manage the exporting process. Each

experience along the way is either a success or a problem. When it is the latter, they are

interested in finding a solution, but not necessarily in learning from it to extend their

understanding of the market. Most companies we interviewed in the Frustrated to

Enthusiastic categories believed they had an outstanding product with little international

competition. Not all of them had fully researched the market before saying this or had

questioned the medium-long-term sustainability of this position, even if it were true.

Information and support given by external agencies was used primarily to ascertain whether

a specific action or issue in a specific market would prove to be viable (i.e. profitable).

When agencies were not able to deliver this kind of support (e.g. provide a list of the best

semi-conductor distributors in Germany) the company would be dissatisfied with it and

would not know what to do next.

4.4.13 The management of the process amongst the Successful was better in that it assumed that a

venture into a foreign market required research, investment, relationships and skills. These

companies committed themselves to satisfying foreign customers and clients, see this as a



normal business risk and dedicate the necessary resources to it. A medium-term assessment

of international activity is wide-spread among these companies. They do not like making a

loss on any venture but will try to learn from it for the next attempt. These companies carry

out extensive research before reaching a decision, including foreign visits and attendance at

trade-fairs. They will develop skills that address specific needs such as export

documentation and which help build relationships and knowledge of the market, such as

foreign language competence. In these companies, the export manager works alongside

other managers to plan the production, marketing and financial activities properly. Agents

and distributors are cultivated and assessed for performance at the same time and always in

mind is the option of developing direct routes to market or more efficient manufacturing

and customer service operations. These companies take competition for granted and whilst

proud of their products, see them as being in a constant state of evolution in response to

competitive pressures, market demand and technological changes.

4.4.14 Our research has revealed a range of approaches to the management of exporting activities

amongst SMEs which, to a large extent mirrors the changes undergone by larger companies

in the increasingly competitive and open world economy of the current era.

4.4.15 There are as many companies which rely on traditional customers and methods as there are

those that embrace change and competition. All may be active internationally but those

which plan their actions, listen to markets and develop management skills, emerge from our

study as the ones which prosper in the medium-long term. Of course, not all companies

have the resources immediately to implement such a new and different mentality but

deserve support all the same. In order to continue to progress their international activity

this support needs to target the way in which companies manage the entire process of

international trading activity, rather than the way in which they deal with isolated problems,

such as market information, export documentation or shipping. A management mentality is

required which sees overseas markets as integral to the business activity and which services

those markets through a planned management of the company’s resources.



Policy Implications

Planning, manning and scanning are key characteristics of successful exporters.

Inexperienced exporters tend to lack these skills and often respond to events rather than

prepare for them. The development of mechanisms to improve these skills in the less

experienced internationalised businesses is likely to help them compete more effectively in

international markets.

A stasis frequently sets in whereby companies lose momentum in their development of foreign

sales after initial investment and enthusiasm. The Tentative are a key group here and helping

these companies to adopt the practices exhibited by successful exporters is critical.

Obstacles which discourage inexperienced companies from exporting are considered to be

minor by successful companies. Successful exporters have developed skills in their personnel

to deal with such obstacles and could assist less experienced firms in developing ‘how to’

knowledge to deal with these challenges.

The management mindset is a key element of successful companies’ performance and can be

developed with good planning. Successful companies have developed systems for obtaining

proximity to their markets and clients. These include regular visits, good use of trade fairs,

good management of distributors and agents and investment in skilled personnel. Such

managers see the management of exporting as no different from any other aspect of their job

and they have been able to reduce the ‘psychic distance’ that deters less experienced

companies from taking initiatives and taking risks and stops them from managing clients

effectively.

Attitudes towards trade fairs and foreign visits varies across the range of companies in a

systematic and predictable way. Companies which prepare for trade fairs with marketing

and sales flair invariably enjoy and benefit from them. Companies which go there at the last

minute or under duress obtain little benefit from them.

Companies which develop a good communication policy are more likely to reach Successful

status than others. Translating packaging and correspondence into the language of the client

appears to be an avoidable expense to some companies. All companies which make this effort

benefit from it both directly and indirectly.

Management structure does not always sufficiently recognise the needs of the exporting

function. Long-standing presence in export markets often results in a complacent attitude to

the management of exporting. Exporting often remains with the personal domain of the

Managing Director and, even where export managers are appointed, they have insufficient

authority to develop strategy and maximise opportunities. Younger managers driven more

by relationship issues in marketing often find themselves unable to influence managing

directors driven by an ‘order and profit-margin’ mentality.



4.5 PROBLEMS

Introduction

4.5.1 In this section we investigate the key challenges, as identified by the Curious and the

Frustrated, preventing them from becoming involved in international activity, and the major

problems experienced by the Tentative, Enthusiastic and Successful in their non-domestic

trading activity. Previous researches undertaken by the Project team allowed the

identification of seven key potential sources of difficulty likely to be faced by the firm

involved in international trade (see Table 9 below), that is, seven key areas where any

weakness is likely to result in a source of competitive disadvantage when competing in

international markets. In a closed question, using a tick box approach, the interviewee was

asked to rate the degree of difficulty presented by each of the seven areas on a scale of 1-5,

where ‘1’ represented no real problem and ‘5’ represented a major problem. Each of the

seven areas were then investigated in further detail during the course of the interview to

gain insights into both the causes of the problems and their potential solutions.

4.5.2 The research objective here was to build an understanding of the problem issues facing the

Curious, the Frustrated, the Tentative and the Enthusiastic and to learn from the Successful

how solutions to these problems might be generated. We found, of course, that the

Successful firms have certainly not found solutions to all their problems whilst the other

four categories were often able to contribute to the generation of solutions.


4.5.3 Table 9 below provides a breakdown of the responses to the closed question followed by an

analysis informed by the insights gained through further discussion during the course of the

interview.

Table 9: Rating of problem issues across the five categories of firms interviewed

Mean Curious Frustrated Tentative Enthusiastic Successful

Management skills 2.82 2 3.2 2.3 2.8 3.8

Internal capacity 2.14 1.3 2.6 2.6 1.8 2.4

Finances 2.44 2 2 2.7 2.9 2.6

Strategic planning 2.78 2.7 3.8 2.2 2.5 2.7

Information Sources 1.50 1.3 2.3 2.1 2 1.8

Market intelligence 2.80 2.5 2.6 3.2 2.9 2.8

Product issues 2.20 1.2 3.2 2.1 2.3 2.2

The Curious

4.5.4 This group cite concerns surrounding strategic planning and market intelligence as their key

reasons for choosing not to become involved in international activity. This group rate each

of the seven areas fairly low, including the problem issues, reflecting perhaps a general



inability to self-analyse and a rather unrealistic appreciation of the scale of the potential

difficulties involved in international trade.

