1. education

HOW TO SUCCESSFULLY EVALUATE
EXPORT MARKETS:
Swiss small and medium machinery companies in Southeast Asia
Linna Ji
Moritz Maier
Maria Mountaki
Ruppim Sukpanich
M.Sc. International Management
Supervisors: Prof. Dr. Rolf Meyer
Andrew Mpeqa
Michael Sitte
July 3rd, 2013
EXECUTIVE SUMMARY
The following research paper is aiming to investigate the determination criteria of Swiss
machinery SME's entering to Southeast Asian markets. In today’s business environment,
organizations and businesses are becoming increasingly aware of the strategic importance
of effective market evaluation in order to gain a competitive advantage and ensure the longterm growth of the business.
The role of small and midsize enterprises in Switzerland is with a percentage of 99.6%
(Swissinfo, 2011) very important. The Swiss machinery sector is the backbone of
Switzerland's economy and its many SME's account for 11% of the Swiss workforce. The
sector exports totaled around 70 billion Swiss francs per year (Wallstreetjournal, 2012). This
increased globalization has led Swiss machinery companies to go further than the domestic
market. Most of them focus on the highly growing Asian markets, searching for possibilities
to expand the business.
Plenty of studies in the field of export performance have been conducted, however not many
analyzed the phase of the export decision. Wiedersheim-Paul, Welch, & Olson (1975)
however stated, that the pre-internationalization phase is crucial for export success.
Objectives of this research have been achieved through reviewing numerous literatures in
the field of internationalization of SME's, determinants of export as well as frameworks for
export behavior and market analysis. The paper’s outcomes have been obtained through
semi-structured interviews with companies and experts.
There are a number of limitations, which this research paper faced, such as the small sample
size relative to the number of all exporting SME's in Switzerland, reflecting on the level of
reliability of the research results. Further the limitation of time for research which reflected on
the validity of the research outcomes.
The findings of the multiple case studies strongly suggest that Swiss SME's in the machinery
sector base their export decision for Asian countries on experience rather than market
indicators from external sources. This could be due to the size and limitation in resources.
This research could be a useful source of information for the internationalization phase of
SME's based in Switzerland considering entering Asian markets. The value of this paper
provides useful information needed for evaluating markets and how to enter the market
based on multiple cases and current literature.
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TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
5 1.1. BACKGROUND
1.2. RESEARCH SCOPE
1.2.1. SMALL AND MEDIUM-SIZED ENTERPRISES (SMES)
1.2.2. ASEAN MARKETS
1.2.3. SWISS MACHINERY
1.3. RESEARCH STUDY AND PURPOSE
1.4. RESEARCH OBJECTIVES
1.5. RESEARCH PROPOSITION
1.6. ROAD MAP
5 6 6 6 7 7 8 9 9 CHAPTER 2: RELATED LITERATURE AND THEORETICAL FOCUS
10 2.1. GLOBALIZATION AND INTERNATIONALISATION
2.2. INTERNATIONALISATION THEORIES
2.2.1. UPPSALA MODEL
2.2.2. ECLECTIC PARADIGM
2.2.3. NETWORK MODEL
2.2.4. INNOVATION-RELATED INTERNATIONALISATION (I-MODEL)
2.2.5. “BORN GLOBAL” THEORY
2.2.6. INTERNATIONAL ENTREPRENEURSHIP THEORY (IET)
2.2.7. INTERNATIONALISATION OF SMES
2.3. MARKET ENTRY MODEL - EXPORT
2.3.1. DRIVERS OF SME INTERNATIONALISATION
2.3.2. DETERMINANTS OF EXPORT BEHAVIOR
2.3.3. PRE- EXPORTING PROCESS
2.3.4. MARKET SELECTION METHODS
2.3.5. QUALITATIVE APPROACHES
2.3.6. QUANTITATIVE APPROACHES
2.4. MARKET ANALYSIS TOOLS
2.4.1. CAGE DISTANCE FRAMEWORK
2.5. PEST/PESTEL ANALYSIS
2.6. SWOT ANALYSIS
2.7. PORTER’S FIVE FORCES
2.8. CONCLUSION
10 11 11 12 13 15 15 16 16 16 17 18 19 20 20 20 22 22 23 24 26 26 CHAPTER 3: METHODOLOGY
27 3.1. 3.2. 3.3. 3.4. 3.5. 27 28 29 31 31 PHILOSOPHICAL ORIENTATION
RESEARCH DESIGN
SAMPLE SELECTION
DATA COLLECTION
CONCLUSION
CHAPTER 4: DATA ANALYSIS
32 4.1. 4.2. 4.3. 4.4. 4.5. 4.6. 32 33 34 35 35 36 INTERVIEW ANALYSIS
GENERAL CODES
VALIDITY AND RELIABILITY
ETHICAL CONSIDERATIONS
LIMITATIONS AND DELIMITATIONS
CONCLUSION
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CHAPTER 5: FINDINGS
37 5.1. PROFESSIONAL BACKGROUND
5.2. COMPANY PROFILE
5.2.1. HISTORICAL EXPORT MARKETS
5.2.2. REASONS FOR EXPORTING
5.3. MARKET INDICATORS FOR ENTRY
5.4. MARKET ENTRY
5.4.1. MARKET SELECTION PROCESS
5.4.2. METHODS
5.5. RISKS AND BARRIERS
5.6. SUCCESS FACTORS
5.7. CURRENT PERFORMANCE
5.8. FUTURE OPPORTUNITIES
5.9. CONCLUSION
37 38 38 39 41 42 42 43 44 45 47 47 48 CHAPTER 6: REFERENCES
49 CHAPTER 7: TABLES
54 CHAPTER 8: FIGURES
55 CHAPTER 9: APPENDIX
56 9.1. INTERVIEW GUIDE (COMPANIES)
9.1. INTERVIEW GUIDE (EXPERTS)
9.1. INTERVIEW TRANSCRIPTS
56 60 62 Page 4
CHAPTER 1:
INTRODUCTION
Chapter one will outline the main context of this master thesis. Setting the scope of the research in
discussion, defining the research problem and research questions as well as giving a first research
proposition. In order to make this work more readable, this chapter is also outlining the format and the
organization of the paper. Lastly a road map was developed in order to lead through the topics,
leading to this chapter's conclusion.
1.1.
BACKGROUND
Traditionally companies target their international activities to psychically close markets, those with the
least factors inhibiting the flow of information to the firm. There have a considerable amount of studies
analyzing export behavior, and performance. The Process of internationalization is consisting of
several steps. Firms who want to stimulate growth through export development must first distinguish
between the many different export combinations. This is due to the fact that a large number of export
opportunities exist, but only a very limited number of these can be explored, The main reason for this
are scarce resources (Papadopoulos and Denis, 1988:38). Plenty of research has been conducted in
the field of internationalisation and expanding foreign market presence. Although criticized (Andersen
1993), Johanson and Vahlne’s (1977) Uppsala model is the most influential study showing that
Swedish manufacturing firms learned and increased their foreign market knowledge over time
primarily through experience. Only after gaining this confidence they increase foreign market
commitments and expand to more psychically distant markets. This nature of the internationalization
process is making pre-internationalization phase critical (Wiedersheim-Paul, Welch, & Olson, 1975).
As in many other countries, Switzerland thrives on its many flexible and innovative small and mediumsized enterprises (SMEs). They form the vast majority of private sector businesses, provide two-thirds
of jobs and are an important basis for a stable and efficient economy (FDEA, 2009). Switzerland
generates almost half of its income abroad. Exports are the engine that drives the economy and an
opportunity for small and medium-sized businesses (FDEA, 2009).
With the increasing globalization of markets, interest in international entrepreneurship has grown
rapidly over the past two decades (Hisrich et al., 1996; Keupp and Gassmann, 2009; Knight and
Cavusgil, 1996, 2004, 2005; McDougall et al., 1994; Oviatt and McDougall, 1994, 2005; Zahra and
George, 2002). A major feature of the global economy has been the liberalisation of emerging
economies and their integration into the worldwide economy (Aulakh and Kotabe, 2008). Traditionally
studies in the field of internationalization focused mainly on big multinational enterprises (Dana,
Etemad and Wright, 1999). However, the interest in research in the field of SMEs operating in
international markets has been increasing as their internationalisation process in most cases already
starts at an early stage (Fillis, 2001; Ruzzier et al., 2006). Since most research is focusing on the
internationalization process itself, the determination criteria and decision choices are left behind.
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1.2.
RESEARCH SCOPE
1.2.1.SMALL AND MEDIUM-SIZED ENTERPRISES (SMES)
As defined in European law, “SME” stands for small and medium-sized enterprises (EU
recommendation 2003/361). The main factors determining whether a company is an SME are:
1.
2.
Number of employees and
Either turnover or balance sheet total
Company category
Employees
Turnover
(or) Balance sheet
total
Medium-sized
< 250
≤ € 50 m
≤ € 43 m
Small
< 50
≤ € 10 m
≤ € 10 m
Micro
< 10
≤€2m
≤€2m
The same standards are also valid for Switzerland.
Nearly all (99.6 per cent) of all businesses in Switzerland are small and medium-size enterprises.
These companies employ 1.45 million people, around 70 per cent of all employees not working for
state-run enterprises (Swissinfo, 2011). The School of Business Administration in Fribourg conducted
a research program referring to a poll of 625 export-oriented companies. The study showed the large
number of SMEs markets them “central” to Switzerland’s international success. In the years 2007 to
2009, the questioned firms generated over 50 percent of their sales’ revenues from exports. The study
revealed that the case even suits for the micro enterprises; in the medium enterprises, exports
accounted for about 60 per cent. According to Henrique Schneider, political secretary of the Swiss
Trade Association – the umbrella organisation for SMEs, about a third of Swiss SMEs do business
abroad. The share of exports in the turnover of all Swiss SMEs is estimated at between 30 and 40 per
cent.
1.2.2.ASEAN MARKETS
Southeast Asia or Southeastern Asia is a subregion of Asia, consisting of the countries that are
geographically south of China, east of India, west of New Guinea and north of Australia. The 10
countries comprising the Association of Southeast Asian Nations (ASEAN) are Burma, Brunei
Darussalam, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Viet
Nam.
ASEAN as a whole represents the EU's 3rd largest trading partner outside Europe (after the US and
China) with more than €206 billion of trade in goods and services in 2011. According to UNCTAD’s
WIPS 2012-2014 (World Investment Prospects Survey 2012-2014, United Nations Conference on
Trade and Development), in Asian countries, China continued to be in the top spot as investors’
preferred destination for FDI, but the rankings of South-East Asian economies such as Indonesia and
Thailand have risen markedly. Overall, as China continues to experience rising wages and production
costs, the relative competitiveness of ASEAN countries in manufacturing is increasing.
According to the Association of Southeast Asian Nations, small and medium-sized enterprises are
also of overwhelming importance in most Asian countries. SMEs are the biggest source of domestic
employment, providing a livelihood for over three quarters of the region’s workforce
(Wattanapruttipaisan, 2002).
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In December 2012, the final negotiation for a Free Trade Agreement (FTA) between Singapore and
EU were completed. The EU is in negotiation FTA with Malaysia, Vietnam and Thailand, and the EU’s
door remains open to start negotiation with other partners in the region and hopes one day to
complete these agreements with a region-to-regional trade agreement. Switzerland, being a member
of the European Free Trade Association (EFTA), its trade agreements are usually concluded in the
EFTA (European Union, 2013). The EU is ASEAN’S 2nd largest trading partner after China,
accounting for around 11% of ASEAN trade. By far, EU is also the largest investor in ASEAN
countries. EU companies have invested around €9.1 billion annually on average from 2000 to 2009
(European Commission, 2013). According to data published by IMF in 2012, for the year 2011,
Switzerland was the 14th biggest trading partner with ASEAN countries, 1.6% of ASEAN’s import were
from Switzerland.
1.2.3.SWISS MACHINERY
Machinery, or mechanical engineering, can be described as "an assembly, fitted with or intended to be
fitted with a drive system other than directly applied human or animal effort, consisting of linked parts
or components, at least one of which moves, and which are joined together for a specific application",
as defined by European Commission. In this sense, machinery is the collective name for mechanical
and electrical engineering sector.
The machinery sector is an important part of the engineering industry and is one of the industrial
mainstays of the European community economy (European Commission, 2013). In a broad view, the
machinery, electrical engineering and metals industry (MEM) represents the largest industrial sector
and holds a key position in the Swiss economy with 350,000 employees. The MEM industry
contributed 19.3% to GDP in 2007, while its share of added value amounted to 9.4%. In almost every
division of the machinery industry, Switzerland’s export volumes rank among the highest in the world.
Approximately 80% of MEM industry products are exported, and the industry contributes 39.6% to
total Swiss exports.
The Swiss machinery sector is the backbone of Switzerland's economy, though the country is better
known for its financial sector. But together, the machinery sector's many small and midsize enterprises
account for 11% of the Swiss workforce, nearly twice as much as financial services. Machinery-sector
exports in the first half totaled around 35 billion Swiss francs ($36 billion) (Wallstreetjournal, 2012).
1.3.
RESEARCH STUDY AND PURPOSE
Several studies exist on how to enter a market and how to evaluate a market. They describe both
qualitative and quantitative methods to evaluate a foreign market. The studies mainly focus on large
international corporations with plenty of resources. Small and medium enterprises, however are left
behind. This paper tries to investigate the market determination and decision choice of small and
medium-sized Swiss manufacturing companies exporting to Southeast Asia.
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1.4.
RESEARCH OBJECTIVES
Our group wants to investigate determination criteria of Swiss machinery companies entering in
Southeast Asian markets. The research will try to evaluate methods used to research, evaluate and
compare the markets as well as market indicators leading to successful decisions.
GRAND TOUR QUESTION:
What are the main determination criteria of Swiss machinery SME's entering Southeast Asian
markets?
SUB-QUESTIONS:
1.
2.
3.
4.
Which market research methods are used?
How they evaluate the markets?
How they compare the markets?
What are the market indicators leading to successful decisions?
This study aims to provide an insight in good practices in the field of market evaluation strategies on
the example of Southeast Asia and gaining a better understanding on how a comprehensive market
evaluation and comparison is influencing export success.
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1.5.
RESEARCH PROPOSITION
This paper tries to investigate the market determination and decision choice of small and mediumsized Swiss manufacturing companies exporting to Southeast Asia. The suggested findings in this
study are that, despite of the psychic distance between the markets, most of the firms enter at an early
stage of their internationalization process by using different entry modes.
1.6.
ROAD MAP
The Road map of this paper provides six steps as a structure in order to apply an inductive approach
to build theory from case study research.
Chapter 1. Introduction. This chapter is giving an overview over the thesis and introduces the topic,
the research problem, the research questions as well as the research proposition.
Chapter 2. Literature Review. Chapter two introduces the key topics of the thesis including critical
success factors of project management, vision, leadership and communication, change management.
Important concepts and models are highlighted in order to make the reader familiar with existing
research and findings in all the connected fields.
Chapter 3. Methodology. This chapter is outlining the methodology used in order to collect and
analyse the data. This chapter outlines how the multiple case studies are the right approach in order to
investigate the role of the project vision. The chapter also describes the research design, case
selection, interview description and data management. Lastly, the chapter will address the advantages
and disadvantages of such a research methodology.
Chapter 4. Data Analysis. The data analysis chapter is focusing on the analysis of the quantitative
data, starting with the guidelines of the interview and the coding schema. Several codes were created
in order to give assistance with analysing the transcribed interviews. The role of the researchers will
be discussed as well as the validity, the reliability and the limitation of the data. Last but not least the
author wants to address ethical questions.
Chapter 5. Findings. This step involves telling the story (theory) and showing results (the data). The
data will show the role of vision in relation to project success and considers the findings and emerging
themes in relation to the literature. Lastly, the chapter critically analyses the findings, literature and
models to fully address the research question and research objectives as presented in this chapter.
This chapter is also making use of the findings from the previous chapter and gives recommendation
on how to use these findings to create a compelling project vision. Further this chapter is giving
general guidance on how to achieve successful outcomes. The authors are concluding the findings
and outlining further research fields, which this study could not cover.
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CHAPTER 2: RELATED LITERATURE AND
THEORETICAL FOCUS
The previous chapter introduced general information about the background of this paper. In order to
get a deep understanding about the topics discussed we first need to define the concepts of
globalization and internationalisation. In the second step we will have a look at internationalisation in
small and medium enterprises. The third part will introduce the most important theories of
internationalisation. The following graph will give an overview about the theories in the field:
Figure 1: Literature Review, Source:Own
This literature chapter aims to review the overall background concepts and information regarding
internationalisation and export. Related theories, frameworks and models will be introduced and
discussed in the following sections.
2.1.
GLOBALIZATION AND INTERNATIONALISATION
There is a confusion between the two terminologies: globalisation and internationalisation. Firstly, it is
very important to clarify the different meaning of these terms.The term globalisation is explained by
Bernstein and Cashore (2000; 71) as “structural economic factors, mainly rising levels of trade,
finance, and foreign direct investment.” A broader definition is defined as “growing transcendence of
borders with manifestations that include increased global trade, finance, communications,
organization, ecology and consciousness” (Scholte, 1997 in Bernstein and Cashore, 2000). Thus limit
of the term lies in the scope of economic structure. On the contrary, concept of internationalisation
concerns more of issues occurring internationally whether it is participation, transaction, or influences.
The term is defined by Buckley and Ghauri (1999; 84) as “the process of increasing involvement in
international operations.” We can say that internalisation is a continuous process resulted by
globalisation.
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2.2.
INTERNATIONALISATION THEORIES
Due to the pressure and opportunities globalisation has brought to business world, many large and
small firms have been thriving to internationalised. For the past decades, scholars and researchers
have been developing theories and models on how and why internationalization process is
accomplished. We will discuss some of the well-known theories in order to obtain some background
concepts of internationalisation in general to understand the overall process and later we will explore
more on the internalisation of SMEs.
2.2.1.UPPSALA MODEL
Traditionally companies target their international activities to psychically close markets, those with the
least factors inhibiting the flow of information to the firm (Andersen 1993). Johanssson & Vahlne’s
(1977) Uppsala model is the most influential study showing that Swedish manufacturing firms learned
and increased their foreign market knowledge over time primarily through experience. Only after
having gained this confidence, did they increase foreign market commitments and expand to more
psychically distant markets. Pandian and Sim (2002) explain the model which identifies the four main
stages of international expansion as follows;
1.
2.
3.
4.
No export activity
Exporting through independent agent
Exporting through sales subsidiaries
Moving the production/manufacturing overseas
Figure 2: Four stages of international expansion (Pandian and Sim, 2002)
According to Pandian and Sim (2002), the mechanism behind the model refers to the state and
change aspects. The state aspect is composed by foreign market knowledge and market commitment.
The knowledge of the foreign market contributes to the experience of the firm in foreign market where
it learns and understands demands, supply, opportunities, the business operations and any other
relevant issues in conducting business in that particular market while the market commitment can be
measured by the resources a firm allocates to that market as well as the level of firm’s involvement. As
for the change aspect, it has two components including commitment decision and current activities.
The current activities are experiences which firm gains through the market commitment and market
knowledge which then leads to the confidence and commitment to allocate resources and make the
commitment decisions - decision of expanding to foreign market.
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Figure 3: The basic mechanism of internationalisation (Johanson & Vahlne, 1977:26)
Another feature which lies in the Uppsala theory is the distance of the foreign market from the homecountry. The concept of psychic distance implies that firms perform best in international market which
shares resemblance with their domestic market (Kuo and Fang, 2008). This concept is relatively
similar to Ghemawat’s CAGE distance framework which is used as a method to measure the
difference of culture, administration, geography, and economy between home-country and foreign
market. The CAGE distance framework methods will be discussed in more details in the part of Market
Analysis Tools.
Johanson and Vahlne (2009) explain the exporting behavior of Swedish firms that firms usually start
their process of internationalization by going to countries that are close to domestic market in terms of
physical distance. Then, after establishing a success in that market, the firms will start to expand the
business in countries that are further away from the home-country. This nature of the
internationalisation process is making pre-internationalisation phase critical (Wiedersheim-Paul,
Welch, & Olson, 1975).
The model later was challenged by many theorists who claimed that there are limitations to the model
which include the fact that the model does not distinguish between big and small firms; and the model
focuses on past-export behavior rather than the export decision-making (Reid, 1981). The Uppsala
model has then been criticised for its simplicity of using only the experiential factor as core component
in explaining the process of internationalisation (Tan, Brewer, and Leisch, 2006). However, it is still
influential in the field which emphasises on linking the process through learning and experiencing in
the process of internationalisation (Pandian and Sim, 2002). Therefore, as an empirical study, the
experiences of Uppsala model will serve as a base for our research in understanding pre and post
internationalisation processes.
2.2.2.ECLECTIC PARADIGM
Dunning's (1976) eclectic paradigm of international production is derived from various theoretical
approaches such as the theory of firm, trade theory, organizational theory and location theory. It
attempts to integrate three general and interrelated concepts to identify and evaluate the significance
of factors influencing both the initial act of cross-border production by firms and the growth of such
production. It is based on the assumption that firms will not invest in foreign market when domestic
market offers lower costs. The extent and pattern of international production can be determined by a
set of three factors, which are:
§
Ownership-specific advantage: intangible assets of the firm such as intellectual property,
brand reputation, and the overall competitiveness of the firm including specific skills or
technique of production, etc. The more competitive advantages a firm has, it will more likely to
get involved in foreign direct investment.
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§
Internationalisation advantage: the efficiency of firm’s production through organizational
process or firm’s core competencies.
§
Location-specific advantage: the ability of firm to operate business in specific location which is
attractive. The attractiveness of location includes the availability of resources firm needs as
raw material for production, climate, infrastructure, availability of technology, etc. (Porter,
2008)
These three needed to be present and satisfied at the same time if it should be profitable for a firm to
undertake foreign direct investment (Porter, 2008). Dunning’s Model gives the appropriate reasoning
for Swiss SMEs starting to export and establishing their business in foreign markets i.e. ASEAN
countries.
2.2.3.NETWORK MODEL
The network model challenges the Uppsala model regarding the entry mode in which firms do not take
time to learn and experience in order to gain knowledge of the desired market rather, they establish
relationships and networks to do so in a much faster pace (Mitgwe, 2006). The network model
emphasises on relationships between firms. This model allows external influences to be part of firm’s
decision of internationalization (Hadley and Wilson, 2003). Also, it states that firms use the network
and relationship that they have established both in home-country and abroad as a basis of
internalisation decision making. In other words, firms internationalise using the resources and/or
complementary advantages shared with the other firms in the network to benefit itself and its
partnership.
Johanson & Mattsson (1998) stated that there are four different levels of internationalisation and they
include (1) The Early Starter, (2) the Late Starter, (3) the Lonely International, and (4) the International
among Others as depicted in figure 3.
Figure 4: The network approach of internationalisation (adapted from Johanson & Mattsson 1998)
1. The early starter firm is the enterprise which has low degree of internationalisation of both the
firm and market. The firm does not have relationship or network with other firms and it has
very limited resources and knowledge of foreign market. The knowledge of the market can be
acquired through the development of network and relationships with foreign firms in the
market.
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2. The lonely international is a level of a very internationalised firm which is in a noninternationalised market. It is the stage where a firm has already established networks and
relationships in an international market. Its exposure to the market contributes to the
experiences and knowledge which,compared to the early starter, is more ideal.
3. The late starter is the opposite of the lonely international. It is in the internationalised market
while the firm is not. The firm lacks knowledge, experiences, and commitment to the market
while having direct network and relationships through customers, suppliers, or competitors. At
this stage, the firm requires more coordination to position itself in the market.
4. The international among others level is when the firm takes advantage of the total
internationalised environment; firm and market. Here, the firm has established relationships
and network in international market as well as having first hand experiences and knowledge
regarding the market which leads to the assumption that the firm has a high commitment to
the market. The firm can develop its position by establishing its own subsidiaries to serve the
new market as a mean to enhance its capacity. (Hadley and Wilson, 2003; Lin, 2012)
Johanson and Vahlne (2009) accepted criticisms regarding their Uppsala model and agreed with the
limitations of their model. They then revised and developed a new version of the Uppsala model. To
make the model more up to date and relevant to the new era of internationalisation, the revised
version of the model has integrated the theory of networking into it as depicted in Figure 4.
Figure 5: The business network internationalisation process model (Johanson & Vahlne, 2009)
In this new version of Uppsala model, the term ‘opportunities’ is involved. Johanson and Vahlne
(2009) claimed that the term is now considered as an important element of the knowledge concept.
Moreover, the ‘market commitment’ is now replaced by ‘network position’ with the assumption that
nowadays firms tend to internationalise through developing networks. In the change state, ‘learning,
creating, trust-building’ replaced ‘current activities’ to elaborate and clarify the result of the term
‘activities’ which in the end all comes to experiential knowledge. The old term of ‘decision commitment’
has now changed to ‘relationship, commitment, decisions’ to emphasise on creating relationship
through networking. Commitment can be establishing new relationships or improving the existed
relationships.
In advocate with Mort and Weerawardena (2006 ) and Onkelinx and Sleuwaegen (2008), we believe
the Network Model facilitates a very quick entry mode and positioning process in a new market; as an
internationalisation strategy, it is very important specifically to SMEs due to its benefits of resources
sharing given resources is one of SMEs’ business barriers.
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2.2.4.INNOVATION-RELATED INTERNATIONALISATION (I-MODEL)
Various researchers agreed that the decision of internalisation is an innovation process of the firm.
(Bilkey and Tesar, 1977; Cavusgil, 1980; Czinkota, 1982; Reid, 1981) The process of I-model can be
summarized into three stages as follows; (Leonidou and Katsikeas,1996).
§
§
§
pre-export stage: firm focuses more on domestic market comparing to the foreign market
though firm has limited experience.
export trail stage: firm starts exporting occasionally when it sees the opportunities to expand
the markets.
advanced export stage: firm is fully engaged in exporting and gaining experiential knowledge
of the foreign market.
In Cavusgil’s model, the process is most often initiated by unsolicited orders from abroad and
internationalisation is seldom initiated from strategic intent; often directed by a “firm champion”; an
internal entrepreneur that guides the firms towards its internationalisation. The export involvement is
operationalised by the exporting sales ratio, thought to reflect the extent of a firm’s dependence on
foreign markets. Other researchers have also used this operationalisation of export stages, referred to
as export intensity (Cavusgil 1980; Diamantopoulo and Inglis 1988).
The Uppsala model, Network model, Eclectic paradigm, and Innovation-related internationalisation
model are parallel and similar in the sense that they are developed based on the assumption that firms
have to be in business for a long time to start initiate the process of internationalisation and therefore,
the firms engaging in internationalisation are often large and very experienced (mature) firms
(Kandasaami, 2004). There are also theoretical approaches in internationalisation of small sized firms
that take shorter time to internationalise:
2.2.5.“BORN GLOBAL” THEORY
Critiques have been made for both U and I models, referring that they both assume domestic
maturation and internationalisation as a strategic option (Arild, 2010). Another relatively new study of
Australia’s high exporters spotlighted the rise of numerous small firms that successfully competedvirtually from their inception-against large, established players in the global arena (Andersson et al,
2004; Rennie, 1993).
The study coined the concept of "born globals", and it was followed by numerous studies on the same
phenomenon under names such as born globals (e.g., Andersson & Wictor, 2003, Knight & Cavusgil,
1996; Madsen, Rasmussen, & Servais, 1999; Madsen & Servais, 1997), global start-ups (Oviatt &
McDougall, 1995), international new ventures (McDougall et al., 1994), and instant exporters
(McAuley, 1999). Born global phenomenon is more common today, as internationalisation becomes
less complicated and risky because of lower trade barriers and cheaper transportation and
communication. Various studies also proved such phenomenon, for example Chang and Grub (1992)
found born globals in Taiwan, and Lindmark, Christensen, Eskelinen, Forsstrom, Sorensen, and Vatn
(1994) found born globals in the Nordic countries. Consequently, there is abundant empirical evidence
showing that not all firms internationalise gradually in a stepwise manner; some firms internationalize
quickly and right from their inception.
The Swiss Internationalization Entrepreneurship Survey (SIES) conducted by Credit Suisse study
(2007) establishes that most Swiss SMEs internationalize in stages. Each stage of this
internationalisation process is shaped by particular behavior on the part of the entrepreneur, and at
each stage more resources are committed and uncertainty increases. At every stage, only limited risks
are taken as the company steps up its investment and gradually gains experience that will prove
useful later in the process. In most cases, the closest markets from a geographical and socio-cultural
point of view are targeted first. Only as a company builds up more experience and know-how, will it
venture into markets further afield. Born Global, which is active in various foreign markets also actives
in Switzerland. In the SIES (2010) survey, the study found that 18.1% of the SMEs surveyed can be
designated as Born Globals.
Page 15
2.2.6.INTERNATIONAL ENTREPRENEURSHIP THEORY (IET)
Entrepreneurs are founders and owners of new business or managers of existing firms. International
entrepreneurship is defined by McDougall and Oviatt (2000; 903) as “combination of innovative,
proactive and risk seeking behavior that crosses national borders and is intended to create value in
organizations”. Although SMEs are not the exclusive domain of entrepreneurship, many people often
associate entrepreneurship with SMEs because, on average, SMEs tend to be more entrepreneurial
than large firms (Mike, 2008: 331).
McDougall and Oviatt (2005) went into more depth of this theory and constructed deeper concept of
entrepreneurship to include four components which are discovery, enactment, evaluation, and
exploitation of opportunities existing in overseas markets. The term discovery refers to finding or
searching for advanced opportunities. Enactment is to use that opportunity in achieving and gaining
competitive advantage over competitors. Evaluation is necessary in assessing actions taken regarding
making use of the opportunity. And exploitation is the next step or the further development of gaining
benefits from the opportunities (Mcdougall and Oviatt, 2005).
The Born-Global and IET models prove that small and medium sized firms can be engaged in
internationalisation through the characteristics of the firms and the behavior and motivation working for
the firms. In next section, we will discuss the internationalisation specifically of SMEs.
2.2.7.INTERNATIONALISATION OF SMES
Small firms become increasingly international. It was reported that small firms contribute 25 to 35% of
world exports of manufacturers, and about one-fifth of manufacturing small firms receive between 10
and 40% of their turnover from cross-border activities (OECD, 2000). Moreover, small firms seem to
get into the international scene at a much earlier stage than before and they are also more actively
pursuing strategies that involve international activities (Knight, 1997; McDougall & Oviatt, 2000;
McDougall, Shane, & Oviatt, 1994; Reynolds, 1997). According to the statistics of EU, there are more
than 20 million SMEs in the EU that represent 99% of businesses, and are a key driver for economic
growth, innovation, employment and social integration (European Commission, 2013). As for
Switzerland, SMEs also represent a huge proportion of the economy. According to the Swiss Federal
Statistical Office, 87.37% of the companies in Switzerland are microenterprises, 10.65% are small
enterprises, and 1.99% are medium-sized enterprises. SMEs play an crucial role in Swiss economy.
As was confirmed by Henk in 2011, the reasons for implementing an international strategy (as
opposed to a strategy focused on the domestic market) include: to yield potential new opportunities; to
extend a product’s life cycle and to secure needed resources etc (Henk, 2011). A major feature of the
global economy has been the liberalisation of emerging economies and their integration into the
worldwide economy (Aulakh and Kotabe, 2008). Many theories and concepts have been suggested to
capture the process of internationalisation. Knowledge about the validity of these assumptions is of
great interest to firms facing important strategic decisions. An influential theoretical starting point to
explain firms' international development has been different types of stage and process models (Bilkey
& Tesar, 1977; Cavusgil, 1980; Johansson & Vahlne, 1977, 1990; Reid, 1981). A basic assumption in
these models is that firms internationalise in an incremental, stepwise, and gradual process for gaining
increased experiential knowledge and reduced risk (Johanson & Vahlne, 1990; Loustarinen, 1979).
2.3.
MARKET ENTRY MODEL - EXPORT
As described by Volberda et al. (2011:331), exporting refers to “the international trade of goods or
services shipped from an exporting company in one country to an importing firm in another country or
countries”. Although the cost of transportation can be relatively expensive, it is the simplest and
quickest access of internationalise strategies used due to its low requirement of commitment
(Majocchi et al, 2005). In particular, export is the main mode of internationalisation (Dhanaraj and
Beamish, 2003).
Page 16
2.3.1.DRIVERS OF SME INTERNATIONALISATION
The motives of internationalisation can be triggered from two main factors; proactive and reactive
factors (Cavusgil, 1982). Czinkota (2004) explained proactive factors (push factors) as motivations
driven internally from inside the firm itself. The firm is actively looking for opportunities to earn more
profits. Push motivations require a lot of desire, enthusiastic, commitment, and the will to learn and
gain information of the markets in order to succeed. On the other hand, reactive motivations are the
motives of internationalisation which firms are able to act and respond passively to external and
internal environment, such as competitive pressure. Firms with knowledge of international market can
internationalise quicker because they do not have to push themselves in gaining that knowledge or
know-how which they have already acquired. Another factor can be firm’s product uniqueness; without
any competitors regarding the products, firms can expand the market to overseas easily.
Proactive Motivations
§
§
§
§
§
§
§
Profit advantage
Unique products
Technological advantage
Exclusive information
Managerial urge
Tax benefits
Economies of scale
Reactive Motivations
§
§
§
§
§
§
Competitive pressure
Overproduction
Declining domestic sales
Excess capacity
Saturated domestic markets
Proximity to customers and ports
Table 1: Why firms go international, Czinkota (2004)
Moreover, European Commission (2004) claimed that the overall primary motivation behind
internationalisation is based on economic factor such as market size and costs to build competitive
advantages. Volbera, et al (2011; 319) suggested four main drivers as follows:
§
§
§
§
Increased market size: can be a driver of internationalisation for SMEs operating in market
which has limited domestic growth opportunities
Return on investment
Economies of scale and learning: to reduce cost of production
Location advantages: lower-labour costs, cheaper cost of supplies, strong match on CAGE
framework, etc.
In addition, European Commission (2004) further defined motives of internationalisation of firms which
specifically are using exporting as mode of entry.
Figure 6: Motives for internationalisation (European Commission, 2004)
Page 17
Therefore, we can rank the important motives behind exporting firm in internationalisation accordingly
as the following:
1.
2.
3.
4.
5.
6.
7.
Access to new and larger markets for products/services
Additional production capacity
Strict laws and regulations on the domestic market
Access to know-how and technology
High production cost on the domestic market
Access to capital
Access to labour
2.3.2.DETERMINANTS OF EXPORT BEHAVIOR
Export behavior studies aroused interest in both - an academic and professional context. Katsikeas et
al. (2000) highlighted the importance of exports from three perspectives:
§
§
§
Politicians, who analyze exports as a way to accumulate foreign currency reserves, increase
levels of employment, productivity and social prosperity.
Managers seeking for corporate growth that imply an increase in production capacity, an
improvement in financial results and business competitiveness, and also to ensure the
survival of the company in a highly globalized marketplace.
Researchers, considering exports as a changing but promising area to develop theories.
Cavusgil and Zou (1994) showed that although SME exporting has been an area of research in small
businesses, studies often focus on the decision to export rather than analyzing the export strategy of
the company. They also state that export strategy would be determined by internal forces such as firm
characteristics and external forces such as industry and export market characteristics. Caves (1996)
showed that the most technologically advanced companies are more involved in international markets
than those less advanced.
Dejo & Ramírez (2009) identified important determinants for export behavior as:
Figure 7: Determinants for export behavior Source: Inferred from Dejo & Ramírez (2009)
Establishing patterns of export behavior followed by SMEs provides new evidence on the differences
between different exporting companies that allows us to understand better the internationalization
process of SMEs.
Reid (1981) claimed that there are five stages of export process behavior as an adoption of
innovation. In the process, firm and decision maker variables play specific and particular roles at each
different stage.
§
§
Export awareness is the stage where the need of export occurs. It can be from opportunities
or emergency. The process of decision making in this stage involves with various factors
including the information of foreign market, experiential knowledge, or the first-hand
experience in operating business in foreign market.
Export intention involves the motivation behind the decision to export products or services
overseas. It includes expectation of earning profits as well as the commitment to enter the
foreign market which requires confidence and strong will.