4.5.5 Within this category of firm, we can identify two sub-groups. The first of these two groups

readily identify internal skills as the key issue. There is a general awareness that

international activity requires a different set of management skills which they feel are

lacking within their firm. With respect to strategic planning, the whole planning process

looks so complex and daunting that they prefer to avoid it. They are aware that

international trade will bring fresh market opportunities, but things are not so bad that they

need to put themselves through the pain of planning and all that it would entail. In terms of

market intelligence, many feel that there might be an international market for them, but

they are not really sure and do not really know how to find out.

‘We used to generate all our business within about 15 miles from here, but in the past few

years we have had to employ a salesman to travel the country to find the work. We have

thought about sending him overseas but we don’t really know if we have a market there and

in any case he doesn’t have any experience in this area’ (Manufacturer, Norfolk).

4.5.6 The second sub-group feel that the problems are mainly external to the firm. For them the

real problem is the market, where they identity two critical issues. The first issue is a

general feeling that they do not have the right product, although this is often nothing more

than a ‘gut feeling’. The second issue is a basic mistrust of international markets per se,

from distributors and agents who would fail to deliver their products to market through to

customers who would fail to pay.

‘We sometimes get faxes through inviting us to tender for work overseas, but I don’t think

there is anything there for us really…we are currently looking into an offer from India, but

I worry about getting paid if we sent something there’ (Printer, Bedfordshire).

The Frustrated

4.5.7 This group, who unlike the Curious have actually had experience of international trade,

give all seven potential problem areas a higher score than the previous category of firms.

The key problems identified, all graded higher than 3, include strategic planning, marketing

skills, and product issues. Again, two distinct groups can be identified here.

4.5.8 The first group found their experience of international trade quite satisfactory, are quite

keen to do more but are not really sure how to go about it. Again this group feel that their

inability to successfully pursue international activity is probably due to their poorly

developed skills in the areas of strategic planning and marketing. Like the Curious, in

product terms, they either feel that they probably don’t have the right product for

international trade, or suspect that there might be a market for them but are not really sure.

‘We have had some excellent collaboration with the Malaysian partners over the years, but

it is over for now. I wish we could do more, and I am sure we could, but we never really sit

down and think it through properly. Strategic planning is definitely an issue for us’

(Chemicals manufacturer, Norfolk).



4.5.9 The second group are somewhat bemused by their ability to generate international sales and

are often taken by surprise. They are always happy to respond to an international enquiry,

but have no desire to be proactive in developing this side of their business activities.

We had never sold anything overseas and then one day we got an order from Hong Kong

out of the blue. We didn’t know how to send anything overseas, but we looked into it and it

all worked. It was quite easy really, but we didn’t really think about trying to see if we

could sell any more there. We are quite busy enough as it is really’ (Manufacturer/Service

Company, Suffolk).

4.5.10 It is important to note that neither of these groups see international trade in strategic terms

but rather as a means of improving profitability.

The Tentative

4.5.11 This group see market intelligence as the only real issue facing them. There is a general

feeling that internally things are under control and the only real problem is in finding

international customers. Within this group we often find an inability to self-analyse, little

critical awareness of the competitive realities facing them and a tendency to look to service

providers to solve their problems for them, that is, to effectively remove their commercial

risk by finding them customers. It is very interesting to note that this is the group of firms

performing least well in their international markets, are faced with the greatest range of

problems, are generally badly equipped in terms of skills and knowledge to find solutions

and yet think that only real problems are external to the firm.

‘The most useful thing TPUK could do for us would be to give us a list of potential overseas

customers’ (Software design company, Cambridge).

The Enthusiastic

4.5.12 This group of firms identify management skills, finance and market intelligence as their

key challenges. They have greater experience of international activity and as this activity

develops, the increasing need for higher level management skills becomes apparent if they

are to manage an increasingly complex trading environment effectively. Finance now

becomes more of an issue both in terms of capital funding and cost management. Market

intelligence remains a key issue, but less so than for the tentative, representing an increased

awareness that the key issues here are more internal to the firm than external. As a

consequence of the increased complexity and more diverse nature of their international

activity, the importance of effective strategic planning is now becoming increasingly

recognised.

4.5.13 This group of firms are perhaps the most frustrated. They have the required enthusiasm

for international activity, and many have extensive experience in international markets, but

we find a large gulf between this group and the Successful. In the section on motivation

and drivers we noted that the international activity of these firms is driven by financial

rather than strategic considerations and in the process section we saw that these firms



commit very limited resources to international activity. In terms of problem issues, this

translates into a reluctance to commit the necessary resources to improve skills and learning

within the firm to the level required to deal with the increased level of complexity required

of the successful international firm.

‘New management have come in and we now have incredibly ambitious international

growth targets. I think these are unrealistic because the new management don’t really

understand the market properly and they don’t really take time to talk to the staff who are

left in the dark sometimes. I must admit I find it very frustrating sometimes because we

could do so well’ (Manufacturer and retailer, Norfolk).

The Successful

4.5.14 This group identify management skills as their key challenge. Many of these firms are

now operating in a highly complex international trading environment which requires

advanced management skills. The remaining problems have not gone away, but their

accumulated learning and knowledge has enabled these firms to regard them as secondary

considerations. We find a number of successful firms resolving problem issues through the

employment of former employees of large firms. These individuals bring with them the

large firm experience which the SME is then able to draw upon in the generation of

solutions to their international trading problems.

4.5.15 We find a significant difference between the Successful firms and the other groups in that

for the first time we find international trade being considered an integral part of general

business activity. That is, as has already been identified in the section on motivations and

drivers, many firms in the previous groups take a largely tactical approach to international

activity, regarding it as simply an additional extra aimed at adding revenue, that is,

contributing to the bottom line. Conversely, the Successful firms think of international

activity in strategic terms, as an integrated element of their general business operations with

the aim of adding value to the business rather than added revenue.

4.5.16 Interestingly, growth now becomes an issue for the first time. For many of the successful

firms, growth is a key business objective and international trade is seen as a primary vehicle

for the delivery of that growth. Hence the consideration of international activity in a

strategic manner. Conversely, a number of successful firms interviewed had no wish to

grow beyond their current size (often around 25 –30 employees). The owner-managers at

the head of these firms are quite happy with the current trading situation of the firm, which

provides them with the desired mix of an interesting, manageable working environment and

the required lifestyle. The accumulated knowledge gained through their international

activity has taught them that increased levels of international trading would be

accompanied by greater complexity, both internally and externally, the need to recruit

additional senior management, greater levels of delegation and increased levels of

commercial risk.

‘We have now become very successful in the USA and have picked up some multi-million

dollar contracts. Our finance director rubs his hands, but I just see potential difficulties in



looking after our new customers. This is all very public and if something goes wrong that is

also very public. Yes, our key challenge for the future is our ability to manage our customer

relationships and service their needs at distance’ (Software design company, Cambridge).

‘If you came back in five years, where would we be? Just where we are now I hope. In the

same building and about the same size. We have enough cash to go five years without

selling anything and still cover all our costs so we can just concentrate on developing our

software and every now and again we go overseas on a selling trip to find some new

customers. It’s a great place to work’ (Software design and service company, Cambridge).

Summary

4.5.17 Three key skills areas emerge as critical if the firm is to compete effectively in

international markets, namely: i) strategic planning skills; ii) management skills; and, iii)

market intelligence skills. This reinforces our findings in section 4.4 where we looked at

the process of internationalisation and where we identified Planning, Manning and

Scanning as the key elements in the successful management of that process.



Policy Implications

Firms at all levels of experience encounter problems and have learning needs.

For all firms market intelligence is more of a problem than market information.

At all levels of experience, internal problems are generally more important than external

problems.

Improved management skills are required at all levels, particularly for the Successful who are

often competing in a complex trading environment.

Different groups of businesses emphasise different problems and so business support agencies

need to segment the market if they are to provide an appropriate and effective response to the

range of problems identified.

The Curious, Frustrated and Tentative need assistance with clarifying and understanding

their problems. This could be achieved through, for example, the provision of ‘how-to’

guides, written/on-line case studies and support from the Successful to provide assistance and

‘how to’ knowledge in addressing initial problems and challenges.

The Enthusiastic and Successful need more direct intervention as their problems tend to be

more specific to the business. This could be achieved through the delivery of specific services

or brokerage to specialised sources of support.



4.6 SUPPORT

Introduction

4.6.1 In this section we seek to identify how each of the categories of interviewed firms attempt

to solve their problems and where they might go for assistance to do so. We identified

seventeen potential sources of business support and in a closed question, using a tick box

approach, the interviewee was asked to indicate which sources of support they had used in

the past. For those services used, the interviewee was then asked to rate the usefulness of

the support received on a scale of 1 to 5, where ‘1’ is poor use and ‘5’ is excellent. Again,

any interesting issues arising were then investigated in further detail during the course of

the interview to gain further insights into support provision.


Table 10: Take-up and rating of business support

Type of

organisation

Curious Frustrated Tentative Enthusiastic Successful Totals

No Av No Av No Av No Av No Av No Av

Business Link 3 1.7 4 3 7 3 14 3.3 19 3.2 47 2.8

DTI 3 3 3 4 5 3.6 11 3.5 17 2.9 39 3.4

Chamber of Comm 3 1.7 3 3.3 6 2.2 11 3.7 14 3.3 37 2.4

Trade Associations 4 3.3 2 3.5 3 3.3 10 4.2 12 4 31 3.7

Competitors 2 4 1 5 6 4.2 8 3.9 11 3.1 28 4.0

TPUK 2 3 2 3 9 3.3 12 3.3 25 3.2

Banks 2 2 1 4 4 2 9 3 7 4 23 3.4

Legal consultants 2 3.5 1 3 1 4 9 4.4 8 3.3 21 3.6

Accountants 3 3.3 1 2 8 3.6 7 4.4 19 2.6

Family & Friends 1 5 3 4.3 5 4 7 4.3 16 3.5

Universities 2 4.5 2 4.5 1 3 8 4.3 13 3.3

Recruitment consts 1 2 3 3.7 3 2 6 2.2 13 1.2

Other organisations 3 3.3 4 3.3 3 4 10 2.1

Marketing consts 1 3 3 3 5 3.6 2 2 11 2.3

Prof Associations 3 3 6 2.5 9 1.1

Management consts 1 3 3 2 3 4.3 7 1.9

Financial consts 1 1 1 5 1 5 2 4 5 3.0

Total Businesses 7 5 13 24 26 75

Note:

No.= Number of business using this service; Av. = rating of that service on a scale of 1-5 where 1 is poor and 5 is excellent.

4.6.2 In terms of business take-up rates, the four major providers of business support are all

present in the top six, that is, Business Link (63%), DTI (52%), Chamber of Commerce



(49%) and TPUK (33%). Trade Associations (41%), which were rated as the most useful

of this top group, and competitors (37%) are the remaining two in the top six.

4.6.3 It should be noted that the take-up rate for Trade Partners UK is likely to be higher in

reality as many firms think they are dealing with the DTI when in fact they are actually

dealing with TPUK.

4.6.4 We can see from Table 10 above that in general take up rates of public sources of support

tend to be higher than private sources, across all categories of firms and as a percentage of

the whole sample. Having made contact with these public sources, the majority of firms

interviewed were much more satisfied with the level of service offered that with the private

sector. In particular firms often cited the support offered by the banks, recruitment

agencies and management consultants as being the least consistent.

4.6.5 Informal sources of support were often cited as important and we can see from the table

that competitors are in fifth place with 37% and family and friends are tenth with 21%.

These two informal sources were generally regarded as supplementary to the formal

sources as opposed to replacements, and both the Enthusiastic and the Successful tended to

regard these two informal sources as occasional, but essential, sources of support.

‘We heard that Hong Kong were about to ban imports and we panicked a bit. So I rang

one of my competitors to see if they had heard anything and to ask them what they planned

to do. They were already aware of this and had started exporting to the Carribean. So we

did a bit of research and caught a plane over there to investigate’ (Wholesaler, Norfolk).

4.6.6 We find that the more experienced internationalised firms, the Enthusiastic and the

Successful, are much more aware of the potential support available, have at some time or

other accessed all the potential sources of support identified and having done so generally

rate the usefulness of support received more highly than the less experienced firms.

4.6.7 In general, we find that the Enthusiastic and the Successful have greater awareness of the

need for support in their international activities. Having identified this need, they are then

better at identifying the appropriate source of support which in turn leads to a higher degree

of satisfaction with the support received. Conversely, the Frustrated and the Tentative are

largely unaware of the types of support on offer, have had contact with a significantly lower

number of support agencies and are generally less satisfied with the support received.

‘I think you have to know what you need. If you ask for help and they say ‘What with?’, you

can’t just say ‘everything’ The more you are aware of just what you need, the better your

chances are of actually getting it’ (Manufacturer, Norfolk).

4.6.8 Reinforcing our findings elsewhere, the Enthusiastic and the Successful demonstrate a

greater degree of self-analysis informed by the learning that comes with experience. This

leads to an increased awareness of the need for support, both formal and informal, if they

are to be effective in their international activities.