Page 18
§
§
§
Export trail stage is when firm starting to engage in export providing limited experience and
knowledge. This involves searching for the markets.
Export evaluation stage is the process after being involved with exporting products or services
overseas, a firm assess the outcome in terms of profits.
Export acceptance stage is a result of export evaluation. When the outcome of export activity
has been assessed, firm can make decision, to adopt the export and expand/increase it or
reject the export, according to the results of the evaluation.
Export Behavior As an
Adoption of Innovation
Process
Stage 1
Stage 2
Export Awareness
Export Intention
Export Adoption Stages
Problem or opportunity
recognition, arousal of need
Motivation, attitude, beliefs, and
expectancy about export contribution
Decision Maker
(Variables Involved)
Past experience exportrelated or not; type, level, &
amount of foreign information
exposed to, and associated
individual characteristics,
unsolicited foreign orders
Expectations from entry into foreign
market, foreign market orientation,
export orientation, and underlying
attitudes toward foreign involvement
Firm
(Variables Involved)
Past firm performance,
reputation, and visibility
Managerial goals and existing firm
resources
Table 2: Export Behavior As an Adoption of Innovation Process. (Reid, 1981;103)
Our research focuses mainly on the area of the first two stages based on Reid’s (1981): export
awareness and export intention, which are steps before firm actually taking action of exporting
products or services. This pre-exporting stages include several processes which involve many of
decision makings and selection. We are going to explore into more details of the processes involved in
pre-exporting.
2.3.3.PRE- EXPORTING PROCESS
Before taking action and partaking in exporting, firm needs to gain knowledge of oversea markets.
Oversea market research plays a critical role in determining the success of the firm in exporting to
specific countries. It is the first step of the export decision and hence, a vital step, as there are many
opportunities for export but scarce resources. The purpose of this section is to explore the market
selection theories and methods that used in exporting firms.
Page 19
2.3.4.MARKET SELECTION METHODS
International Market Selection (IMS) has been defined as “the process of establishing criteria for
selecting country markets, investigating market potentials, classifying them according to the agreed
criteria and selecting which markets should be addressed first and those suitable for later
development” (Kumar et al., 1994; Poul, 2008). Selecting the “right” market to enter is important as a
first step in expanding exports to ensure export success, determining foreign marketing strategies and
determining where to establish bases to establish a favourable competitive position in those markets
(Papadopoulos and Denis, 1988; Rahman, 2003). In order to yield a higher return on investment and
make sure that resources are not wasted on less attractive export markets, companies should focus
their efforts and resources on a limited set of dominant export markets (Shankarmahesh et al., 2005).
Papadopoulos and Denis (1988) classified IMS into two broad types of approaches - qualitative
approaches (rigorous and systematic gathering and analysis of qualitative information about one or a
handful of potential country markets) and quantitative approaches (analysing large amounts of
secondary statistical data about many or all foreign markets).
Figure 8: International Market Selection Source: Derived from Papapoulos and Denis (1988)
2.3.5.QUALITATIVE APPROACHES
Qualitative approaches typically start with identifying a short list of countries for further consideration
by establishing objectives and constraints for exporting a specific product to each country under
consideration (Papadopoulos and Denis, 1988). Government agencies, chambers of commerce,
banks, distributors, customers, international experts and foreign market visits are alsoe served as
sources of qualitative information (Pezeshkpur, 1979). As there are practically large numbers of
counties thoughout the world, Douglas et al. (1982) suggested a screening procedure of secondary
data be used to determine which countries to investigate in depth.
2.3.6.QUANTITATIVE APPROACHES
According to Papadopoulos and Denis (1988), the quantitative approaches were further divided into
market grouping methods and market estimation methods. The method of market grouping
commences with the firms’ existing business strategy, by selecting the markets which most closely
resembles the markets already penetrated (Majoro, 1977; Steenkamp and Ter Hofstede 2002;
Shankarmahesh et al., 2005). Thus, markets are grouped based on country similarities. The
underlying idea is that firms should concentrate their international business expansion to the markets
which call for the least adaptation in their marketing mix and only gradually expand to new clusters, as
the potential of the original cluster is fully exploited (Poul, 2008).
Market estimation evaluate foreign markets on the basis of several criteria that measure aggregate
market potential and attractiveness. The criteria often include wealth, size, growth, competition and
access indicators (Sakarya et al., 2007). Market estimation models can be further categorised into
Page 20
firm-level and country level methods, according to the summarize of Papadopoulos and Denis (1988).
Firm-level methods can be applied by firms to identify markets for their limited product ranges. These
methods often include an analysis of companies’ objectives, profitability, managerial experience and
knowledge, customer standards and attitudes and product adaptation requirements when identifying
potential export markets.
Figure 9: Cognitive process of methods; Source: Cavusgil 1985; Kumar et al., 1994
On the other hand, country-level methods can be applied by a country’s export promotion agency to
identify the most promising country-product combination to focus their export promotion efforts on.
The literature of international market selection model will facilitate us in better understanding of the
cognition process of companies. With the purpose of this study being partly to find the methods used
by Swiss SMEs when evaluating and comparing exporting markets.
Page 21
2.4.
MARKET ANALYSIS TOOLS
Market analysis tools are often applied, in order to get a more comprehensive view, by a company
when one or several potential markets are pre-selected. In this section, several classic market
analysis tools will be discussed, which set good frameworks for companies and been proved to be
effective.
2.4.1.CAGE DISTANCE FRAMEWORK
As mentioned in the previous section, CAGE distance framework is often used as a methods to
measure between home and host countries, comparing and matching the compatibility by using four
main aspects of a country which include cultural, administrative, geographic, and economic aspect.
(Ghemawat, 2001)
Figure 10: CAGE on country level; Source: Harvard Business Review, September 2001
Cultural distance: It refers to as the software of the mid, in that it has a sometimes invisible but
indelible influence on people’s values and behaviours. The aspects of religion, language, and norms
could determine the difficulty of the trading.
Administrative distance: It reflects the historical and present political and legal associations between
trading partners; for example, colonial ties between trading partners, or participation in common
Page 22
trading blocs (Ghemawat (2001). It exams historical or current political factors that might favor or
impede a business relationship between a company and a new country market. An example of a
company using an advantage of administrative distance is Grolsch, a Dutch beer producer, who
selected its international markets through historical colonial relationships (Ghemawat and Mitchell,
2008).
Geographic distance: Besides the physical distance between host country and home country, the
aspect also covers the size of the country, distance to borders, accessibilities to ports and
infrastructures which facilitate the transportation process. This physical distance plays a crucial role in
transportation cost, however, technology and internet has shrunk distance in terms of transportation
time and eliminated geographic distance at certain extend.
Economic distance: mainly refers to wealth of people; disposable income and purchasing power.
Company needs to know that people in selected market are able to afford their products otherwise
there is no point to export to that country. Other elements are natural resources, human resources,
labour cost, financial resources, infrastructures, and knowledge.
CAGE distance framework facilitates company to analyse their potential international markets through
identification and comparison of differences in each aspects. It can be applied to both country and
industry levels for specific analysis. The impacts of the distance aspects will be different depending on
the level of sensitivity regarding each aspects of specific country or industry.
2.5.
PEST/PESTEL ANALYSIS
PESTEL, initially known as PEST, the four factors which are included in this tool are Political factor,
Economic factor, Social factor, and Technological factor. Later on, two additional factors;
Environmental factor and Legal factor, were introduced and integrated to this tool and the name was
changed to PESTEL analysis. With this tool, company can assess the six factors of a country which it
would like to penetrate. (Carpenter & Sanders, 2009; CIMA, 2007)
Political factor refers to political condition of the country, which includes government-related issue
such as law and regulations in terms of trade and imports, tax policies, and the overall condition of the
country regarding politics such as the stability.
Economic factor includes consumer’s disposable income and purchasing power, interest rates, GDP,
inflation, and anything financial related which can have an impact on company’s exporting activities.
Social factor of PEST analysis focuses on more of demographic rather than beliefs and norms as
CAGE framework does. This factor also covers the lifestyle of the people, trends, consumer behavior,
and perceptions of brands.
Technological factor is very obvious. This factor considers the development, advancement or
existing technology in host country. This includes the technological related patent, law, license,
regulations, and restrictions.
Environmental factor concerns with people awareness of environmental related issues as well as
how those issues are being dealt whether it is from the government side or private sector side.
Legal factor considers legislations which can affect the company’s activity in the host country.
The six PESTEL factors also vary depending on business fields. For example, social factor can have
more significant influence on shoe producers than aero-plane producers..
Page 23
2.6.
SWOT ANALYSIS
As PESTEL analysis considers only external factors, it is often used with SWOT analysis to determine
both external and internal factors. As SWOT is widely used to identify business’s internal and external
environment, in accessing company’s strengths and weaknesses as well as the business
environment’s threats and opportunities.
Figure 11: SWOT Analysis Diagrams (CIMA, 2007)
By having all elements listed out will not really benefit the company. Ten Have et al, (2003) suggested
that to gain the fullest benefit of SWOT, after identifying the four elements, a company should list
possible actions to improve or develop the situation further. For example, considering company’s
strengths and develop action plans as regard to the opportunity. How can a company benefit from the
opportunity existing in the business environment with its strengths?
Page 24
SWOT analysis can be done in regards to host country’s business environment (Threats and
Opportunities). Company then will be able to identify its strengths and weaknesses and compare to
the host country’s environment and assess if the opportunities and threats can be beneficial and
overcame by its strengths as well as if there is a possibility of the company using its strengths in
avoiding the threats identified and how to minimise the weaknesses. Or how can a company reduces
the threats with its strengths?
Opportunities (O)
Strengths (S)
Weaknesses (W)
SO Strategies
WO Strategies
Use strengths to take advantage of
opportunities
Take advantage of opportunities by
overcoming weaknesses or making
them relevant
ST Strategies
WT Strategies
Use strengths to avoid threats
Minimise weaknesses and avoid
threats
Threats (T)
Table 3: Second step of SWOT Analysis (Ten Have et al, 2003)
Page 25
2.7.
PORTER’S FIVE FORCES
Five Forces Analysis is developed by Michael E. Porter in 1980. The model is an in depth analysis of a
competition in the industry. This model looks at an industry’s 5 elements, which are threat of new
entrants, supplier’s bargaining power of buyers, bargaining power of suppliers, threat of substitute
products or services, and rivalry among existing competitor.
Figure 12: The Five Forces That Shape Industry Competition (Porter, 2008; 4)
Porter (2008; 5) pointed out that “The point of industry analysis is not to declare the industry attractive
or unattractive but to understand the underpinnings of competition and the root causes of
profitability....The strength of the competitive forces affects prices, costs, and the investment required
to compete; thus the forces are directly tied to the income statements and balance sheets of industry
participants... good industry analysis does not just list pluses and minuses but sees an industry in
overall, systematic terms.”
Porter five forces analysis draws upon industrial organisation economics to derive five forces that
determine the competitive intensity and therefore attractiveness of a market. It is a framework for
industry analysis and business strategy development.
2.8.
CONCLUSION
The theories and models discussed in the chapter are knowledge fundamentals for this research. The
internationalisation models, market entry mode, and market selection conceptions will guide us in the
whole process of research design. Further, tools like CAGE, PESTEL are regarded as classical tools
in analysing a market from both the academic and pragmatic point of view. Understanding these
models will help us better modeling Swiss SMEs’ choices in the pre-exporting period.
Page 26
CHAPTER 3:
METHODOLOGY
The previous chapters reviewed the relevant literature examining the topic of the export decision
process. The literature review provides a research value proposition by clearly showing both a gap
and an opportunity for a study in the field. We could show that there has not been a lot of research in
this field and that a clear strategy has a positive influence on the success.
This chapter aims to expound the methodological issues of a research paper and helps the reader to
understand not only the outcome but also the surrounding of the study. In a first section we will
develop the research questions, which define the goal of the study at hand. Further we like the reader
to understand our philosophical orientation for this research and under which light the paper should be
considered. This theoretical framework is also the basis for the chosen procedure and its instruments.
A detailed description of the actual conduct of the study will be offered in the last part.
3.1.
PHILOSOPHICAL ORIENTATION
The choice of the theoretical framework (also referred to as the paradigm) is an essential step in the
beginning of every research. It not only describes the basic beliefs the researchers have but also
under which light the research was conducted. Mackenzie & Knipe (2006) concluded that the chosen
paradigm is also the basis for decisions regarding the methodology and procedure.
“A paradigm is a way of looking at the world. It is composed of certain philosophical assumptions that
guide and direct thinking and actions.” (Mertens, 2010)
Amongst others there are two major philosophies or paradigms in research: The more traditional
positivist and the interpretivist (or anti positivist) paradigm. For our study we chose to follow the
interpretive approach, as our goal was to explore and understand different experiences and their
meaning to participants. We therefore provide the difference between the two paradigms as to explain
our decision.
Positivists assume that there exists a single, objective reality independent of individuals’ perception.
Interpretivists there while belief that there is not one real world but that reality is essentially mental and
perceived. (Hudson & Ozanne, 1988) Positivist research observes, measures, describes or tests a
theory or a certain situation. Interpretive research on the other hand has the intention of understanding
an experience or a situation by gathering different views and interpretations of the reality. Interpretivist
researchers consider these different interpretations as the pursued knowledge of their research and
not the reality itself. It is unavoidable that respective experiences of participants as well as of
researchers have an impact on the outcome of the study. (Mackenzie & Knipe, 2006) These facts
about the interpretive approach are true for this research. While interpretive research may involve
different methods, researches most likely rely on qualitative data collection methods.
For this study the authors gathered data through qualitative, semi-structured interviews, which let open
room for story telling and reflecting of situations. “Qualitative” is an accepted term for the analysis of
data that are not numeric. It usually can be seen as the collection and analysis of unstructured textual
material in order to develop concepts, categories, hypotheses, theories or mere descriptions of social
phenomena (Tesch, 1990).
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3.2.
RESEARCH DESIGN
For this research the authors have chosen a qualitative research strategy which “emphasizes words
rather than quantification in collection and analysis of data” (Bryman & Bell, 2007) and which concerns
ideas, feelings, and attitudes in order to get a better understanding of the research problem (Yin,
2003). In a qualitative study, the author goes deeper in the research area through interviews and
documentation. For achieving the research objectives an inductive approach has been chosen,
whereby the research is used as a source for producing a theory (Bryman & Bell, 2007).
A qualitative approach will be appropriative for several reasons. First, there is currently no or limited
quantitative data on this topic because it difficult to measure the impact of vision on project’s
outcomes. Second, the research will endeavour to assess personal experience in leading teams with
respect to personnel behaviour, and such an analysis, by definition, should be of qualitative nature.
Also, historic statistical data will be largely irrelevant for the contemplated analysis due to the novelty
of the subject. Finally, most information, such as personnel and management opinions and attitudes,
will be gathered through interviews, which will require qualitative interpretations.
It was not sufficient for the intended research to conduct a survey or a questionnaire among selected
project managers, because the research topic and its implications could be addressed only by
conducting face-to-face interviews - by asking not only predefined, but also supplementary questions
as discussions develop. Bryman and Bell who are suggesting also support this approach, that
interviews improve researcher’s understanding of the topic by giving an opportunity to gather broader
views and people impressions (Bryman & Bell, 2007).
In order to understand qualitative research we can focus on five different qualitative research
approaches. But what is the definition of qualitative research? “Qualitative” is an accepted term for the
analysis of data that are not numeric. It usually can be seen as the collection and analysis of
unstructured textual material in order to develop concepts, categories, hypotheses, theories or mere
descriptions of social phenomena (Tesch, 1990).
Creswell (1998) defined five different approaches for qualitative design:
Characteristics
Narrative
Research
Phenomenology
Grounded
Theory
Ethnography
Case Study
Focus
Exploring the life
of an individual
Understanding the
essence of
experience
Developing a
theory grounded
in data from the
field
Describing and
interpreting a
culture-shaping
group
Developing an indepth description
and analysis of a
case or multiple
cases
Type of Problem
best suited for
design
Needing to tell
stories of
individual
experiences
Needing to
describe the
essence of a lived
phenomenon
Grounding a
theory in the
views of
participants
Describing and
interpreting the
shared patterns of
culture of a group
Providing an indepth
understanding of
a case
Discipline
background
Drawing from the
humanities
including
anthropology,
literature, history,
psychology and
sociology
Drawing from
philosophy,
psychology and
education
Drawing from
sociology
Drawing from
anthropology and
sociology
Drawing from
psychology, law,
political science,
medicine
Unit of analysis
Studying one or
more individuals
Studying several
individuals that
have shared
experience
Studying a
process, action,
or interaction
involving many
individuals
Studying a group
that shares a
culture
Studying an
event, a program,
an activity, more
than one
individual
Data Collection
Forms
Using primarily
interviews and
documents
Using primarily
interviews with
individuals,
although
Using primarily
interviews with
20-60 individuals
Using primarily
observations and
interviews, but
perhaps collecting
Using multiple
sources, such as
interviews,
observations,
Page 28
documents,
observations, and
art may also be
considered
other sources
during extended
time in field
documents,
artefacts
Data analysis
strategies
Analysing data
for stories
„restorying“
stories,
developing
themes, often
using a
chronology
Analysing data for
significant
statements,
meaning units,
textural and
structural
description,
description of the
„essence“
Analysing data
through open
coding, axial
coding, selective
coding
Analysing data
through
description of the
culture sharing
group; themes
about the group
Analysing data
through
description of the
case and themes
of the case as
well as crosscase themes
Written Report
Developing a
narrative about
the stories of an
individual’s life
Describing the
„essence“ of the
experience
Generating a
theory illustrated
in a figure
Describing how a
culture-sharing
group works
Developing a
detailed analysis
of one or more
cases
Table 4: Qualitative research design; Source Creswell (1998)
As Yin (1994, p.38) suggests, “the first and most important condition for differentiating among the
various research strategies is to identify the type of research question being asked.” In general, “what”
questions may either be exploratory (in which case any of the strategies could be used) or about
prevalence (in which case surveys or the analysis of archival records would be favoured). ‘How’ and
‘Why’ questions are likely to favour the use of case studies, experiments or histories.
For this research the authors are using a multiple case study approach. Lofton (1971) is saying that
the case study approach is appropriate when collecting data and conducting thematic analysis
between cases. Having defined and reasoned the appropriateness of the qualitative multi-case study
approach, let's now decide how to choose the sample.