4.6.9 Assistance with Trade Fair attendance was widely regarded as the most valuable source of

support by the Successful and is a very typical example of how many firms use the formal

route but informal means to exploit the opportunity to the full. Rather than simply using

these events to generate sales, the Successful tend to use Trade Fairs as a critical element of

their market intelligence gathering activities. They are used to keep an eye on the

competition, to see who is doing what, to meet up with customers, to find new distributors

and agents, to keep up with market developments and so on. The other four groups of firms

tend to regard Trade Fairs uniquely as a selling opportunity, and would be reluctant to

commit resources to attendance unless they thought a sale would result.

‘The best thing that ever happened to us was getting a subsidised place on a Trade Fair.

This allowed us to travel to the region, talk to the people there and from that we started to

build up relationships. We were then able to travel over independently because we had the

contacts’ (Recruitment Agency, Cambs).

‘Our biggest Trade Fair is in Detroit and all our customers come there to see us. So by

going there we get to see everyone in the USA at least once a year’ (Manufacturer, Cambs).

‘Whenever I ask to go abroad to visit a Fair or anything I am told I can only go if I bring

back a sale. I keep telling them that it takes ages to build up relationships and turn them

into sales but it doesn’t do any good’ (Manufacturer and Distributor, Suffolk).

4.6.10 Three general points tended to be raised by The Curious, the Frustrated and the Tentative

concerning the available support: i) some confusion as to what is available and which

providers offer which particular services; ii) that the support available tends to be too

general and that no one is able to help with specific problems; and iii) that the assistance

available only takes the firm so far but then at the point assistance is needed the most there

is no further assistance. These comments reflect the tendency for these groups to be

reactive rather than proactive in their actions, as already identified elsewhere in this report.

They tend to become frustrated quite quickly if they cannot find what they want with a

tendency to blame others rather than to look inside the firm for the source of difficulty.

One could say that there is almost a ‘told you they wouldn’t be able to help’ mentality even

before the search for assistance has been started.

4.6.11 The issues raised in the previous point are indicative of the significant difference in

mindset found between the Successful and the other four categories. The Successful seek

to self-generate solutions to their problems either internally or through their networks.

They are constantly scanning the environment to see if anyone else can help, are very

happy to engage with the formal support agencies, but they view these agencies as part of

the wider support network rather than the solution to their problems. That is, they regard

themselves as self-reliant. Conversely, the Curious, the Frustrated, the Tentative and the

Enthusiastic all tend to look to the support agencies to solve their problems, but generally

feel that nobody can help because their problems are so specific. They are not really clear

about what they want but think that they probably won’t get it anyway.



‘We had a guy over from BusinessLink a while ago. I must say he was very good, but he

couldn’t really do anything for us and so we haven’t bothered with anyone else since’

(Printer, Beds).

‘My advice to anyone starting international trade for the first time would be to talk to

everyone and any don’t be afraid to ask for help from anyone. I think we have probably

used just about everybody over the years’ (Chemicals Distributor, Herts).



Policy Implications

Support should aim to improve skills and build organisational capabilities. This will help to

generate a sense of self-reliance and self-confidence and avoid the development of a

dependency culture within the firm.

The Curious, Frustrated, Tentative and Enthusiastic often need assistance in understanding

their problems before they are able to identify the most appropriate type of support required.

Off-the-shelf solutions are unlikely to be effective for the Successful, for whom specific

solutions need to be tailored to specific problems.

There is a need to develop mechanisms which encourage learning and experiential exchange

between SMEs and the support community. It may be useful for policy makers to ‘live with’

internationalised SMEs within their world to help develop understanding and insight from

within the ‘inside’ rather than from the ‘outside’.

Business support agencies could review the ways in which they market their services to the

Curious, Frustrated, Tentative and Enthusiastic to improve the delivery of the key messages.

One support provider is unlikely to be able to resolve all the challenges facing

internationalised firms and therefore there is a need for joined-up-thinking rather than

competition among support providers.



5 SHARING BEST PRACTICE

5.1 Background and overview

One of the objectives of this project has been to identify best practice from around the Eastern region

and to add value to the region through the sharing of this best practice through skills and knowledge

transfer. We have evidenced elsewhere in this report that skills and knowledge development are

critical if firms within the region are to compete effectively in international markets. In this section of

the report we offer a number of profiles of highly successful internationalised firms from within the

region we feel have been highly effective in developing their international activities through the

building of organisation capabilities, learning and skills.

5.2 Company profiles

Polar Systems, Manufacturer, Norfolk

Founded 16 years ago manufactures ‘one-off’

machines for the food industry. Specialised

products with a high R & D input for specific

customers. Owner-manager has a strong

international orientation and believes in being

very close to the customer. Uses trade fairs to

build up network of personal contacts and to

understand customer needs. Very hands-on,

intimate relationships with clients, control over all

aspects of the business and a sharp grasp of his

industry and markets. In all respects sees no

difference between domestic and non-domestic

trading activity. Aware of skills needs but looks

for individuals who will ‘fit’ into the business and

trains them rather than looking simply for

qualifications. Is looking to develop the business

but will do this steadily without putting the future

position of the business at risk.

Cornelius Group plc, Chemicals Manufacturer

and Distributor, Herts

Formed in 1935, this firm went through a

management buyout 14 years ago. They are

among the top 5 companies in the UK and the top

100 in Europe. The firm employs 75 with a

turnover of around £30m. The firm imports raw

materials from around the world and exports to

western Europe, Poland and the USA. The firm

believe the keys to successful international

activity are closeness to the customer, establishing

an appropriate infrastructure and getting the

product right. Cultural issues are regarded as very

important and are thought more important than

language skills. Great effort is made to develop

relationships with the customer and to develop a

clear understanding of the target market. High

level internal skills are regarded as critical and an

appreciation that things do not happen quickly.

Growth is a key business objective and

international activity is seen as the delivery

mechanism.



41

Cavendish Silks, Clothing Manufacturer and

Retailer, Essex

Owner-manager founded the firm after having

worked previously in Spain and Germany. Very

appreciative of the importance of language skills.

An entrepreneur with a strong sense of identity

and tight control over the business. Used the

Commercial Attaches as an introduction to the

markets in Norway and Italy and then worked

hard to develop a network which he sees as the

key to market development. Believes in high

level management skills to ensure professionalism

and quality. For him the key skills in international

dealings are to keep close to the market, be able to

react quickly to changing situations, develop close

relationships with agents and clients and spend

time with them getting things right.

Tyron Automotive, Systems Manufacturer,

Beds

Manufacturers flat tyre protection systems with 9

employees and a turnover of £1m. Initially pulled

into international activity by market opportunities,

quickly appreciated the potential and started

attending trade fairs to learn about overseas

markets. Started building a ‘preferred’ list of

contacts and clients, and then worked hard to

obtain orders and establish a distribution network

though international distributors. Due to the Ford

Explorer/Firestone issue there is huge potential for

expansion and the firm sees international activity

as the way to grow the business, primarily through

the USA and the Middle East. Have made good

use of the support offered by Trade Partners UK,

BusinessLink and the Chamber of Commerce.

BIOTEC Laboratories Ltd, Manufacturer,

Suffolk

Assembles and manufactures diagnostic testing

equipment for TB, Hepatitis etc. Started in 1987

by a biomedical scientist married to as Nigerian

who recognised the market opportunities through

visiting the country, so in effect a ‘born global’

company. Grew steadily until 1996 when new

staff effected a strategic shift in the firm when it

was decided to grow the business through

international markets. Trade fairs and existing

networks were used to reactivate dormant contacts

to generate orders. Now export to over 60

countries world-wide. Employ 25 with a turnover

of £2m. Market entry strategy is to use trade fairs

and networks to identify the main distributor and

to negotiate an exclusive contract. This minimises

the cultural and other difficulties of trading in

such complex market conditions. Very extensive

use of business support agencies. Advice to new

internationalised firms would be to get to know

the target market well and develop relationships

and networks before committing resources. Be

aware of who can help with which problems,

don’t be afraid to ask for help, and ask everyone

you can think of.

NetSupport Ltd, Software Business,

Cambridgeshire

Started 13 years ago by an IT consultant to

develop software allowing remote control of

linked computers. Was joined by the former

Group Finance Director of a large firm who

became Finance Director. Used trade fairs to

learn about the market and build up contacts.

Eventually obtained an order from Germany and

discovered high potential there. Servicing

customer needs of critical importance and difficult

to do at distance and so the Finance Director used

his large firm experience to open an office in

Germany. Through trade fairs obtained an order

from the USA and also opened an office there to

exploit market. Very effective mix of skills,

founder with product knowledge, Finance

Director with market development skills.

Recruited in key areas to build organisational

capabilities. Use the DTI for market intelligence,

attend trade fairs to learn about the market, obtain

some direct sales and then either use distributors

or open own facility. Now with 50 employees and

a turnover of £4m their product is sold worldwide.

Seeking to grow the business mainly through

international activity.



42

6. SKILLS AND KNOWLEDGE

6.1 Introduction

6.1.1 The method adopted for this study has been to observe and record the behaviour of

companies from a wide range of sectors and of varying size, age and international

experience. We did not seek to squeeze these companies into a pre-conceived analytical

framework but have attempted, in our analysis, to identify the variables in their

composition, culture and context which have played a significant part in their progress, or

otherwise. It was not our aim to locate the companies or their personnel on a scale of

educational achievement, though we are able to make some general estimates of the

relationship between performance and educational qualification of key personnel.

6.1.2 This analysis will therefore focus in the first instance on the skills and knowledge required

by companies, in normal circumstances, to sustain successful performance in a competitive

international trading environment. Some of these skills (general management) may apply

equally to the domestic trading environment. Others (foreign language skills) may be

specific to the international environment. Very importantly, and this is something we need

to research further, we will discuss the nature of the transition from domestic trading to

international trading from a skills and knowledge perspective, as it emerged from our study.

Do all companies make this transition successfully, or is there something about the make-

up of some that helps them do it better? In order to simplify the complexity of the issues

surrounding skills and knowledge development, we conclude our analysis with an

identification of skills and knowledge needs across the five categories of firm interviewed.

6.1.3 In conclusion we will venture some observations about the relationship between our

findings and the skills strategy for the Eastern region.

6.2 Planning, Manning and Scanning

The process section of this report broke down the exporting experience as described by

companies into the concepts of PLANNING, MANNING AND SCANNING. These are the titles

we will use to describe the skill-sets and knowledge characteristics of successful international

companies.

PLANNING

Describes the way in which a company navigates its involvement in foreign markets. This

comprises financial and legal matters as well as production, resources and logistics. Some

companies (a minority) will undertake careful preparations and analysis of its own readiness and

suitability for a particular exporting venture in a foreign market including the drafting of a

business plan. Other companies (the majority) simply respond to an opportunity to export with a

view to generating revenue without too much thought as to the implications of this action or how

to undertake it in a sustainable way.



MANNING

Describes the management process by which a company organises or develops its resources to

service foreign markets. These resources are usually both material and human. Some adaptation

of products and manufacturing process may be needed to meet the needs of overseas clients. The

need to communicate with those clients will generate a demand for skills such as foreign

language competence. These may be met by recruitment, training or consultancy measures.

SCANNING

Describes the way in which the firm informs itself about those markets. Market information is

one of the more obvious elements of exporting activity. More and more channels of

communication requiring varying levels of skills and investment are now available. Many of

these can be carried out at a distance but the most valuable form of knowledge, market

intelligence, is usually obtained through a variety of sources such as personal relationships and

visits to the market or other events such as trade fairs.

Table 11: Skills and Knowledge breakdown

SKILLS PURPOSES

(FIND ANSWERS!)

KNOWLEDGE

PLANNING Markets

Financial

Legal

Production

Competition

What are the reasons

for going international?

Is the company ready

to do it?

What will be the

impact of this decision

on the organisation?

Do the responsible

managers know how to

build a strategy?

MANNING Communication

(foreign languages)

Sales

Logistics (inc.

documentation)

Leadership

Do we have the

resources to support

exporting?

Do we have the skills

to meet the needs of

overseas clients?

Are we prepared to

build and develop

relationships with key

partners?

Do the responsible

managers know how to

structure and skill up

the company?

SCANNING Market research

Building the best

channels to market

Identifying

opportunities

Building networks

Monitoring the

competition

Is there a market for

our products and, if so,

what do we need to

know about it?

How do we find these

things out?

How do we exploit

these opportunities?

Do the responsible

managers know how

business practice

differs in other markets

and how this might

impact on the

company?



6.3 Skills

According to the Cambridge Advanced Learner’s Dictionary, a skill is:

an ability to do an activity or job well, especially because you have practised it.

6.3.1 Planning

The Planning skill-set poses serious challenges to the typical small and medium enterprise.

Most companies came into existence not as a deliberated, rational response to a set of

market conditions but in response to an opportunity or a passion. To ask such an

organisation to adopt a strategic planning approach to international markets is therefore

asking them to do something foreign. All of their personal and commercial history may

even militate against the suggestion. They have built their persona around the value of

being pragmatic, problem and sales-oriented and commercially astute. That is, at this point,

strategy is driven by sales rather than the other way round. Indulging in abstract concepts

and calculations about markets and competences seems to them to be the antithesis of

business success. Even if they could see the case for it, it is usually not something they

would see themselves as capable of. The average educational qualification of the decision-

makers interviewed in our study was between GCSE and A level. The average for

Successful companies was between A level and degree level. Most, when questioned, said

that their reason for starting exporting was to respond to an opportunity. When these

companies approach business support agencies it is not usually to ask for advice, but to ask

for support or information to help them achieve something specific they have already

resolved to do. In our study we found evidence of a transformation process at work. Good

advice will not simply give them what they want. It will alert them to what they need and

help them find a way to obtain it.