3.3.
SAMPLE SELECTION
Data gathering is crucial in research, as the data is meant to contribute to a better understanding of a
theoretical framework (Bernard 2002). It then becomes imperative that selecting the manner of
obtaining data and from whom the data will be acquired be done with sound judgment, especially
since no amount of analysis can make up for improperly collected data (Bernard et al. 1986).
The purposive sampling technique, also called judgment sampling, is the deliberate choice of an
informant due to the qualities the informant possesses. It is a non-random technique that does not
need underlying theories or a set number of informants. Simply put, the researcher decides what
needs to be known and sets out to find people who can and are willing to provide the information by
virtue of knowledge or experience. Purposive sampling is especially exemplified through the key
informant technique, wherein one or a few individuals are solicited to act as guides to a culture. Key
informants are observant, reflective members of the community of interest who know much about the
culture and are both able and willing to share their knowledge (Bernard 2002).
Page 29
This research focuses on how Swiss SME’s manufacturing in different areas and fields are willing to
impart their knowledge and experiences. Based on this information the researchers were creating a
non-probability purposive sample criteria that consist in all interviewed managers (and companies)
should have:
Company level
Manager level
Exporting in Asian Countries
Responsible for the export decision
Machinery sector
More than 5 years of experience
SME
Senior profile (CEO preferred)
Table 5: Interviews
In order to get the interview partners, around forty (40) companies were contacted overall. From this
number, the researchers managed to achieve seven (7) interviews from six (6) companies with the
aforementioned characteristics.
For the purpose of this research, it was also necessary to conduct expert interviews. As the research
topic is export orientation of Swiss companies to South East Asian Markets, authors contacted OSEC,
as it is the Swiss organisation which offers consultancy services and support to Swiss small medium
exporting companies, and conducted a semi-structured interview with a specialist in South East Asian
markets. During the interview the researchers had the opportunity to explore from a holistic
perspective the reasons of Swiss SMEs exporting and expanding to South East Asia, whether the
companies use a systematic approach to enter the market, the problems they encounter and other
matters related to the research subject.
Additionally, authors conducted two interview from respondents with academic background. The first
interview was conducted from a researcher at FHNW with research experience in export orientation of
Swiss small medium companies in emerging markets. The second interview was taken from a
Professor in Marketing, specialist in market entry strategies, with an extensive international working
experiences and very good knowledge of the Vietnamese market.
Furthermore, there have been several persistent attempts to set up contacts with South East Asian
Embassies, unfortunately without success, due to unspecified reasons, as there was no feedback to
our requests. This problem might had an impact on secondary data collection with regard to Swiss
companies which are active in these countries.
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3.4.
DATA COLLECTION
The authors used both primary data in the form of semi structured interviews as well as secondary
data in the form of literature and documentation (document analysis) relating to the topic of export
decisions. Interviews are a useful tool for researchers in order to collect primary data on facts and
attitudes, in particular as far as the qualitative analysis is concerned (Atkinson & Silverman, 1997). To
define interview questions, the authors performed a preliminary review of relevant literature
(publications, newspaper articles, books, etc.) concerning current developments in the field:
Figure 13: Data collection; Source Own
Then a semi-structured interview guide was designed with consideration of the research problem,
question and propositions.The questions tried to cover the dimensions of the research topic in great
detail and in a comparative approach. The main questions were followed by secondary and general
questions as listed in the guide. The researchers set the size and the time needed per interview. The
interviewers also departed from the guide and asked some relevant questions according to the
provided inputs. A brief description of the research objectives for the potential interviewees was
developed, highlighting the possible incentives they could have when participating in the project. The
interview guide was tested in one company so that researchers could identify if it met the desired
outcome and what changes they might make before finalizing it.
For the collection of secondary data from OSEC and academic marketing specialists, the researchers
formulated an additional separate interview guide.
3.5.
CONCLUSION
This chapter described why the authors are choosing a qualitative research design with a multiple
case study approach, and gives information about how the data for this study is collected through semi
structured interviews. It is further explained how the respective managers were chosen as a sample
and why this is relevant for this study. With the research methodology in place, we can now proceed to
the data analysis.
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CHAPTER 4:
DATA ANALYSIS
The previous chapter reviewed the research strategy and reasoned why a qualitative research method
with multiple cases is appropriate for this type of study.
The data analysis process is defined by Jorgenson in the following way: „Analysis is a breaking up,
separating, or disassembling of research materials into pieces, parts, elements, or units (noticing &
collecting). With facts broken down into manageable pieces, the researcher sorts and sifts them,
searching for types, classes, sequences, processes, patterns, or wholes (thinking). The aim of this
process is to assemble or reconstruct the data in a meaningful and comprehensible fashion.“
(Jorgensen, 1989).
In this chapter the focus will therefore be on the analysis of the quantitative data, starting with the
guidelines of the interview and the coding schema. Several codes were created in order to give
assistance with analysing the transcribed interviews. The role of the researcher will be discussed as
well as the validity, the reliability and the limitation of the data. Last but not least the author wants to
address ethical questions before concluding the chapter.
4.1.
INTERVIEW ANALYSIS
According to Yin a researcher needs to rely on experience and the literature to present the evidence of
a study in various ways, using various interpretations (Yin, 2003). Stake believes that qualitative data
analysis is an interactive and reflective process that begins as data are being collected rather than
after data collection has ceased (Stake, 1995). The author of this thesis is at the same time the
interviewer. Therefore it was very important to be personally present at all the interviews in order to
understand the outspoken messages and also the context of the emotional emphasis that respondents
put in their answers. The role of a subjective judgment in a qualitative research by concluding that
"each researcher will make up his or her own mind" is differentiating them from quantitative or
experimental researchers whose decisions may be standardized in a more objective manner (Stake,
1995). Within this subjective judgment the author performs a more accurate evaluation of the
interviewees’ opinions and attitudes.
§
§
§
§
§
§
§
The researchers scheduled the interviews and administered the interview questions
personally
Before conducting the interviews, the interviewee was fully briefed on the research topic and
purpose, the areas under investigation
All interviews were carried out using the two interview guides, one for the company interviews
and on for the expert interviews (Appendix).
The interviews took in between 30 and 60 minutes.
The interviews took place between October March 2013 and June 2013 with the majority
being completed in May 2013. Most of them were held in the interviewee's office.
The interviews were recorded (audio), in order to avoid data loss, securing a high quality
protocol and to enable further analysis of the content. A Dictaphone did the recording.
All Interviews were transcribed (Appendix).
The result, a transcribed interview, was processed with Atlas.ti. Atlas.ti is a workbench for the
qualitative analysis of large bodies of textual, graphical, audio, and video data. It offers a variety of
tools for accomplishing the tasks associated with any systematic approach to unstructured data, e.g.
data that cannot be meaningfully analysed by formal, statistical approaches. In the course of such a
qualitative analysis, Atlas.ti helps you to explore the complex phenomena hidden in data. For coping
with the inherent complexity of the tasks and the data, Atlas.ti offers an intuitive environment that
keeps you focused on the analysed materials. It offers tools to manage, extract, compare, explore,
and reassemble meaningful pieces from large amounts of data in creative, flexible, yet systematic
ways. (Source: Atlas Handbook)
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4.2.
GENERAL CODES
A coding scheme was developed based on the interview guide, the research questions and Company
internal guidelines in order to arrange the data systematically. Overall, the author created a set of 24
general codes. The name of the codes and it description are presented in the Table below:
Code Name
Description
Educational / professional background
Under this code, information relative to; education;working
experience;current position is provided, referring to title,
position, experiences area of expertise.
Company Profile
General information provided about the company, kind of
machinery, size of the company and their sales turnover.
§
§
§
Company Profile- Products and services
Company Profile-Number of employees
Company Profile-Sales and turnover
Exporting
§
§
Exporting-Exporting history
Exporting-Current markets
Reasons for exporting
§
§
Under this code, information regarding exporting background
of the companies, how many years they export and current
exporting markets.
It was specified why Swiss SMEs internationalised their
business and then why they selected to enter ASEAN markets.
Reasons for exporting in general
Reasons for exporting to ASEAN markets
Market indicators for entry
Exploring whether firms use specific indicators to assess their
targeting market.
Market entry
Through this coding researchers tried to discover whether firms
used or use a systematic method to evaluate the specific
market and if they have particular strategies to assess and
enter them. Additionally, a fifth subcode is developed which
refers to the barriers firms encountered before entering the
selected market.
§
§
§
§
§
Market entry - Evaluation process
Market entry - Evaluation methods
Market entry - Methods
Market entry - Country examples
Market entry - Barriers
Risks and challenges discovered after entry
At this code risks and challenges during their experience in the
local markets are mentioned.
Success factors
Factors which relate to successful performance in the local
market.
Current performance
Under this code, information regarding their current
performance at the SEA markets is given.
Future opportunities
Information regarding companies` plans, what opportunities
they foresee in SEA.
§
§
Future opportunities- Indicators
Future opportunities- Plans
Table 6: Codes
The codification with the Atlas.ti software enabled a clear structure in order to answer the research
questions. Reflection and analysis of the codes in addition to written documentation material was
transposed into the written study report to give a well-structured presentation and discussion of the
findings.
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4.3.
VALIDITY AND RELIABILITY
As far as qualitative research is concerned, it is generally noted that it contains a certain weakness
with regard to its potential to be replicated and generalized across social settings (Bryman & Bell,
2007). Accordingly, a proper assessment of the quality of a qualitative study is hard. For quantitative
research, the terms reliability and validity have been introduced as key criteria in the evaluation of a
research (Bryman & Bell, 2007).
While reliability refers to the consistency of a measure of a concept and examines whether or not a
measure is reliable, validity is significantly concerned with the issue of whether or not an indicator (or
set of indicators) that is conceived to judge a concept really measures that concept. Verification
ensures the scientific quality of our study and includes both validity and reliability. The risk of bias and
subjectivity is high in qualitative research.
There has been some discussion among researchers about the relevance of reliability and validity for
qualitative research (Bryman & Bell, 2007). However, since this is not a primary preoccupation of
qualitative research, some writers have considered the possibility that the meanings of these terms
need to be altered. Le Compte and Goetz (1984), for instance, derive the terms external reliability,
external validity and internal validity for qualitative research (Bryman & Bell, 2007). A vital role for a
qualitative study within internal validity is to give logic and forms a coherent and consistent line of
argumentation throughout the study. In this study internal validity was achieved. The study started with
the research questions in order to formulate the relevant theoretical framework as the first step. The
theoretical framework was then guided by the research questions to establish the interview guidelines.
The interviews together with the internal documents were then analysed to derive the findings.
Furthermore these findings were then tied back to the theoretical framework to obtain the outcome of
the study.
External reliability refers to the degree to which a study can be replicated (Bryman & Bell, 2007). This
criterion is difficult to meet as qualitative research always includes the social setting. Accordingly, Le
Compte and Goetz (1984) question the feasibility of freezing the social circumstance and setting
(Bryman & Bell, 2007). Moreover this study is investigating a progressive phenomenon within the
business setting, which is normally influenced by the rapidly changing social expectations. For
external validity, the reason that this research is uniquely focused on the particular case company
within the Project management area using multiple cases, in different business units and different
types of projects. Crafting case reports that were in depth and rich with information to provide readers
the opportunity to judge the issue of generalizability for themselves and also examining each case to
enhance the generalizability of comparable contexts. Also the author has confidence that within the
declared limitations of this study the findings are generalizable to a broader audience and worthy of
further specific study in other environments.
In concluding the issue of methodological integrity, the authors are confident that the research
undertaken is methodologically sound and transparent in order that readers may judge for themselves
on the integrity of the research. It is also important to recognize that Babbie (1993) notes a tension
between reliability and validity. There often appears to be a trade off between quantitative measures
and qualitative measures as the latter can often be argued as more valid as it is richer but less reliable
because collection methods may be subjective. On the other hand, quantitative measures often lack
the depth or breadth of understanding although they are often very reliable. Regardless, the author
takes the position that a researcher needs to address each regardless of the methodological design of
their study and not agree to a trade off.
Page 34
4.4.
ETHICAL CONSIDERATIONS
Ethical issues were also considered during our research project; when we had to formulate the
problem, to plan and conduct the interview and at the final stage when structuring our findings.
Firstly, we had to formulate the questionnaire by selecting those questions that would lead to
satisfying and precise answers without provoking any negative feeling or reaction from the side of the
interviewees. We were responsible to ensure that the managers a) would be well informed of the
purpose of our research, b) would feel free not to answer to a question which would make them
uncomfortable and c) had comprehended possible risks they might take as a consequence of
participating in the research.
Confidentiality was of great importance in order to secure the success of the interview and for this
reason we had informed the interviewees in advance that the company’s name they work for, as well
as their identity, would be kept confidential. Moreover, while transcribing the interviews, that we would
remove all information, which could reveal their and their firms’ identity. With regard to recording, we
asked always if they wished to be recorded and indeed there were a few cases where researchers
took only notes.
Another key factor for reassuring that the interview would have the desired outcome was that authors
tried to create a friendly atmosphere, in order that the managers felt comfortable and relaxed to speak
freely. For this purpose, interview meetings were arranged to be at their premises where it would be
easy to record the conversation without any disturbance.
Interviewers also took into consideration not to deceive the interviewees. According to Bryman and
Bell (2011:141) deception occurs when researchers represent their research as something other than
what it is. The Academy of Management Code of Ethical Conduct states that “Deception should be
minimized and when necessary the degree and the effect must be mitigated as much as possible”.
In addition, according to the Market Research Society Code of Conduct (2010), voluntary informed
consent was one of the principles that researchers had to take into account. Informed consent means
that the interviewees should be aware in advance of; the research topic, the questions which would be
asked, possible risks they might face by answering these questions, the recording procedure which
would be used and observation methods which might be applied.
Moreover, the MRS Code of Conduct highlights the importance of respect and honesty to the
participants, protection of their reputation (“do no harm”) and in general transparency of the research
process. During interaction with the managers and before conducting the interviews, researchers
clarified all the aforementioned critical matters.
4.5.
LIMITATIONS AND DELIMITATIONS
The researchers had to deal with multiple limitations and delimitations of this study, herewith listed as
following:
§
§
§
The size of the sample was small and own defined. It might have limited the scope of the
findings and been prejudiced by the researchers.
The limitation to the selected manufacturing industry-machinery-, the size and origin of the
firms-Swiss small medium- and also the limitation to a specific region of Asia, South East
Asia- has caused difficulties in defining and reaching those companies which could meet the
goal of our research.
Interviews were conducted mainly in English which is not the mother tongue of either the
interviewers or the interviewees and this factor may have caused some bottlenecks in
communication and exchange of adequate information.
Page 35
§
§
§
§
The fact that interviews had to be conducted in English limited researchers’ choice to achieve
meetings, as many managers of small or medium companies might not have felt comfortable
to respond to requests in English.
Attempts to reach Southeast Asian Embassies in Bern were not successful and this has
caused delays in collecting data relative to Swiss firms which are active in these countries.
Adequacy and richness of data might be affected by the time, cost and research methodology
approaches. Also, there are assumptions which need to be considered, such as samples
might not be honest; samples may be affected by the interviewees subjective opinion;
financial related data might have been kept confidential due to reluctance of sharing.
There might have been cultural bias within the group, having different working methods and
opinions that could potentially affect the data.
4.6.
CONCLUSION
This chapter addressed the coding scheme used to analyse the data collected from interviews as well
as the validity and reliability of the data used. Later, limitations to the study and ethical considerations
were discussed. The goal of this chapter is the transparency on behalf of the authors that the reader
will be confident and able to make an informed judgement to the generalizability of the findings that
will be discussed in the next chapter.
Page 36
CHAPTER 5:
FINDINGS
The previous chapter explained the methods for the data analysis used in this study. This chapter
aims to analyse the findings. The findings will be presented and constructed with the help of both primary data from the interviews and secondary data from the literature. Last the authors are trying to
answer the main research questions before leading to a general conclusion.
5.1.
PROFESSIONAL BACKGROUND
As a first code the researchers have the professional background of the interviewees as it is
considered to be important to reach the appropriate people who are responsible for the exports to
emerging markets and specifically South East Asian countries. Also, asking some personal
information in the beginning of the interview was necessary in order to create a friendly and
comfortable atmosphere between the interviewer and the interviewee, before asking the key
questions.
Below the table shows the educational, professional background of the managers and also their
management position at the company.
A/A
Company
Profile
Education of
interviewees
Prior working
experience
Years of
experience
Management
level
1
Medical technology for
robotic rehabilitation
therapies
Mechanical
engineering
In a semiconductor
industry
At the current
company more than
10 years
Market Development
Strategist
2
Consumer Products
Manufacturing
N/A
N/A
11 years at the
current company
CEO
3a
Pharmaceutical
manufacturing company
producing high tech lab
equipment
Phd in Biology
In a pharmaceutical
company
35 years of which
17 years at the
current company
Market Development
Strategist
3b
Pharmaceutical
manufacturing company
producing high tech lab
equipment
Technical
Designing
school and MSc
in Management
In machine
processing
companies and at a
fire heating systems
firm
12 years at the
current company
Sales manager
4
Design and manufacturing
of biorectors and production
plants for the
pharmaceutical and biotech
industry
Phd in Natural
Sciences,
Microbiology
and Bioprocess
Engineering
N/A
N/A
Head of process
engineering
department
5
Machinery
Engineering
In several similar
positions
N/A
Head of the Swiss
division
6
Machinery
Physics and
MBA
In several
companies as a
physιcist
More than 10 years
CEO
Table 7: Professional Background
The following table shows the list of experts who participated in the current project. As mentioned
before, all three participants are related to the South East Asian Markets due to their working
background. Hence, information gathered from these interviews gave the researchers the opportunity
Page 37
to have an overview of Swiss small medium companies which internationalise in SEA and to explore
the research questions from a holistic perspective.
A/A
Experts
Education
Profession
Years of
experience
1
OSEC
N/A
Specialist-Consultant for Swiss SMEs
exporting to SEA markets
N/A
2
FHNW
N/A
Professor in Global MarketingExtensive experience in multinational
companies and sound knowledge of
the Vietnamese market
N/A
3a
FHNW
Master in
International
Management
Researcher
approx. 7
Table 8: Companies
5.2.
COMPANY PROFILE
The second code is related to general information about the companies such as the kind of machinery
they produce, the number of employees, their sales turnover and company’s history. Below
researchers listed the gathered data so as to provide an overview of the firms which participated in the
project.
A/A
Company Profile
Number of Employees
Turnover
1
Medical technology for robotic rehabilitation
therapies
150
N/A
2
Consumer Products Manufacturing
65
N/A
3
Pharmaceutical manufacturing company
producing high tech lab equipment
300
CHF 65 million
4
Design and manufacturing of bioreactors and
production plants
130
N/A
5
Machinery
200
N/A
6
Machinery
10
N/A
Table 9: Company profile
5.2.1.HISTORICAL EXPORT MARKETS
Before entering the main questions, it was necessary to collect some data with regard to the exporting
background of the firms, how and when they initially started exporting and which markets they are
active. For this reason a coding under the name Exporting was developed, with subcodes Exporting
History and current exporting markets to SEA. With this coding , researchers attempted to categorize
the markets companies initially exported and which ASEAN markets they are active currently. This
helped them analyse the data more efficiently.
Almost all respondents stated that they started exporting since company’s creation starting mainly
within Europe due to geographic and cultural proximity. Additionally, it can be said that ASEAN
markets have been targeted by some of the participating firms quite recently, as in the past they were
Page 38
focusing mainly on China, Hong Kong and Japan. Hence, and in combination with the information
given by the OSEC specialist, South East Asian markets are recent trends of countries that Swiss
SMEs seek to expand their businesses to. This occurs mainly because in Asia, Japan and China are
currently considered to be-in some cases-saturated markets with strong competition and
administration difficulties. Another important reason is that firms have the tendency to seek for
countries with low labour cost and China is no longer considered to be a cheap market, according to
the experts’ statements.
Company
Exporting Markets Initially
Exporting Markets ASEAN
1
Europe, USA. Then China, HK, India, Japan, Latin
American, African countries etc.
Singapore, Indonesia, South Korea, Taiwan
and Thailand.
2
Europe, China, India, Japan, Australia, North Korea
Thailand, South Korea, Singapore
3
European countries, USA, Canada, Japan, China and
others
Taiwan, Indonesia, Malaysia and Singapore
4
Europe, USA, India, China and Korea
Not specified
5
Several countries
Thailand
6.
Many including China, Japan, Korea
Taiwan
Table 10: Historical export markets
5.2.2.REASONS FOR EXPORTING
The researchers want to find the reasons for exporting in order to examine the main determinants for
companies to export. Analyze not only why companies export, but also why they export to Asian
markets is described in the following analysis.
Literature is suggesting that the main reasons for implementing an international strategy are to yield
potential new opportunities; to extend a product’s life cycle and to secure needed resources (Henk,
2011). Looking at the model from Czinkota (2004), SME's have two main motivations to export:
proactive and reactive. Proactive factors (push factors) are motivations driven internally from inside
the firm itself. The firm is actively looking for opportunities to earn more profits. All interviewees
mentioned that the main driver is to get a higher sales volume or they want to grow the business. One
respondent mentioned the uniqueness of the product and two have a technological advantage over
their competitors.
Proactive Motivations
Mentioned by the Experts
Mentioned by the Companies
Profit advantage
4
6
Unique products
0
1
Technological advantage
1
3
Table 11: Proactive export motivations
Page 39
Looking at the reactive motivations, which are the motives of internationalization through which firms
are able to act and respond passively to external and internal environment, such as competitive
pressure. Most of the respondents mentioned that the Swiss domestic market is too small to achieve
beneficial results. They also agree that the market in their sector is saturated. Two respondents
mentioned the proximity to their customers. They benefit from being close to the market and
customers.
Reactive Motivations
Mentioned by the Experts
Mentioned by the Companies
Competitive pressures
4
6
Declining domestic sales
2
4
Saturated domestic markets
3
5
Proximity to customers and ports
0
2
Table 12: Reactive export motivations
Having a look at why companies export to Asia the researchers try to compare the answers from the
respondents with the motives defined by the European Commission (2004):
Motive
Expert Responses
Company Responses
Access to new and larger markets for
products/services
1
6
Additional production capacity
1
2
Access to know-how and technology
1
High production cost on the domestic
market
3
Access to capital
1
Access to labour
3
3
1
Table 13: Motives for export activity
The main motive to go to Asia are the opportunities of the market size. Since the interviewed
companies are based in Switzerland, they make use of the high quality products and some use Asian
markets to get additional capacity for production or knowledge. The interviewed Expermentionednes
together with two companies that the high production cost on the domestic market is a reason for
going to Asia. This could eventually correlate with the labor cost considered being cheaper, however
with the data from this study there is no general statement possible.
Page 40
5.3.
MARKET INDICATORS FOR ENTRY
Literature is suggesting several models to assess indicators in order to enter a market. The
researchers wanted to find out if these models were used and how much they relate to the reality.
Ghemawat (2001)'s CAGE Distance Framework, which assesses the differences between the
domestic market (in our study the home market) and the export market is used to analyse the
interviews because it considers the cultural, administrative, geographic, and economic aspects. The
researchers are using the CAGE framework because it also considers the industry level.
The following table combines the different responses from the interviewees mapped to the respective
country and area.
Country
Culture
Geography
Asia
Economy
Administration
ASEAN countries
have a revolutionary
change in economy.
Regulations could be a
problem.
The Asian market is
still growing a lot and
we are of course
trying very hard to
benefit from this.
Singapore
Languages (4 official)
and Communication
are crucial for the
business.
Speaking the Chinese
language makes it
easier to connect with
the customers.
Thailand
People are used to
buy products on the
street markets.
The eating culture is
very different, so it is
difficult to sell our
product.
Vietnam
It is important to be in
the same place and
time zone as the
customer.
Singapore compared
to the other SEA
markets is much more
developed, it is a
highly developed
country, very active in
the pharmaceutical
industry.
Sometimes it is not allowed
to sell products without
producing in the country.
Management capacity in
regard to administrative
issues
High end products are
difficult to position
because of the low
income level.
The Swiss franc is
very strong compared
with the Thai
currency.
Typical indicators are
income per capita, of
target or specific
customer segment.
For example, the
middle class of
Vietnam is growing.
Vietnam has a
completely different
market than Thailand.
You should be able to
communicate. There
are language barriers.
For example,
Vietnamese is
impossible to
communicate. And
they don’t really speak
French - 50% of
population is younger
than 25, maybe only a
few very old people
able to speak French.
Vietnamese
pronunciation of
English is virtually
If you are in the textile
industry you go to
Vietnam.
It is now considered
to be “little China” due
to its low cost
Vietnam is politically a
communist country where
state-owned enterprises
dominate everything. As a
foreign company, you rarely
get a fair chance; because
the state-owned companies
are preferred by the
government and many other
companies.
Page 41
impossible to
understand
When the French was
still running with the
Americans in Vietnam,
there was a cultural
closeness.
Table 14: Market indicators
From the responses, we can see that cultural and economic aspects heavily influence the companies.
To be close to the clients (proximity) was mentioned as the only aspect for the geographical distance.
The Asian Markets are still considered to be growing, however it has to be differentiated in regard of
the social, and economic development of the country. For example, Singapore is considered to be
very high developed in comparison with Vietnam and Thailand.
The language is considered to be a very important factor while doing business. It brings the
companies closer to the customers and helps to understand the culture. Language issues were
mentioned several times.
The authors like to mention that the above comments are highly individualistic as the interviewees are
active in different countries as well as having different background in terms of experience. It reflects
the perceived reality of different Southeast Asian countries. No generalization can be made from these
results. However, all the important aspects from the literature were covered in the responses. This
shows that the companies do consider all four dimensions from the CAGE Distance Framework as
market indicators.
5.4.
MARKET ENTRY
5.4.1.MARKET SELECTION PROCESS
Literature suggests very systematic market entry process ( market selection and entry methods).
Researchers wanted to find out whether theories are applied in business reality.
Screening process for potential market is never solidly mentioned. It is more of common knowledge of
business environment and current trends. It is a common knowledge that emerging markets such as
ASEAN countries are now big opportunities to conduct businesses with due to its economic growth
and the growing population.
The selecting process involves more activities than the screening as it is the stage where the potential
markets are narrowed down to one market. Market research was mentioned as the first step of the
market selecting process. Companies do researches of potential markets regarding situation of
specific industry and sector in that country, relevant regulations and law, and the needs of their
products in the market. This information can also be obtained through business associations, business
hubs as well as online means (available to be bought online). After gaining all information, companies
compare and match it with their own situation as an entity as well as their products.
Experts suggested that before selecting markets to entry, companies need to know the reasons
behind their decision of entering new market. Why do we go to this country? What does this country
offer that could benefit the company? Knowing the reasons help companies make the right selection.
The next step of the market selection is forming networks. Most companies and experts agree that
networking is very important strategy in the pre-export stage. It is a quick way to gain insights of the
market. There are several associations and business hubs which act as facilitators to companies who
wish to engage in internationalisation. Other than providing market information, these facilitators, such
as OSEC (now called Switzerland Global Enterprise), provide contacts of local experts and
representatives in relevant field for companies to form relationships with. These networks are the
internationalisation help agents who assist companies to enter the market. They act as experts who
Page 42
have the insights and knowledge and, sometimes, authority that can help companies start up business
relationship with the country. Though not all companies chooses to go to associations for help. We
have found out that one of the companies interviewed does not appreciate the service of OSEC
claiming that OSEC provided them with basic information where they can obtain from the Internet by
themselves. A company can also establish relationships and network through more informal means
such as having an employee knowing someone from potential markets. Other agents, involving in the
market selection process, that were mentioned are other Swiss companies which have already
exported to ASEAN markets. They act as consultant through sharing experiences and knowledge.
Market grouping was done in one company. The company divided the potential market into three
groups, which are the focus countries, opportunity countries, and cherry picking countries. The groups
are formed in the order of countries the company wants to tackle (first to last).
Surprisingly, not all companies engages in intensive market research. One company which serves
niche market responded that they know that their product is needed in certain markets and that is the
only information they need to know. Another case is a company which follows their partners. If their
partners go to new market, it goes to that market as well.
Researchers tried to find out what kind of tools companies use to facilitate their market selection
process but analysis tools were never mentioned in any interviews. Companies and experts stated
that a lot of times companies use their ‘gut feelings’ when entering new market. Simple analysis are
made but without any concrete models. Experts stated that most companies do not use theoretical
models or tools, such as CAGE distance framework, Porter’s five forces analysis, SWOT analysis, and
PESTEL analysis, in conducting businesses even though they are valuable and can be very useful.
They recommend companies to use them.
There is no specific identification process as literature suggests. The final selection is done right after
the selection process.
5.4.2.METHODS
Four out of six companies mentioned that they started their export with neighboring countries such as
Germany and France. This response was expected as it is suggested by literature as common method
due to psychic distance. Companies started out exporting business to nearby location to gain
knowledge and experiences. After being successful in those countries, they will have more confidence
and knowledge to enter potential countries which are more further away in terms of physical distance.
This situation is also similar to the comment of an expert who mentioned that Swiss companies firstly
go to big countries in Asia, such as China, Japan, and India then they try to fill the gaps in Southeast
Asia after being successful in those big countries.
Two out of six companies mentioned that they started out in Singapore before going to other ASEAN
countries because Singapore offers the most similarity to Switzerland in terms of infrastructure
development, least language barriers, and similar working mentality.
Establishing subsidiaries was mentioned by many companies but only as a method they wished they
were able to do because such method requires huge amount of money and it is most likely to be
impossible for small companies with little resources.
Sales partners (partnership) are formed through the networks companies have established in the
selection process. Sales partners act as product distributor in the specific market for Swiss
companies.
Direct sales is one of the simplest export means. One expert mentioned that there are many
companies engaging in online sales through platform such as Amazon and selling per orders so
companies do not have to spend money setting up offices. This direct sales method was mentioned
by one company. The company stated that it started the sales through e-commerce and fair trades &
exhibitions.
Page 43
5.5.
RISKS AND BARRIERS
The authors wanted to find out about the perceived risks while entering Asian Markets and how these
risks are assessed and processed during the decision making process. The risks mentioned during
the interviews are as follows;
Risk
Is it influencing the export decision
(Barrier)?
Did it lead to a stop of the export
activities (Risk)?
Lack of understanding
Yes
No
Lack of skills
Yes
No
Accident handling (investigation)
No
No
False Promises from partners
No
No
Dependency on information
No
No
Payment
No
No
Certification
Yes
No
Liability
Yes
Yes
Political and economic stability
Yes
Yes
Customs
Yes
Yes
Corruption
Yes
No
Intellectual Property (Product copies)
Yes
No
Time scheduling
No
No
Table 15: Risks and Barriers
Most of the risks do not affect the overall export decision. However, there are several barriers such as
certification, liability and customs which are considered before exporting.
The results show that the companies are not using the Five-Forces Model to assess risks properly.
They rely on their gut feeling and try to make their own experience and use it to explore new markets.
Page 44
5.6.
SUCCESS FACTORS
Success factors of international business are highly subjective ideas of the companies. The following
table summarises the success factors mentioned by interviewees:
No
Company /
Expert
Success Factors general
Success Factors Asia
1
Company
GDP growth and wealth is beneficial
Having a differentiated and unique
product
Asians like the latest technologies
Preference in Swiss quality product (Swissness)
2
Company
Knowledge
High end Product
Good quality
Healthy turnover
Swissness
Patience
Brand
3
Expert
4
Expert
Network
Innovation
Swissness
Strong Partners
5
Company
Brand
High quality
Flexibility in fulfilling specific wishes
Swiss origin of the products
6
Expert
High value products
Innovation
Protecting Intellectual Property by keeping it in
Swiss
Swissness
Uniqueness
7
Company
Sales force
Service department
Products meeting the local market price
Educated, and cheap labor force
8
Company
Brand
Swiss products (quality)
Price
Companies present from the same sector
(pharma)
9
Company
Focus on the right market
Assessing and optimizing processes
Building better products
Reevaluate location
Long term client relationships (no one time sale)
Focus on service
10
Company
Export (turnover)
100% Quality
Export strength of the clients has a direct
influence on the demand
Local staff
Table 16: Success factors
With a grouping of the success factors and comparing by the amount of mentioning we can give them
a relevance:
Success factor
Amount of mentioning
Swissness
Swiss quality
Swiss origin
6
Product
High end product
High quality
Flexibility
6
Innovation
Knowledge
4
Page 45
Technology
Brand
3
Price
2
Cheap labor force
2
Location
2
Education of the local staff
2
Turnover
1
Network
1
IP protection
1
Sales force
1
Service
1
Partners
1
Table 17: Success factors by relevance
From this data, researchers could suggest that Swissness is a very important success factor for Swiss
SME’s operating in the ASEAN market. Since the research is only analysing the technology oriented
sector, Quality of the products is of big relevance. The service quality was just mentioned once.
Considering innovation as a part of the product, this success factor would even have higher relevance.
Page 46
5.7.
CURRENT PERFORMANCE
Company performance, although, is not the focus of our research, we intended to find out how the
companies evaluate their performances in exporting to ASEAN markets, whether they operate
successfully or not in general. Different aspects are mentioned by interviewees regarding performance
assessment as the following:
§
§
§
§
§
§
§
Turnover
Growth rate
Increasing labour force
Intention to expand
Quality of goods and services
Shared value with clients
Short-term or long-term goal
As the questions raised were in a sequence, the performance indicators are associated with success
factors. However, no figures or any detailed information about turnover or growth rate were given, due
to information sensitivity and confidentiality. While some respondents indicated the company has slow
growth in the ASEAN market, other respondents indicated growing number of employees recruited,
and intention of expanding to other ASEAN markets for example India. Some simply refering high
quality goods and services secure long-term profitability, more from a strategic point of view.
5.8.
FUTURE OPPORTUNITIES
Corresponding to market indicators to entry, researchers tried to find out the indicators for future
opportunities in the ASEAN markets, from the perspectives of the respondents. Again, no evidence of
application of any tools (i.e. CAGE, PESTEL, SWOT, and Porter’s Five Forces) is revealed according
to the data collected. We herewith reframing our findings based on the aspects of CAGE of future
opportunities:
Culture
Country Level
Industry Level
n/a
Higher quality standards which match
Swiss companies’ competency
Increasing demands for products for
example in automotive sector, machinery
and engineering
Administration
Political situation and policy changes
n/a
Geography
Population growth
Higher local supervision and operational
requirements
Economy
Asian markets are very big and there will
be substantial growth in the next few
years
Increasing number of requests for
quotations
Revolutionary change in economies
People are getting richer and richer
Table 18: Future opportunities
The table above combines the perspectives from both company respondents and expert respondents
together, we could see that the distances in the four aspects are narrowing down which favors future
business activities. From the data volume collected, the future tendency in economic aspect is
perceived as the key indicator for future opportunities.
Page 47
5.9.
CONCLUSION
Switzerland is a very international country in terms of its existing drivers of internationalisation
engagement in businesses. Its location in the heart of Europe enhances its potential of conducting
businesses in the nearby European areas and because of its small size, born global Swiss companies
engage their business activities outside of the country to gain more customers and sales volume. Its
innovative characteristic and the well known ‘Swiss quality’ offer Swiss companies global
opportunities.
Swissness plays crucial role in machinery exporting business. As been defined in the 2006
government report, “Swissness” brings to mind “healthy, well-ordered, efficient” for both Swiss and
foreign consumers. It has also connotations of “precision, meticulousness, reliability and
thoroughness”. (Swissinfo. 2006). Which features are perceived as important for machinery, because
these types of product rely very much on the quality. Product with high quality and flexibility is another
guarantee of success. Having the “Swiss” brand, which is well known and globally accepted as
premium quality producer, facilitates exporter to find the markets in which this level of quality is
needed. Swiss brand distinctly differentiates itself from other brands. The Swiss exporter can use this
given advantage as their competitive advantage against possible competitors in the market.
Although the findings cannot be generalized, Swiss machinery exporters, involved in this research,
have revealed that there is no systematic approach regarding market research to be done in the preexport process. There are no concrete guidelines or models which they follow. The companies do
engage in some simple market research but in a logical sense rather than strategic sense. The market
analysis tools such as SWOT analysis, Porter’s Five Forces Analysis, and CAGE Distance Framework
are not recognized as solid models but managers rather analyse the markets driven factors from their
practical experiences in the field.