Along the way, it is clear that Successful companies, through training, experience and self-

development BECAME planners. Their initial level of educational qualification may not

have indicated them as being capable or inclined to do this, but they achieved it and their

status as successful exporters owes much to this achievement. Some may have been

persuaded to join a training programme offered by one of the support providers. Others

may have recruited an individual who had relevant education or experience and has

introduced this thinking into the company. Either way, they have acquired a foundation for

planning and analysis and the ability to respond to market conditions which are essential for

international growth.

Companies which have failed to make this progression (most notably the Tentative) may

not have had the fortune to acquire these skills. They may alternatively be more resistant to

them than some of the other companies. They display a static and passive attitude towards

their business problem which results in an inability to place their situation in context, assess

strengths and weaknesses, understand market conditions and find alternative ways forward.

Support packages directed at these companies which are not underpinned by a strategic

analysis and plan are likely to falter.



We therefore can distinguish between what companies want and what they need. They

want information, money and solutions to precise, small problems. They need to learn to

plan, to broaden their management mindset and build better manning and scanning skills.

6.3.2 Manning

Most of the companies we interviewed have limited resources with which they can develop

their international trade ambitions. Some, however, often as a result of sound strategic

planning, develop a clear idea of how they need to develop their material and human

resources to make their international activities more profitable. This often involves

investing in skills which are not critical to domestic business success, such as foreign

language skills.

There are many arguments for and against foreign language competence in UK business

organisations. The arguments against tend to emanate from observers with a short-term

cost/benefit approach to business transactions. The acquisition of language skills can be

costly if it involves employing individuals who are not able to carry out other tasks. This is

in reality very rarely necessary if the labour market is properly exploited. Some doubt the

benefit of foreign language use by British companies when English has become the lingua

franca of international business. Recent research in the Eastern region rebutts this

argument by identifying incidences of business lost at 25% of companies questioned. 40%

rely on English or the intermediation of English-speaking local agents and 21% report that

they have experienced cultural barriers.

We found a close correlation between valuing foreign language use and sustained success

in international trade. Successful companies value relationships and market intelligence

and these are best cultivated and exploited by use of the language of the client and market.

We also discovered a complex appreciation of foreign language use by successful

companies. Good managers will see occasions on which they individually, or a member of

their personnel, will profitably exhibit the ability to speak or write the foreign language.

These occasions are normally critical to understanding and relationship development and

can, in one fell swoop, make those expensive language classes worthwhile. On another

level, a good manager will see how the foreign language used in the right place and in an

expert fashion can make his product and company look more professional and appealing to

the market. Using a professional translator to produce packaging, invoices, web-sites or

instruction manuals and safety leaflets in the foreign language can help find clients, make

the product more attractive and ensure customer satisfaction and repeat business.

We can say much the same about other skills needed to enact international trade well. The

international company has to equip itself with the skills to dispatch the goods, satisfy

customs and excise requirements and ensure customer satisfaction in a more complex

transaction than most which apply in a domestic environment. It is however important to

note the key role played by the owner-manager in this context. He/she has to provide the

leadership and informed decision-making in this challenging environment. There is a

strong body of literature that suggests that owner-managers with a strong international

orientation tend to be more successful in the long term as they appreciate the need for new



skills more quickly. The skills he/she possesses are therefore the critical ones and they

need to be in place before any of the others can be developed or effectively deployed. In

this respect, manning follows on from planning, which, as a process, needs to identify skills

shortages and devise a plan to redress them.

6.3.3 Scanning

Much export support has traditionally leapt straight to the process of scanning, bypassing

the first two stages. Information about opportunities in a foreign market can be sufficient to

create an exporting opportunity which a company will seek to exploit.

In a more competitive and strategic environment where the company first needs to assess its

readiness and ability to export effectively and in a sustained manner, information about the

foreign markets needs to be aligned in a more structured way with the company’s plans.

Information is not just about one-off opportunities, it is about market conditions, national

regulations and competition. The forms of information available in the global economy are

multiple and accessible through multiple channels. Competing effectively at a distance is

only possible if a company can maximise its understanding of the local environment and

conditions. Market information (and its partner, intelligence) is therefore an on-going and

crucial tool to a company that wishes to grow in international markets. The Successful

companies we interviewed used the internet, trade fairs and exhibitions, personal

relationships and networks and visits to the foreign market regularly and effectively to

improve their decision-making and adjust their business strategy. Managers we observed

who were successful at international trade tended to be people able to carry out these tasks

with similar confidence and ease to what they show in the domestic market. Some, but not

all, of these managers may have had previous experience of international trade. Others did

not but simply felt comfortable in different environments and with foreign clients. The

ability to read signals, solve problems, interpret data and understand clients in other

cultures can be developed alongside or, in some case, independently of foreign language

skills and some are more predisposed to it than others.

Here once again, the process of scanning needs to be seen, not just as an activity in itself,

but as a part of a strategic approach towards international trade. The issue is not the

obtaining of information, but the decision as to what information to look for and how and

where to look for it. Answers to these questions should emerge from a strategic business

plan. This does not preclude the possibility of a fortuitous order coming through the

letterbox and proving to be the start of a successful exporting venture. The strategic plan

will ask of the company and the owner-manager questions that will help him/her devise the

tools and skills to take advantage of such an opportunity, to develop it and to apply it to

other markets. In this way, the firm continues to behave opportunistically or

entrepreneurially, but within a more strategic framework so that international activity

becomes targeted rather than ad hoc.



6.4 Knowledge

Whilst the concept of skills currently carries a great deal of significance in economic and

educational strategy in the UK at the moment, it is probably correct to say that the concept of

knowledge has even greater import within the context of global economic and corporate

competitiveness. As a concept, it is less easily grasped than is the notion of a skill. It takes many

more forms, is less easy to quantify and to isolate in its manifestations in daily life. This quality

has made of it something of a Holy Grail in contemporary management theory. As Holden3

points out, ‘It can be shared, in principle, universally. (Alternatively…) it can be forgotten and not

used.’ The operating assumption for many theorists and business leaders is that much of the

knowledge that makes a critical contribution to the modern organisation is tacit, i.e. we do not

necessarily know we are using it in our daily decision-making. It is therefore particularly

difficult to analyse and exploit as it is sometimes conscious and sometimes unconscious.

According to the Cambridge Advanced Learner’s Dictionary, knowledge is

understanding of or information about a subject which has been obtained by experience or study,

and which is either in a person's mind or possessed by people generally.

6.4.1 Planning

As already acknowledged, the process of strategic planning is a rather vague, abstract

concept. It involves the assembling of data from the past and observations about current

trends in an attempt to prepare the company for the future. It is no surprise that these

predictions often turn out to be wrong, no matter how good the data was or the intellectual

ability of the planners.

Nonetheless, planning has a number of benefits. The process of planning:

increases the familiarity of the planner with the business and the market

it forces the planner to consider and reflect on a variety of possible scenarios

it puts the planner into a position of informed readiness to confront emerging realities

These are all very valuable experiences for anybody who has to deal with the international

environment, where political events, natural catastrophes or mergers and acquisitions can

overnight change the competitive position of your company in a foreign market. Clearly,

planning is a demanding process and it is no surprise that, where declared in our study, all

the individuals responsible for exporting in Successful companies were educated to at least

A level standard, with a good number having at least a degree. Conversely, the Tentative

companies, who we found generally to have stagnated in their international operations had

a poor record here. The majority were educated just to GCSE level or equivalent.

6.4.2 Manning

Once a business strategy has been defined, the resources and skills of the company have to

be aligned with it and the target markets. This process requires a sound knowledge of both

3 Holden N. (2002) Cross-cultural Management: A Knowledge Management Perspective. Financial Times Prentice Hall.



the company and its markets. When these markets are overseas, the data on them is

inevitably distant and complex. The owner/manager needs to ensure the quality of the data

and its application to the company’s operations. Our research found that whilst the Curious

and the Successful companies were attentive to this issue, once again the Tentative

companies lacked commitment to it. 80% of Curious companies and 72% of Successful

companies possessed foreign language skills but only 23% of Tentative companies did.

The flow of knowledge about clients and the market to the company that is facilitated by

foreign language skills and other examples of commitment to, and experience of, the

foreign market becomes a critical tool in the company’s attempts to sustain and improve its

performance there. This knowledge is present in the individuals who work in and for the

company (including distributors) and a key management task is to help facilitate the flow of

this information through the management process.

6.4.3 Scanning

Knowledge about foreign markets usually resides primarily in the owner/manager (or the

sales manager) who goes there and liaises with clients. The quality of the data obtained

will depend on the quality of the relationships he/she can build with the market. Here, as

earlier, we can identify skills which help obtain that data. Equally important, however, is

the flow of information from the owner/manager to other stakeholders. This process has to

be managed if the data is to have meaning beyond the owner/manager. On a mundane

level, the expense of sending personnel to overseas markets can be expensive but savings

and benefits can be obtained if information about travel, customs or expectations are passed

on. On a more critical level, what might appear on the surface to be unimportant

information to the owner/manager about a particular client can become invaluable

information in the hands of the Finance Director or the Production Manager. Once again,

obtaining data is only a part of the task, the critical element is knowing what to do with it.

6.5 Skills and Knowledge Needs

In the discussion above we have attempted to examine some of the key issues surrounding skills

and knowledge development through an examination of the key role these play in building the

ability to compete effectively in international markets. In order to summarise these complex

issues, in the Tables below we identify the skills and knowledge needs of the firms interviewed

across the five categories.



Table 12: Skills and Knowledge Needs: The Curious and Frustrated

The Curious and The Frustrated

Inactivity in international markets is largely due to the lack of perceived

international market opportunities (no pull factor) and generally benign

domestic conditions (no push factor)

Key questions facing these two groups:

Planning: Do we really want to grow the business through international activity?

Manning: If so, do we have the skills and resources to achieve this objective? If not

how do we fill the skills and resource gaps?

Scanning: How do we find out if there is a potential international market for our

products?

Skills and Knowledge needs

Planning

How to build a business plan

How to map course of actions and learn basic process

How to anticipate the consequences of the decision to go international

How to identify the actual costs associated with new market development

How to evaluate company response to export opportunities

Manning

How to assess strengths and weaknesses of resources

How to obtain extra resources, where necessary

How to approach support agencies

How to manage doing business in a foreign language

How to modify products to meet market needs better

How to process orders

How to plan market visits and trade fair strategy

Scanning

How to find out about potential market opportunities

How to assess competitive position in selected markets

How to identify where and when problems with foreign languages occur

How to identify potential partners

How to triangulate market intelligence sources

How to find out about market regulations that affect market development

How to find the type of information and/or contacts to comply effectively

How to identify and approach support agencies



Table 13: Skills and Knowledge Needs: The Tentative and Enthusiastic

The Tentative and The Enthusiastic

The Tentative: Little ability to self analyse. Have discovered that international

trading is complex and challenging and have lost their initial enthusiasm.

Perceive problems to be largely external to the firm and largely expect support

agencies to solve them on their behalf.

The Enthusiastic: Understand complexity of international trading environment

and perceive the critical challenge to be (in)ability to compete effectively. i.e.

understand the key problems are internal rather than external. Much more

receptive to support agencies than the Tentative.

Key questions facing these groups:

Planning: Are we committed to international activity? Do we need to revisit our

business objectives? Are we being strategic enough in the way we deal with our

international markets and customers? How can we develop more established

guidelines and procedures?

Manning: How do we identify our skills gaps? How do we acquire/develop dedicated

resources? How do we find and assess appropriate support?

Scanning: How can we learn to understand the differences between markets and how

to manage those differences? How do we evaluate market opportunities?


Planning

How to develop more established guidelines and procedures

How to identify processes by which to evaluate current international activity

How to evaluate new market opportunities

Manning

How to affirm market operations and negotiate changes, if necessary

How to identify the appropriate type of market presence

How to undertake an audit of skills and resources

How to move towards a geo-centric HR strategy

How to understand the differences between markets and how to manage them

How to evaluate and review partner agreements

Scanning

How to service the needs of current international customers

How to identify new market opportunities

How to test new products/channels

How to develop a framework for new market development

How to find and assess the most appropriate type of support



Table 14: Skills and Knowledge Needs: The Successful

The Successful

Have a number of strengths: Internal – high level skills development; External -

strong products and well established markets. Understand the key to success is

their ability to manage an increasingly complex and challenging international

business environment.

Key questions facing this group:

Planning: How do we control the new market development process? How do we

influence key stakeholders? How do we manage/influence support?

Manning: How do we acquire dedicated resources for key markets? How do we

develop specific higher level skills?

Scanning: How do we service customer needs at distance? How do we ensure

appropriate local presence?