Associations such as OSEC and other business hubs have involvement in the market research
process as consultants, information providers, and networking facilitators. Companies can go to them
for information of specific country. Not only that, OSEC also provides intercultural tips for companies
engaging with countries which are very different from Switzerland in terms of business conducting
culture as well as different mentality of people, this cultural awareness is very emphasized in Asian
regions. Even though OSEC can be very helpful, not many companies involve them in their pre export
stage.
As illustrated and supported by the literature, Network model challenges the Uppsala model regarding
the entry mode, in which companies who do not take time to learn in order to gain knowledge of the
desired market, rather they establish relationships and networks to do so in a much faster pace. As
what has been found in this, companies choose to go to countries where they have a partner or other
relationship. Networking is perceived as a key factor in influencing companies on market selection.
Many times firms select and enter a new SEA market because of their local partners` networking. In
this sense, local networking is considered to be a very important market indicator for entry.
Almost all companies, according to the responses, are opportunity driven. They enter a market due to
their customers’ or/and requests from local sales representatives. INterview participants mentioned
that they enter through existing channels, through partnerships or whenever they have an opportunity.
As we have mentioned that Swiss SMEs, which were engaged in the research, do not have
fundamental or systematic approach involving in the decision making process of any pre export stage,
researchers agreed that it will be very helpful for Swiss SMEs to be able to engage in this activity
through solid and concrete methods. Because it is such an important step which can determine the
success of internationalisation, we feel that there should be associations or institutions which can
provide information regarding tools or systems companies can apply in order to make efficient
decisions for the market evaluation and selection.
Further research could be done to explore at what extent systematically approaches facilitate
internationalisation process of SMEs, and what can be done to help the SMEs improve the efficiency
and effectiveness of internationalisation.
Page 48
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CHAPTER 7:
TABLES
Table 1: Why firms go international, Czinkota (2004) ........................................................................... 17 Table 2: Export Behavior As an Adoption of Innovation Process. (Reid, 1981;103) ............................. 19 Table 3: Second step of SWOT Analysis (Ten Have et al, 2003) ........................................................ 25 Table 4: Qualitative research design; Source Creswell (1998) ............................................................. 29 Table 5: Interviews ................................................................................................................................ 30 Table 6: Codes ...................................................................................................................................... 33 Table 7: Professional Background ........................................................................................................ 37 Table 8: Companies .............................................................................................................................. 38 Table 9: Company profile ...................................................................................................................... 38 Table 10: Historical export markets ....................................................................................................... 39 Table 11: Proactive export motivations ................................................................................................. 39 Table 12: Reactive export motivations .................................................................................................. 40 Table 13: Motives for export activity ...................................................................................................... 40 Table 14: Market indicators ................................................................................................................... 42 Table 15: Risks and Barriers ................................................................................................................. 44 Table 16: Success factors ..................................................................................................................... 45 Table 17: Success factors by relevance ............................................................................................... 46 Table 18: Future opportunities .............................................................................................................. 47 Page 54
CHAPTER 8:
FIGURES
Figure 1: Literature Review, Source:Own ............................................................................................. 10 Figure 2: Four stages of international expansion (Pandian and Sim, 2002) ......................................... 11 Figure 3: The basic mechanism of internationalisation (Johanson & Vahlne, 1977:26) ....................... 12 Figure 4: The network approach of internationalisation (adapted from Johanson & Mattsson 1998) ... 13 Figure 5: The business network internationalisation process model (Johanson & Vahlne, 2009) ........ 14 Figure 6: Motives for internationalisation (European Commission, 2004) ............................................. 17 Figure 7: Determinants for export behavior Source: Inferred from Dejo & Ramírez (2009) .................. 18 Figure 8: International Market Selection Source: Derived from Papapoulos and Denis (1988) ............ 20 Figure 9: Cognitive process of methods; Source: Cavusgil 1985; Kumar et al., 1994 .......................... 21 Figure 10: CAGE on country level; Source: Harvard Business Review, September 2001 ................... 22 Figure 11: SWOT Analysis Diagrams (CIMA, 2007) ............................................................................. 24 Figure 12: The Five Forces That Shape Industry Competition (Porter, 2008; 4) .................................. 26 Figure 13: Data collection; Source Own ................................................................................................ 31 Page 55
CHAPTER 9:
9.1.
APPENDIX
INTERVIEW GUIDE (COMPANIES)
Steps
Make sure your
tape works.
Introduce yourself.
Time
Your role, background and motivation to conduct your study.
Function and role of the interviewee.
Personal background and training.
Introduce the
project.
How / when the interviewee started to work at the company
Context of the project.
Goal and main research questions.
Rationale for your study / relevance.
What kind of results you expect.
What will happen with the results.
Clarify
confidentiality
matters and tape
recording.
Why the person has been chosen for the interview.
Clarify confidentiality issues and come to an agreement.
Ask for permission to tape record the interview.
Clarify in what form the interviewee would like to receive the results of the
study..
Profesional
Background
Professional background
Educational and professional background
Current position (since when?)
Tasks and responsibilities
Company
Background
Company background
Kind –category of machinery?
Turnover?
How many employees employed?
What is the history of your exporting background?
Page 56
Reasons for export
orientation
What are the reasons for exporting?
What are the reasons for exporting to emerging markets?
Methods and
indicators used to
evaluate, enter an
emerging market
What are your market entry strategies? (Network, Uppsala model)
(Uppsala Model :
Exporting through independent agents?
Exporting through sales?
Moving the production manufacturing overseas?
Network Model:
Relationship, partnerships with other companies in local market)
What is the process for evaluating the market? (steps)
What are the methods used for each process (if any)?
Was there any research made before the selection of this market and if so
what kind?
Criteria used
Models used
What indicators you use to evaluate a market? (CAGE, Porter, WMBH
frameworks?)
(Indicators to consider before for decision
Population size
GDP growth
Competition in the local market
Administrative factors
Page 57
Infrastructure
Other…………………………………….)
Could you tell us about the perceived risks when you do business
internationally?
South East Asia
exporting
Why do you export to South East Asian markets ? (What kind of
potentials/opportunities are there in SEA for your company?
Could you describe the previously mentioned evaluation process, how it
worked to the SEA market/s? (describe one-two countries examples)
Current situation in
SEA and future
plans and
perspectives
What do you think are the most important success factors when exporting
to SEA?
How does your company perform in SEA (or specific country)?
Why do you think so? (after Q10, depending on the answer… )
What are the lessons learnt from your experience in the SEA market/s?
Are there any indicators for further opportunities in SEA?
What is your company future plans regarding SEA markets?
(Comment: Let the interviewee speak freely. Start with the more easy
questions and pose the more complicated ones later. Do not stick to the
order of your questions but make sure you receive an answer to all of
them. Do not interrupt the interviewee if she/he is in a flow of speech but
make sure you hook up with interesting things the interviewee mentions
and dive more deeply into that. Keep an attitude of appreciative inquiry.
Do not give the interviewee the impression she/he is being interrogated.)
Ask how the
interview was for
the interviewee.
Do you have any additional input to make?
Do you have any questions for us?
Page 58
How do you think about the interview?
Transcriptions
Clarify further
steps.
Further interviews
Analysis
Would you be interested in our final report?
Say thanks.
Thank you very much for you time and support!.
Page 59
9.1.
INTERVIEW GUIDE (EXPERTS)
Steps
Time
Make sure your tape works.
Introduce yourself.
Your role, background and motivation to conduct your study.
Function and role of the interviewee.
Personal background and training.
Introduce the project.
How / when the interviewee started to work at the company
Context of the project.
Goal and main research questions.
Rationale for your study / relevance.
What kind of results you expect.
What will happen with the results.
Clarify confidentiality matters
and tape recording.
Why the person has been chosen for the interview.
Clarify confidentiality issues and come to an agreement.
Ask for permission to tape record the interview.
Clarify in what form the interviewee would like to receive the
results of the study..
Professional Background
Professional background
Educational and professional background
Current position (since when?)
Tasks and responsibilities
Expertise
Expertise areas
- where do you think you are expert in, regarding
exporting/SMEs?
- what is your experience regarding Swiss companies that
export to foreign markets? How do you describe the situation of
Swiss companies that go international?
- Example which you are allowed to speak about?
Reasons for export orientation For what reasons do you think Swiss SMEs export?
4. What are the reasons for exporting to emerging markets
(ASEAN) ?
Methods and indicators used
to evaluate, enter an
What do you think are the market entry strategies used by
SMEs? (Network, Uppsala model)
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emerging market
Do you know some examples?
What strategies would you suggest Swiss SMEs?
(Uppsala Model :
Exporting through independent agents?
Exporting through sales?
Moving the production manufacturing overseas?
Network Model:
Relationship, partnerships with other companies in local
market)
From you experience, what indicators Swiss SMEs use to
evaluate an emerging market? How do you prioritize them?
(Indicators to consider before for decision
Population size - GDP growth- Competition in the local
market -Administrative factors- Infrastructure
What would you suggest for (effective) market
evaluation/selection methods?
Which risks are involved in your opinion?
Current situation in SEA and
future plans and perspectives
What do you think are the most important success factors when
exporting to ASEAN?
Are there any indicators for further opportunities in ASEAN?
Ask how the interview was for
the interviewee.
Do you have any additional input to make?
Do you have any questions for us?
How do you think about the interview?
Clarify further steps.
Transcriptions
Further interviews
Analysis
Would you be interested in our final report?
Say thanks.
Thank you very much for you time and support!.
Page 61
9.2.
INTERVIEW TRANSCRIPTS
Interview No. 1 - Company Interview
Interviewer(s)
Maria Mountaki (M)
Interviewee
Mr. I (I)
Role
CEO
Company 1
Medical high tech products
Date and Time
02.05.2013
Confidential
Yes
Language
English
Recorded
No
Type
Company Interview
(M) What is your professional background? Educational and professional background, Current
position, Tasks and responsibilities?
(I) The interviewee studied mechanical engineering and has a working experience in a semiconductor
industry. He was working for six years in Singapore and two years in Indonesia as a market
development strategist. Currently, he is responsible for the company’s hubs in USA, Singapore and
Slovenia.
(M) Company background - what kind –category of machinery?
(I) It is a globally active medical technology company specializing in robotic rehabilitation therapy for
neurological disorders, located in Switzerland.
(M) What’s the Turnover?
(I) it’s not public.
(M) How many employees are employed?
(I) 150
(M) What is the history of your exporting background?
(I) The company was founded in 1995. Sales activities started in 2001 with first customers in
Switzerland, Germany and USA. The first subsidiary opened in USA in 2004. Then in Singapore in
2010 and currently in Slovenia.
The company cooperates with 40 sales partners around the world and is exporting to all continents.
With regard to Asia, they are active in China, HK, India, Japan, Indonesia, Singapore, South Korea,
Taiwan and Thailand. 98 % of their production is exported.
(M) What are the reasons for exporting?
(I) Switzerland is a small market and as the firm produces a niche product, they needed to export. The
firm is exporting 98% of its production
(M) What are the reasons for exporting internationally?
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(I) They belong to a small community worldwide and the competition is not high. South East Asian
markets are emerging markets which seek for good equipment and quality. These are their assets.
(M) What are the market entry strategies, if any?
(I) After the approval of the product in the local market, the company choose either direct sales or via
sales partners, depending on the country.
For instance, to USA the company choses the direct sales due to knowledge of the market.In
Singapore it also sells directly. Basically, the countries are divided into three categories:
a) The Focus countries; Hong Kong, Singapore, China, Malaysia
b) The Opportunity Countries; i.e Korea, Thailand
c) The Cherry Picking countries; Australia, Indonesia Taiwan
The company focuses on applying strategies to the Focus and Opportunity countries while it has no
active marketing at the cherry picking countries, where no special efforts are made. This means that if
they achieve to be successful at these countries, then they acquire clients from the surrounding
countries through networks.
(M) What is the process for evaluating the market, if any?
(I) The process to enter the market is first to seek for registration approval. Then translating the
manual into the local language and preparing all documentation locally. Quotation is the next step to
secure the potential agreements with the customers or partners. Another point that they consider is
the Fair Trade. Then they visit the most important clinic in order that they get into the “inner circle” of
the market. The clinic then makes the public relations in the media or during conferences speeches
and in this way the clinic “leads” the opinion. So, word of mouth is a very important tool for advertising
and promotion. Afterwards, they support the clinic with the equipment and finalize the agreement.
Through cooperation with the first business partner, they try to settle further partnerships with other
customers, as they had entered the inner circle of the business. i.e in Singapore the clinic bought the
equipment, they were satisfied and they undertook the promotion on an informal basis. And they also
invited managers in the field from the surrounding countries to present the equipment to them, as the
community is relatively small.
Additionally, the firm organizes congresses in USA, Switzerland and Asia where it presents the
products and makes the marketing and promotion. An example was the Asia Pacific Symposium.
(M) What are the methods used for each process, if any? Was there any research made before the
selection of this market and if so what kind?
·
Criteria used
·
Models used
(I) Company makes a research regarding the clinics, which clinic is the biggest and which one belongs
to the Government.
It makes also a research regarding the laws, regulations and the authorities’ structure and role in the
country.
Another important matter for this business it that the products have to secure the medical approval
Selecting the sales partners needs research and analysis. The selection is made according to the
following criteria:
Conducting a research:
a.
about which one sells to hospital rehabilitation
b.
the size of the company
c.
financial strengths
d.
product portfolio
e.
if he sells consumer goods
f.
contacts with clinics
g.
contacts with Government bodies and Ministries
h.
if he speaks English
i.
how he behaves with employees
Then a pre-selection of two-three sales partners is made. The pre-selected partners visit the
headquarters and the chosen one becomes candidate sales partners for one year. During this time he
has to achieve some goals (exhibitions) and to show good communications skills. Afterwards he
becomes silver, golden and platinum partner, according to the margin he achieves.
(M) What indicators you use to evaluate a market?
Page 63
(I) The interviewee stated that they are worldwide currently. He mentioned as indicators the market
potential, culture, language, sales partners (do they exist?), connections. Also, geographic proximity is
very important. For instance, the company has a hub in Singapore in order to be near to the Asian
customers. In Singapore, official languages are four, including English and Chinese, factors crucial for
business. The Chinese language makes easier the access to the Chinese customers. Also, it is very
important that they are in the same time zone with the customers and this makes surely more
convenient the communication. Another indicator is the management capacity with regard to language
or administration issues. An example is that Chinese market is easier than Japanese because of the
language( in Japan everything has to be translated in Japanese) and other regulation and
administration restrictions.
Another significant indicator is the sales partner selection using the criteria mentioned at question 7.
(M) Could you tell us about the perceived risks when you do business internationally?
(I) The possible risks thy have to face can be detected as:
-the lack of understanding, the lack of skills to use advanced technologies
-copycats in Asian markets
-in case of an accident, investigating the conditions under which it took place and finding solutions.
(M) Why do you export to South East Asian markets? (What kind of potentials/opportunities are there
in SEA for your company?
(I) They are leaders in the field and thus they don’t chose markets. They are first entrants practically
as competitors are very few. Actually, the competitors are the manual therapists. The interviewee said
also that customers come to the company.
(M) Could you describe the previously mentioned evaluation process, how it worked to the SEA
market/s?
(I) Skipped
(M) What do you think are the most important success factors when exporting to SEA?
(I) These countries become increasingly important due to several reasons. The most important stated
are:
a) Asians are tech believers, they are excited about technology and they also want to catch up with
the latest technology
b) There is preference for Swiss quality products
c) GDP growth and certainly wealth is an important factor
(M) How does your company perform in SEA (or specific country)?
(I) It performs very well. In 2010 one person was employed at the regional hub, currently 7 people are
working offering service and clinical support.
The turnover in the Asian markets is increasing fast.
(M) Why do you think so?
(I) For the reasons that are mentioned at question 13, because of the uniqueness of the product and
because of the hub the company has in Singapore as a base in Asia.
(M) Are there any indicators for further opportunities in SEA?
(I) These can be the challenges they face currently and some of them need to be addressed:
a. How can a patient pay for rehabilitation (in Asia they finance themselves their health)
b. The improvement of the local health systems
c. Reimbursement available for private people
d. How to prevent from copycats in Asia
Speaking for indicators, the interviewee mentioned that the company is in a special business and it is
strong in product differentiation, it is opportunity driven often.
Page 64
(M) What is your company future plans regarding SEA markets?
(I) Company’s plans are to reinforce positioning, find solutions to some countries in Asia (Japan, India)
and enlarge the business.
Page 65
Interview No. 2 - Company Interview
Interviewer(s)
Moritz Maier (M)
Ruppim Sukpanich (R)
Interviewee
Mr. E (E)
Role
CEO
Company 2
Consumer goods producer
Date and Time
16.05.2013 09:00
Confidential
Yes
Language
Swiss German
Translation
Moritz Maier
Type
Company Interview
(M): We are students of the Master of Science in International Management programme at FHNW
Olten and Basel and we are conducting a study to analyse export decisions before the
internationalisation process is taking place. We try to analyse how companies analyse their markets
and based on which decision criterions companies are evaluating their markets. If you don't mind we
would like to ask you a few questions.
(E): Yes, please!
(M): Could we record the interview?
(E): Yes, you could.
(M): I would like to ask you about your background. You are the CEO of this company - could you
please tell us something about you? Your role, background?
(E): I started to work for the company in october 2002 (operative) and me and my partner could take
leadership over this group based on a succession plan. We split up the business, my partner is doing
all functions related to the holding and i’m doing the operative part. We are a holding with four
daughter companies. All of them are based in Switzerland. I’m coming as a newcomer. I have a
business background and i startet to be interested in this company because of what they do and how
they are set up. I saw the possibility to grow and and optimisations as in every company. We could
make use of it and implement it.
(M): How long does your company export?
(E): This company is exporting as long as they are existing. We are a bit exotic. This has to do with
our customers because the swiss market is not very profitable.
(M): Which markets did you export to?
(E): We started with the direct sales method. There are several sales methods existing. It matters if
you sell by the internet, through wholesale or on fairs. There is also selling by parties or in the
gastronomy sector. There are several channels existing. Every country has different structures. Our
product is a relatively expensive device which we have to show and we could do this best through
direct sales. This are mostly fairs or exhibitions for example the MUBA or the BEA. This is still the best
channel for us to show to the customer what the product is capable of. When we show our product live
we can proof what the device is standing for. Earlier this sales method had a bigger role than today. IN
the 50’s and 60’s we didn’t have the wholesale chains as today. So we went to exhibitions and did
home parties. This not only in Switzerland.
Page 66
(M): How many employees do you have?
(E): Sixty five
(M): To speak about the export: how did you start to export?
(E): We are too small to build our own subsidiaries or joint ventures. So we did partnerships. We got
them through several channels. We have distributors which are independent but officially importers of
our product. Sometimes the representative agency came to us because they wanted Swissness and
Swiss products. There is no way around us. Politics have different approaches for the Swissness
debate with seperate regulations for every industry. Sometimes it was by accident or they knew us. In
some countries we were not present. so they asked us. If we thought it to be the right partner we
startet to work with them.
(M): So you are saying the partners approached you?
(E): We had this, yes. In Russia for example or the Czech Republic. But this was the lucky shot if you
have the right one coming to you. Normally it’s the opposite way around.
(M): What are the main reasons for you to export?
(E): Growth. We want to expand our business. Sometimes the markets will be saturated. We cannot
assume huge growth rates every year in some countries. So growth is definitely one reason to export.
Then we align our strategy to new markets constantly. We want to make our brand more famous.
These are obvoius reasons.
(M): Do you have a focus on emerging markets?
(E): We have to differentiate here. We have countries which are not worth to export to. At least not for
us. TO give you an example: Japan is a customer for more than thirty years. Japan is an extremely
difficult market with a difficult population (from a sales perspective). The country has a very different
culture. We managed to be very successful in this market and to position our product. China is as well
a very good market. It’s our No.3. Then we deliver to Thailand, Singapore and South Korea. But the
rest we could forget. India Burma etc is not very suited for us because of many other factors as well. It
is wrong to assume that if a country has a big population we could derive from this.
(M): Which strategy do you use to tackle a new market? Assuming you have a new market in the
asian region. How do you evaluate this? Do you use a standardised model?
(E): Yes we do have a strategy. First of all we do have mass tailored solutions for our customers. This
could be the color - for example Chinese love red color as many other asian countries. We need to
satisfy these wishes. Then we work with the Packaging and accessories which we are trying to match
with the customer and country. Further we need to have a certification. Since we are in the field of
electronic devices. Some countries ask for this. We have to do this on site in this case. We have some
entry barriers to consider. Then we take off depending on the channels available. Taking Thailand as
an example. In THailand we have a few nice shopping malls and the rest is on the level of a bazar.
Some markets are looking as 100 years ago. So it is not possible for us to position a high end product
with the price more than an average month salary. So we have to enter through differentiated market
segments as home parties and direct sales. So we have another price level. If i would place our
product in the shelf of a wholesale chain in Bangkok, nobody would buy it because nobody knows it.
(M): How do you get until the shelf space?
(E): We have distributors. In our 40 countries we separate them with A B and C Markets based on the
growth expectations. Examples for small countries are Island and Malta. We do not take many actions
in this countries. Then we have big potentials as South Korea. We meet them on the exhibitions
respectively. For example in Frankfurt is the most important industry exhibition once a year. We use
this platform to find contacts and do some acquisition. So we are able to filter and apply our
expectations. We evaluate based on the company. If they are already in our industry and is used to
expensive products they are more likely to become a partner.
(M): So you are doing an evaluation from your side?
Page 67
(E): Yes, we do a selection. If i’m in Frankfurt and take the australian market as an example. We will
most probably not have 20 potential partners from Australia. Maybe 1 or 2. Mostly these markets are
busy as the european countries. So we cannot give this market to another one and compete with
already existing partners.
(M): Your partners could claim a region?
(E): Australia for example is exclusive. If a partner is already in the same industry and has shelf space
in his network - for example with other devices it will be very easy for him to ad our product. So we
target this kind of partners. We have to be active in searching our distribution channels and we have to
provide support for them. So overall we use this exhibitions to create contacts or we use OSEC in
Zurich.
(M): You also work with business hubs and export promotion companies?
(E): We used to do this but with bad experience. With zero result. OSEC has people on site in their
hubs. They employ somebody to analyse the market. This is theoretical assiduity work. They got an
order from us to promote the product in a specific country. So they analyse the country structure,
population, as many theoretical facts. But they totally miss our business. For example we have
countries with a totally different eating culture. Or countries working by hand as in the arabic countries
for example. They don't need our product. We cannot change this culture from one day to another.
(M): The market data from osec is not relevant for you?
(E): It’s just basics. If i would analyse the content it’s 80% basic information. The people working at
OSEC sometimes have no idea about what we are doing or how we work. It oftens misses the target.
(M): We know about standardised frameworks to measure for example cultural or administrative
distances. To what extent do you use them?
(E): It’s a gut feeling basically. Mostly. Of course partners promise a lot which turns out not to be true.
But in most cases it works pretty well. And we don't need such standardised models. The subsidiary
(partner) on site knows better how the market is playing than we do. So we are not really dependent
on this information. Our partners have their contacts and they know exactly how the market is
functioning. Of course we also have sometimes negative experiences. But for us it’s the optimal
situation if somebody is partnering with us who already has a successful channel running. Sometimes
we also partner with a product which is in the same direct sales channel as we are.
(M): What are the risks from your point of view?
(E): We have product copies in the market, especially in the asian markets. But they don’t hurt us
because copies are always worse than the original and the market is regulating on its own. It’s
disturbing but not really a problem for us. We had it in China and India.
(M): Does it influence the decision to go somewhere?
(E): No, not at all. But we have risks of course. For example the payment. We started to work with
prepayment. Japan could pay by invoice. We need to consider liability risks. Luckily we never had any.
In some countries the risk could be the border. For example we cannot deliver the products because
the border is closed.
(M): Do you evaluate this in advance?
(E): Yes, of course. We like to deliver anywhere. But we need to have a strategy for this. The way of
doing it is always more or less the same regardless of the country we want to go. We need to consider
the entry cost for example. They are always different. Looking at the currencies for example. THe
swiss franc is very strong compared with other currencies. So it could be that it’s already going to fail
because of the price. And this does affect us strongly. To give you an example: we are not delivering
to Brazil because of the high border taxes. The taxes to import a device is almost the value of the
device itself (100%). So the chances to be successful are very little. Knowing this in advance is
preventing us from big losses. Further they have very high certification criterias which we are not able
Page 68
to fulfill. So to deliver 500 devices it is not worth the effort. Next to the entry it is important which
channels are existing. We need certain structures. Mongolia for example could never be our next
strategic market because of this. We need to thing where and how to place our product. It’s not
everywhere as simple as in europe.
(M): Which further opportunities do you see in the asian market?
(E): The growth rate in asia is big. Asia’s markets are very big. But it doesn’t help us as long as we do
not have the right partner on site. In some small markets as denmark we are very strong. Which is
almost unbelievable. On the opposite in huge markets with a huge potential we are very weak.
Looking to the US and Canadian market. We need to understand the culture and the mentalities. And
everything is price sensitive.
(M): What are the most important success factors in your opinion?
(E): The knowledge is today still playing a major role in all the different markets. Then we need to offer
a high end product without any faults. Since we are in the middle to high priced segment we cannot
allow us to have any faults.
(M): How do you evaluate market success?
(E): We measure the turnover. Since we are a sales oriented company all what matters are numbers
in the end. We know that patience is needed. It is impossible to achieve the maximum in the first year.
Another important point is if you don’t have a brand. If you want to sell you need to build your brand as
well. If nobody knows your brand then they are not willing to pay the double price than for another
product from a competitor. In Japan for example we are doing business since 30 years. So almost
everybody knows our product. As in every company the success is measured by the turnover. The
numbers are everything which is important.
(M): You are entering every market with clear goals and evaluate accordingly?
(E): Of course. We define our goals together with our partners. And we need to assist from our site
that they can be successful. So we support them financially with marketing or we can do an entry
price. Then we need to provide the proper education on site. We have our own people going to the
countries. We built a set of marketing tools. THis could be displays, DVDs, receipes, etc. We have a
lot of supportive measures on how to enter a market. Then the partner needs to tell us what he needs
for the market because he knows it much better than we do. So we do a planning. We dont do any
contract in the beginning. We do a letter of intention and tell our partners where we want them to be in
the first 2-3 years. We are not able to make a huge effort for a few devices.
(M): If i understand you correctly you try to keep the risk small with this strategy?
(E): Yes. We are too small to make subsidiaries in every country. We would have huge expenses if we
did this in every country. Just think about the personnel cost, offices etc. For our size it’s a proven
model how we do it.
(M): Based on which criteria you decline a market?
(E): We used to deliver to Syria and north africa. Since these countries are very unstable it is not
attractive for us anymore. We are not interested in investing in a partner/market and after a while the
borders are closed, we cannot deliver anymore etc. These are risk we need to consider.
(M): How important is swissness for you?
(E): Swissness helps us in asian markets. In markets as the US and Canada we cannot benefit from
this since they have the feeling they are the best anyways. Since growth and internationalization is our
main strategy, we need to consider any markets. Europe is considered almost saturated in our
segment. We are a niche player and have a very distinct strategy to keep our margin high. THis
means we also have limitations and cannot do everything. How do we analyse? We often get
information from OSEC. But in most cases they are too general. Think about how diverse Swiss
exporting companies are. How could OSEC possibly be able to understand all their business? I think
the scope is too big for them and they are not able to be as individual as they should.
Page 69
(M): Thank you very much for the interview!
Page 70
Interview No. 3 & 4 - Company Interview
Interviewer(s)
Maria Mountaki (M)
Interviewee
Mr. Y (Y), Mr. Z (Z)
Role
CEO
Company 3
Pharmaceutical equipment production
Date and Time
04.06.2013
Confidential
Yes
Language
English
Recorded
No
Type
Company Interview
Info: At this company the researcher conducted two separate interviews, the first from the sales
manager responsible for India market and the second from the sales manager responsible for South
East Asian markets.
(M) What is your professional background? Educational and professional background, Current
position, Tasks and responsibilities
(Y) The interviewee holds a Phd in Biology. He was working in a pharmaceutical company from 1978
till 1996 in Germany and since 1996 he has been working for the current company in Switzerland. He
was working for six years in Singapore and two years in Indonesia as a market development
strategist. Currently, he is responsible for the company’s hubs in USA, Singapore and Slovenia. He is
responsible for expanding business in India.
(M) Company background - Kind –category of machinery?
(Y) It is a Pharmaceutical manufacturing company producing high tech lab equipment. Their
customers are pharmaceutical companies.
(M) Turnover?
(Y) CHF 65 million
(M) How many employees employed?
(Y) 300
(M) What is the history of your exporting background
(Y) The company was founded in 1968 and started as a trading company. It was importing products
from Scandinavian countries and reselling them to Switzerland. At that time Scandinavian countries,
Switzerland and Austria were EFTA members. Now Switzerland follows the European Union
regulations.
From mid of 1990s till 1992, the company focused on Switzerland. Since 1992, they started going
international reaching to export 70-80% of their production. They have their manufacturing company in
Germany and also one subsidiary in USA and on in Japan. Five years ago they bought another Swiss
company in Aargau using it as manufacturing. They were exporting to European Union countries,
USA, Canada and Japan so far.
Since September 2012 the company launched a production site in India. They will use India as a base
to export to China and SEA markets.
(M) What are the reasons for exporting?
(Y) Switzerland is a small market and surely the market is not enough to absorb all production. So in
order to grow the business they had to export.
(M) What are the reasons for exporting to emerging markets?
(Y) Surely the GDP is an indicator. India has a 6.4 growth rate. Especially Indian pharmaceutical
industry’s growth rate is 12% and vaccine market even 20%. Many countries of EU and US invest in
India.
Another reason is their strong interest to invest in new facilities and fabrications.
Third reason is that India possesses highly educated people and low salaries.
Fourth reason is the language, English, second official language and thus there is no communication
problem.
(M) What are the market entry strategies, if any?
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Company’s entry strategy is to establish the production, sales and service site in India. Sales and
service is crucial for this business as customers would never buy this kind of equipment with services
offered from Switzerland. So their strategy is to establish a sales force in India at the moment.
Interviewee stated also that they picked a location in India which is a special economic zone with tax
incentives not only for foreign companies but mainly for local companies.
(M) What is the process for entering and evaluating the market, if any? What are the methods used
for each process, if any?
(Y) Answer for 6 and 7:
Firstly they conducted a market survey for India.
Then they visited the potential customers and realized Swiss prices are too high for India. This led
their decision to go and produce also in India.
They established a partnership with a local manufacturing company in India.
They created together a special line of products for the Indian market which is cheaper and of lower
quality (silver line) as it they were too expensive to sell in India.
Afterwards, both companies approached their potential customers, which are pharmaceutical
companies.
It was also stated that 8000 pharmaceutical companies exist in India. Indian companies rank in the
first top 10 companies globally and 7 Indian companies are among the top 20 ones!
(M) Was there any research made before the selection of this market and if so what kind? Criteria
used and Models used?
(Y) Company conducted an internet research of Indian pharmaceutical companies. According to the
size of the company, they selected the first ten ones.
(M) What indicators you use to evaluate a market?
(Y) The interviewee mentioned that they don’t use specific indicators. They select the major players,
then make personal visits and set up partnerships. No problems occurred so far during this process.
All partners speak English as it is the second official language in India.
(M) Could you tell us about the perceived risks when you do business internationally?
(Y) Interviewee stated as a problem the payment arrangement. However, they found a solution
regarding payment policy.
Another detected issue is that service force of the company needs to grow and expand also to SEA
markets when they expand business there.
(M) What do you think are the most important success factors when exporting to India?
(Y) As success factors the interviewee mentioned as very important the sales force and service
department establishment in India. Also, to offer products which meet the local market prices.
Furthermore, the educated, techwise and cheap labour force of India is considered to be a quite
significant success factor.
(M) How does your company perform in India?
(Y) It is a learning experience at the moment as they started efforts last September and it takes more
than a year to set up the business. Next September they plan to start to produce India.
With regard to time planning, India has slower rhythms than in Switzerland and this surely they take
into consideration.
(M) What is your company future plans regarding SEA markets?
(Y) The aim is to grow the business and reach at least compound growth rate 10% annually. Also,
company wants to expand to other SEA markets because of their growth rate and selling
opportunities.
EU and USA markets are declining and that is the reason they focus on emerging markets.
(M) What is your educational and professional background?
(Z) The interviewee had an apprenticeship in technical designing and worked in several companies in
the area of machines processing, fire heating systems etc. Then he did a master in management. He
has been working for this company since 2000 as a project manager and since 2005 as a sales
manager, covering UK and Ireland in the beginning. Later, when company expanded overseas, he
became responsible for China, Singapore, and afterwards to Taiwan, Indonesia and Malaysia. Most
activities are in Indonesia.
(M) Why you went to Singapore first?
(Z) Because customers of us who went to Singapore, asked from us to deliver them our products
there. Usually in these countries, you need a local agent (ie China).
After Singapore they went to Japan.
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In 2000, when he was employed, the company had only 80 people, so it was too small to go overseas.
They were working only for Europeans market due to lack of capacity and all activities were feasible
from Switzerland. The risk to go overseas was very high.
After EU, they started exporting to USA (2004) and Japan (1998). In most of the cases, agents
address the company to ask for being sales representatives. They build up their businesses, they go
to exhibitions, find companies and contact them.
(M) What are the reasons for exporting to ASEAN?
(Z) One reason is that they select countries which they can afford their high end products.
Another reason is that they want to be the first entrants in these markets and gain the market share.
For competitors it will be more and more difficult to enter the market like this. For example in China,
they could not sell and isolator because of Bosch. Though customers were not satisfied with Bosch,
they kept buying from them.
Thirdly, due to the reputation that these markets will grow like the Chinese. More and more
international companies go to SEA markets either to cover the local markets or to export to Europe.
Additionally, they want to grow the business
(M) What are the market entry strategies if any?
(Z) For every country strategies are differentiated. For example in Japan, they established a local
subsidiary production company,”….Japan AG.”, because Japanese like to buy Japanese products.
In Singapore they work with an Indian agent who has his base in Singapore and makes connections to
other SEA markets.
In Indonesia, a local agent took the initiative to contact and approach the firm through exhibitions and
forum.
Definitely, it is very important to have a good local network of agents for this business.
(M) How do you evaluate the agents you will cooperate with? Do you have specific criteria?
(Z) Yes, they examine if these agents:
have local contacts in the right field in the pharmaceutical industry
are educated in this area and they are not just dealers, so that the provided training they get from the
firm is adequate for offering advice to customers
(M) What is the evaluation process you follow to hire the agents?
(Z) First they send a questionnaire asking for their background and then visiting them in person.
Company works together with the agents on an open basis and if the latter can sell a unit, then they
get a commission. It depends on the efforts of the agents and if they are successful or not. Company
cooperates with agents often without a contract.
The interviewee stated also that twice per year he visits customers with the agents to check how they
work and visit customers with them.
(M) How do you make the decision to enter to a specific market?
(Z) The interviewee mentioned that they don’t have a systematic approach for this. They select the
markets they think that they have a perspective. They tried to consult some studies in advance in a
few countries but the overload of information was not useful in the end. They decided to treat actively
China, Japan and Singapore and case by case Taiwan, Malaysia and Indonesia. Last year they
organized a conference to Jakarta to promote their products and also to educate the market.
(M) Ok, but how you decided that you treat actively China, Japan and Singapore?
(Z) It was due to the inquiries they received from agents and also due to their gut feeling for those
markets.
Singapore compared to the other SEA markets is much more developed, it is a highly developed
country, very active in the pharmaceutical industry and also agents were much more active.
(M) What are the risks in the SEA markets?
(Z) No proper risk analysis has been done so far. A few risks have been identified:
With regard to payment, they have to ensure that payment is secured through payment terms and
policies
Providing good services on site
More time needs to be calculated in terms of planning
Problems with customs, as these countries do not have bilateral agreements with Switzerland-they do
not use the ATA carnet document. Indonesia for instance, is very complicated in terms of imports.