Planning

How to control the new market development process

How to influence key stakeholders

How to develop a strategic approach to effectively establishing a local presence

How to manage/influence support

Manning

How to identify and develop specific skills

How to build a tighter international team

How to acquire dedicated resources for key markets

How to assess support in the new market development process

.Scanning

How to develop client relationship management systems, particularly the

management of client relationships at distance

How to use cultural differences to benefit the business



POLICY IMPLICATIONS

PLANNING

Strategic planning provides the learning and skills foundation on which successful, sustained

international activity can be built.

Many SMEs will resist the exhortation to plan but, once it has been done, will realise the

value of it.

Whilst it is possible to remain international without being a ‘planner’ few such companies

manage to grow and compete effectively in the long term.

Some companies will require special encouragement and support to learn to plan.

MANNING

The skills and knowledge of the manager are critical in the deployment of material and

human resources for international trading.

Resources and people have to be obtained and developed to improve exporting performance.

Relations with overseas clients and markets are much enhanced by the use of the foreign

language and intercultural skills.

Extra knowledge gained in this way is not usually burdensome. The human relationships and

cultural insights are usually a source of personal enrichment.

SCANNING

In an environment where information is plentiful, Successful companies plan market research

activities carefully.

Electronic resources and skills are indispensable for good international management.

Market intelligence and presence are built up through networks and relationships.

Flow of knowledge to and from the market and the company and within the company needs

to be planned and managed.



6.6 The CEIM study and the East of England Skills Strategy

6.6.1 The East of England Development Agency has actively sought to analyse and promote

employment and business skills since its inception. This has led to the publication of the

East of England Skills Analysis in January 2003 and the formation of the Framework for

Regional Employment and Skills (FRESA).

6.6.2 Although it was not a specific objective of this project to respond or report to these events,

it would appear appropriate to venture some proposals as to the place of this study within

the skills debate in the region.

6.6.3 The main FRESA policy document (January 2003) does not specifically raise the issue of

skills for international trade, though it does highlight shortcomings in the region in the

areas of management development, take-up of training by SMEs and higher level skills

generally.

6.6.4 The authors would argue that most of the skills highlighted in this section would probably

be classified as higher level skills if a ready and reliable means were available to make this

assessment. It is notoriously problematic to relate foreign language and environment

related skills to conventional vocational competences, such as those that feature in the East

of England analysis. Yet, given the importance of international trade in the strategy, and

the desire to benchmark skills in the region against standards of excellence world-wide, it is

surely important to foster international skills. In all the cases outlined in this study, the

skills required to improve effectiveness in international markets serve to enhance and add

value to existing competences and operations and to help apply them in challenging

contexts. At present, these skills are most easily represented by the concept of foreign

language learning, and we have already argued for the promotion of well-targeted

programmes in this area. We have also highlighted a less visible (or audible!) set of

competences which characterises successful managers and companies. These competences,

usually referred to as intercultural or cross-cultural skills, help individuals and companies

understand and develop proximity with foreign partners and cultures by understanding their

values, attitudes and behaviour (referred to on occasion in this study as ‘international

orientation’). The East of England, through its universities and consultancy services, is

already at the forefront of British and European activity in this area. A comprehensive

policy to promote sustainable performance in international trade would do well to consider

the place of these skills in the development of its workforce.



7. RECOMMENDED ACTION PROGRAMMES

7.1 Our objective in undertaking this project has been to help build a stock of firms in the Eastern

region capable of competing effectively in international markets. We have aimed to do this

through identifying successful aspects of international business planning, resource management,

international networking, market intelligence gathering and global skills and knowledge

development that can be made transferable across business sectors via training, educational,

development and recruitment programmes.

7.2 The firms interviewed during the course of this research have provided us with a clear message as

to their skills and learning needs with respect to their international activity as identified in the

previous section of the report above. In this concluding section to the report we now identify a

number of initiatives capable of both addressing the skills gaps identified by the firms

interviewed and building upon current skills and learning to assist firms throughout the Eastern

region become more effective in their international trading activities.

7.3 It is important to note that the majority of the actions suggested below would have the Curious,

Frustrated, Tentative and Enthusiastic groups as their primary targets, and a clear aim of these

actions would be to facilitate the transfer of knowledge from the Successful. Any action

programme would however need to recognise that the Successful also have skills and

knowledge requirements which need support and development. A number of firms from this

group have expressed a particular interest in management development programmes of an

advanced standard to improve their skills levels and the opportunity to take part in workshops

with other successful firms to discuss problem issues.

7.4 The recommended action programmes are now itemised below:

i) BEST PRACTICE GUIDES

High quality brochures focussing on examples of best practice in the region containing

diagnostic tools. These could include: ‘How to’ guides to provide simple process

understanding, written/on-line case studies from successful firms within the region,

problems solving techniques and a directory of support agencies.

ii) INTERNATIONAL SME MANAGER DEVELOPMENT

Flexible courses with optional accreditation focusing on the Planning, Manning and

Scanning skills needs as identified.

iii) INTERNATIONAL PARTNERSHIP PROGRAMME

A region wide scheme facilitating international network building and market development,

possibly keyed in to research and innovation projects such as the 6th Framework and

Teaching Company Schemes.



iv) INTERNATIONAL MENTORING PROGRAMME

This would bring high-quality graduates (viz STEP) into SMEs to supply resources and

knowledge advantage. This also has a business-to-business dimension which could be

mediated by the International Trade Advisers. A pilot scheme, GRADEX is currently

running with the support of EEDA/AUEE.

v) WORKSHOP PROGRAMMES

To bring together small groups of managers of international SMEs to share common

problems and to develop solutions. These could be devised in consultation with Trade

Partners UK to ensure that provision is properly targeted to complement existing

programmes. Funding for these could be sought from BusinessLink or the Learning and

Skills Council.

vi) TRACKER STUDY

A study with a five-year time frame to track 50 firms throughout the region as they

undertake their international activities. This would allow rich insights into the skills and

learning needs of international firms as they progress from the Curious stage onwards. This

would permit a better understanding of the reason why some firms exit the international

markets, some get stuck at the Tentative stage and others become Successful.

vii) PASSPORT PLUS

The ‘Passport to Export’ programme has been of benefit to many firms interviewed for this

study and will continue to assist the Curious and the Frustrated to become involved in

international activity. The focus for this project has been to assist the Eastern region in the

objective of building a stock of world class firms capable of competing effectively in

international markets. In order to help achieve this objective we would recommend the

development of a ‘Passport Plus’ programme targeted at the Tentative and the Enthusiastic

to help improve their ability to compete in international markets. If one of the regional

objectives is to improve the competitiveness of firms in their international activity, and

hence increase GDP within the region, our research overwhelmingly suggests that it is the

Tentative and Enthusiastic groups which offer the opportunity to make the biggest impact

within the Eastern region.



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