Therefore, they have to calculate double time than normal. So the challenge is to have effective time
management.
The above challenge has another implication, as sometimes sales employees have to wait more at the
country to wait for the product due to custom delays and this causes additional costs.
(M) What do you think the success factors in SEA markets are?
(Z) In SEA markets they like to have Swiss product due to the quality reputation, but the price is the
most crucial factor for their purchasing decision. Also they have good references globally.
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A success factor for Indonesia is that this country has many pharmaceutical companies which produce
for local markets but also export to Europe and additionally to Islamic countries due to their common
culture. So they offer opportunities to connect will all Islamic countries (Egypt, Arab states etc).
(M) What are your future plans for the SEA markets?
(Z) Their plans are to stay active, expand and build up their reputation.
Also both in Asia and Latin America, their goal is to win the bidding process against their key
competitors.
Page 74
Interview No. 5 - Company Interview
Interviewer(s)
Linna Ji (L)
Interviewee
Mr. B (B)
Role
Head of Engineering Dept.
Company 4
Bioequipment
Date and Time
24.05.2013
Confidential
Yes
Language
English
Type
Company Interview
Recorded
No.
Note: The Interviewee didn’t have time for the interview, he answered our questions with the Interview
guide via email.
Steps
Agenda
Profesional
Background
Q1 - Professional background?
PhD in natural sciences – Microbiology and Bioprocess engineering
· Position
Head of Bioequipment process engineering department.
· Tasks and responsibilities
Project managment, R&D
Company
Background
Q2 - Company background?
· Category (of machinery)
Design and manufcturing of biorectors and production plants for pharmaceutical
and biotech industry.
· Company size – turnover, number of employees
About 130, employees.
Data about turnover are not puplic.
· History/timeline of exporting.
Export since start up of our company 40 yeras ago. Intially european market,
later US, India and China, Korea, since approx. 10 years also ASEAN markets.
Reasons for export Q3 - What are the reasons for exporting?
orientation
Swiss biotech market is far to small to survive with our rather special products global market is essential for our company.
Q4 - What are the reasons for exporting to? (ASEAN countries?)
Increasing interest from universities and new as well as established companies
in this countries for research reactors and production plants.
Methods and
indicators used to
evaluate, enter an
emerging market
Q5 - What are your market entry strategies?
Looking for ideal representatives with a good network. Establishing our own
sales and later service offices in some countries.
Q6 - What is the process for evaluating the specified market?
See Q7.
Q7 - What are the methods used for each process (if any)?
No specific processes. Visiting potential customers together with
representatives. Beeing present at specific international faires
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Q8 - Was there any research made before the selection of markets and if so
what kind?
No, only looking for potential customers together with intrested future
representatives.
Q9 - What indicators you use to evaluate a market before entry?
No special indicators – where we can observe increasing activities in biotech
research, we increase our sales activities. Usually where there is research,
some years later also production will be established – and therefore the need for
fermenters and bioreactors also in production size.
Q10 - What are the lessons learnt after entry? (What would you have done
differently at the stage of market entry?)
Probably nothing.
Q11 - What are the perceived risks when you do business internationally?
Giving away part of our know how.
Current situation in
ASEAN and future
plans and
perspectives
Q12 - What do you think are the most important success factors when exporting
to SEA?
Having a internationally wellknown name within the specific field (biotech
production plants).
High quality.
Being flexible in fullfilling special wishes of customers, being able to provide
customized plants.
Swiss origin of products.
Q13 - How does your company perform in ASEAN market ?
Growing, but slowly.
Q14 - Are there any indicators for further opportunities in ASEAN?
Increasing number of requests for quotations.
Page 76
Interview No. 6 - Company Interview
Interviewer(s)
Moritz Maier (M)
Interviewee
Mr. X (X)
Role
Head of the Swiss devision
Company 5
Company X
Industrial
Date and Time
05.06.2013 12:00
Confidential
Yes
Language
English
Type
Company Interview
(M): We are students of the Master of Science in International Management programme at FHNW
Olten and Basel and we are conducting a study to analyse export decisions before the
internationalisation process is taking place. We try to analyse how companies analyse their markets
and based on which decision criterias companies are evaluating their markets. If you don't mind we
would like to ask you a few questions.
(X): All right! I hope i will be able to answer your quesitons.
(M): Could i record the interview?
(X): Yes, you could but i would like that you hide my name and the name from my company
(M): No problem. We treat all our interviews confidential. Could i ask you about your background first?
You are the head of the swiss devision of this company - could you please tell me more about you?
(X): Before working here i studied Engeneering and could gain some experience in several positions
which helped me to get started in the business. You need a lot of experience to work with our
products. As a child i grew up with these machines and i was always sure i want to work with it.
(M): How long does your company export?
(X): We export for more than 35 years.
(M): Which markets do you export to?
(X): It depends what you consider our basis for export. Our company is present in more than 100
countries. We are producing in 10 contries and shipping our products to the others.
(M): How many employees do you have?
(X): The Swiss company has around 200 employees.
(M): I would like to speak about export again. How did your company start to export? Which were the
main reasons?
(X): We were always export based. The biggest step was to create a joint venture with four companies
in the same field. First, we oerated independently. After the JV we could share our resources, our
knowledge and build a brand which was strong enough to succeed. The JV also enabled us to start
producing in more than 10 contries including some European. Today we are operating in more than
100 different contries.
(M): What are the main reasons for you to export?
Page 77
(X): There are many reasons for us to export. The most important is that the Swiss market on its own
is too small to succeed. So we need the different markets in order to sell our products. We need as
every other company growth in order to satisfy our investors (laugh).
(M): Are you also operating in emerging markets?
(X): Of course. As you know our product is used mostly in industrial companies. We do have very
strong competitors in this field but we were the first to export for example to Brasil. Our Product is
cheaper than the product of our competitors but is offer the same functionality. With this strategy we
could grow in emerging Markets as Africa and South America. Nowadays it is of course cheaper to
produce some parts like the finishing directly in these countries (I mean to finish the product for the
respective market). To produce one piece is very labour intensive and we need to focus on such
countries to compete on our price.
(M): Are you also present in Asian markets? Which strategy do you use to tackle a new market?
(X): Yes we do have a strategy and we are present in Asian markets. Our strategy is to build a
network of selling points in the market. As any company we are sales driven. We need to convince the
customer that we can offer the same quality with our products than our competition. If they believe us
then they will buy because we are cheaper. Further we need to offer service and maintenance after
the sale. This helps us to bind the customers. We want to have long lasting relationships with our
customers. As soon as they are expanding they will need more of our product. Since there are many
different suppliers in our field, we need to differentiate through our service.
(M): How do you make sure the Quality fits, especially in low labour cost countries?
(X): We train them on site. We do not only build our own selling points, we also work with partner
companies. They have to overtake our branding and marketing in order to offer the same experience
in the store. Then they need to qualify their employees. For this we created a certification program.
Every service and maintenance clerk has to do a certification in order to work with our product.
(M): I would like to ask a few questions concerning the market evaluation. Is this ok for you?
(X): Yes, of course.
(M): Do you have a standard method to approach a new market?
(X): Yes, of course. We always try to be the first. We are constantly aligning our strategy to new and
emerging markets which have the biggest potential. First we evaluate a market with the tools
available. This could be standard marketing research. Mostly we buy this data. Then we have to
consider the cost of delivery. As our product has to be either finished as near as possible near the
point of sale, or at least be transported by train we need to have access to some basis infrastructure.
In some countries this is very difficult. Then we have the border issue. Sometimes our product gets
held on the border. This is especially in south American countries the case. Then they want to have
fees to release it. So we have to consider all this before we can enter. The we also need to find land to
start building our sales office. We will then also rent office space and send our managers, which are
mostly local people but trained here with us on the headquarter in order to assist the start of the local
company. I forgot to mention the regulations. As we have a very high tech product every country has
special regulations. We need to fulfil them or adopt our product.
(M): Do you also work with business hubs or companies promoting export as OSEC for example?
(X): Yes, we do. We get a lot of useful data from them. But we are not using their services to start a
hub in the country.
(M): We know a few standardised frameworks to measure for example cultural or administrative
distances. How do you use them?
(X): I also learned about them a few years ago but to be honest it’s mostly our experts who work with
standardized plans and formulas to assess the countries. As I already told you we are certified and all
Page 78
our processes are standardized. We have documentations of all of them and we have to stick to the
proven approach.
(M): Doesn’t this make you a bit inflexible? How can you react to changes from your competition?
(X): No, not at all. A company with our size has to do this, otherwise it’s not manageable. I could, for
example exactly tell you about the process how to build a new showroom in Bangkok. Based on this
process I can then thell you which resources we need to allocate in order to get it done.
(M): What are the risks from your point of view?
(X): Our main risks are changes in the world economy. Since our products are used by the industrial
sector we feel every change directly in our sales. Right now after the crisis, it’s getting better – but we
just couldn’t sell our product for a long time due to no demand.
(M): Do you see other risks?
(X): It’s very common in our market that we look around what the others are doing. You know the base
service is always the same, to bring something from point A to point B. How this is done is however
very different. So we need to be careful that we cannot be copied very easily.
(M): Could this influence the decision to go somewhere?
(X): To a certain degree yes. But sooner or later we will go in any case.
(M): Which opportunities do you see in the asian market?
(X): The Asian market is still growing a lot and we are of course trying very hard to benefit from this.
(M): What are the most important success factors in export?
(X): For us it is that we are focusing on the right markets. Not to spend too much energy on markets
without too high potential. Export itself is our success factor. We constantly try to assess our
processes, optimize them and build better products. With processes I also mean the production sites
and locations overall. We constantly evaluate if there could be a better place to produce.
(M): How do you evaluate market success for yourself?
(X): Market success can only be measured by the turnover we are able to generate. Since it is very
difficult to compete, we have clear goals defines if we enter and this enables us to measure our
success. We are a company which is focusing on long term success, so we are not only interested in
one single sale. We want to help our customers grow and that’s why we also need to measure the
quality of our product and services. It’s not possible to survive otherwise. The whole industry knows
that service is the key to generate more turnover, make customers happy and help us to grow.
(M): Thank you very much for the interview!
Page 79
Interview No. 7 - Company Interview
Interviewer(s)
Moritz Maier (M)
Interviewee
Mr. R (R)
Role
CEO
Company 6
Manufacturing for the Machinery sector
Date and Time
12.06.2013 09:00
Confidential
Yes
Language
English
Type
Company Interview
(M): We are students of the Master of Science in International Management programme at FHNW
Olten and Basel and we are conducting a study to analyse export decisions before the
internationalisation process is taking place. We try to analyse how companies analyse their markets
and based on which decision criterions companies are evaluating their markets. Could i ask you a few
questions concerning this topic?
(R): You are welcome
(M): Am i allowed to record the interview?
(R): Hmm.. Ok. But i hope you will not spread the information too much?
(M): The data will be used confidential and for this study only. Only our group, consisting of four
persons and our supervisors will have access to the transcript. If you like we could hide your name?
(R): Yes i like so and please also the company. Otherwise everybody will know which whom you did
the interview.
(M): No problem. Ok. I would like to start with your background. Could you please tell me something
about your career and how you get into your position?
(R): My background is a bit unusual. I studied physics and started to work for several companies as a
physicist. One day i decided to change my career path and i did an MBA. During the education i got a
contact from a company which is fully export oriented and i was lucky to get a job. That’s where i
learned about the international markets and how to start an export business. I learned about the huge
opportunities in exporting and one day i founded my own company (this company) which is also fully
export oriented. I started first to export products from other Swiss companies. This was 10 years ago.
Then we found out that we cannot take participation in the quality control process so we started to
develop our own product. This took 2 years and we were able to sell it to our existing customers.
Today we just concentrate on our product and we are very successful.
(M): So overall you are exporting for almost 10 years?
(R): With this company yes. But not always the same product.
(M): Which markets do you export to?
(R): We are exporting to mainly 4 countries in Asia. They have the biggest demand for our product.
This is China, Japan, Korea and Taiwan.
(M): How many employees do you have?
(R): I started alone, now i have around 10 employees - including my son who is helping me a lot.
Page 80
(M): I would like to speak about export again. How did your company start to export? Which were the
main reasons?
(R): We started to export with products from other companies. The main focus was the trade and to
get a good margin from this. I knew the markets i'm exporting to and that helped me to keep the price
for these goods high. Later i started to build my own production within the company because we had
to differentiate and get a bigger part from the cake. You know, in it is very expensive to get a new
client so i had to make sure i can establish a long term relationship and sell on a regular basis. Our
product is something they need to exchange every one week because it's like a small part in their
operations. These companies need a product which is very detailed and we cannot allow us to deliver
bad quality. We are currently the only ones who can produce this part. This is giving us a competitive
advantage.
(M): Why Asia?
(R): Asia is a growing market. They produce a lot and have a demand for our product. It was logical to
get to this market. Switzerland is a producer of machinery for the market, we produce one part.
(M): SO do you work with other swiss companies?
(R): I have to. This is giving me better access to the clients and if my part is compatible with their
machines we can make our market broader. Sometimes we also go to expositions together with one
company in order to split the cost.
(M): Which strategy do you use to go to a new market?
(R): We focus on new companies or companies which open a new production site. These are potential
new clients for us. Since we sell a very specialized product, we need to be present if they evaluate
their machines for producing. Without our strong partners from whom they usually buy it would be
difficult to sell anything.
(M): I would like to ask a few questions concerning the market evaluation.
(R): There is not a lot of market evaluation. We export wherever our product is needed. That's the nice
thing in our business. We just have to produce the piece, which is taking about one hour and send it to
the client. Most of the clients need a new part every week, so we ship almost every day.
(M): So your approach is mainly to go where your partners are going?
(R): Yes, it's the easiest for us. We are too small to have any subsidiaries and the clients
demand the Swiss quality. So we follow mainly our partners.
(M): Do you also work with business hubs or companies promoting export as OSEC for example?
(R): No, not at all.
(M): We know a few standardised frameworks to measure for example cultural or administrative
distances. Do you use them?
(R): They helped me in my previous job but nowadays, we mainly operate with the experience we
made. To know the markets is crucial and necessary at the same time.
(M): Doesn’t this make you a bit inflexible? If you are dependent on your partners?
(R): It's a two sided sword or how you say this (laugh)? You can benefit from them but at the same
time you are dependent. overall the benefits are bigger and we can save cost.
(M): What are the risks from your point of view?
Page 81
(R): Of course if our partners don't get orders, we can also not get new customers. But since we have
a recurring business model we are not so much affected. The only problem is, that if
our customers produce less they do not need our products anymore. This is what we could feel in the
last years. The demand was declining a bit.
(M): Could this influence the decision to go somewhere?
(R): No. not really.
(M): Which opportunities do you see in the asian market?
(R): The Asian market is a growing market - at least for us.
(M): What are the most important success factors in your export business?
(R): Without export we would not be able to survive. It's the main driver of our business. We need to
make sure our product is 100% of good quality. Our customers expect this. It is funny but our export
business depends on the export business of our clients. If they are not able to produce and export
their products - also to Swiss by the way - we cannot export. Since the whole economy is
interconnected i think we need to constantly evaluate our market and clients. If the changes are too
big we need to adopt. Right now we have a relatively stable demand but this could change within
weeks.
(M): Thank you very much for the interview!
Page 82
Interview No. 8 - Expert Interview
Interviewer(s)
Linna Ji (L) -Maria Mountaki (M)
Interviewee
Mr I
Role
Researcher
Company
FHNW
Confidential
Yes
Language
English
Type
Expert Interview
(M) What is your professional background? Educational and professional background, Current
position, Tasks and responsibilities?
(I) I get my Bachelor’s Degree in German and US, major in Business Administration focusing on HR.
After that, I did my internship in a German company, in the field of recruiting, also covering all the
other HR aspects. Then I have been working half a year for a university to develop a strategic
diplomat concept.
After that I came to Basel, to join the Master of Sciences of International Management program, the
very first year of FHNW. Had the pleasure to join the dual degree to go to England in the second
semester. In the third semester, I started to work together with Ruth on a research project, that was
the first real research project I was involved: field work, conducting interviews, creating code list,
coding. Was also why and how I got the Atlas.ti things.
Then I was pretty much hired by the school, then I started to work for the school here after graduation.
That was three years back in time. Since then I have been working on several research program, in
the field of stakeholder management, stakeholder engagement; but also in internationalisation,
together with OSEC and companies in Zurich, to find out alternative and innovative ways for
organisations to go to Asian countries, in a way that has not yet been on the market, and these
organisations. I have also done researches, supervise reports with SMEs in Switzerland, and currently
involved in an EU project, with the European Commission to evaluate and research on innovation
system in European Union, so that politician could get information for the development of their own
countries’ own innovation systems. So you see I do researches on many different fields, quite diverse.
But I officially work for the Institute of Management, focusing on strategy and governance.
And back to the old times, I’ve been a banker before, the shadow past. From 1999 to 2003, that was
before the Euro.
(M) Expertise areas regarding exporting and SMEs.
(I) I would not consider myself to be a very sophisticated expert in this area. But I had a chance to be
involved in the Umbrella project to get an insight that was very valuable. Because I got an overview on
the different ways that organisations choose to go abroad, especially to go to Asian. To learn more
about Swiss SMEs and start-ups’ needs and expectations, also their internal processes to decide to
go to another country. That was very interesting, because
We and our partner, United Machinery, they created a new concept for org to enter a new market by
building up a new kind of business hub. Traditional business hub is simply building of facilities with the
support for the organisations regarding technician, invitation of local fairs, trade fairs, getting people
like contact with local lawyers and etc., but mostly that’s it. This is also the normal process goes over,
for example the Swiss SMEs consult OSEC or Switzerland Global Enterprise. So normally, if Swiss
SMEs are interested to go to another market, they sometimes talk to OSEC, they help them with the
market study. If then the company decides to go to the market, OSEC will hand over to the local
networks in this country. Most of the local people work for the local embassy. If they choose a country
that Switzerland has its own business hub, then they end up with such facilities normally. This
provides the basic things companies need when they need to start up a small subsidiary in a foreign
country.
The new idea is that, taking into the consideration of mostly the problem of these people is, they go to
this country, building up an office and maybe have 2 or 3 people working there at the beginning; of
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course they have the products, they have the strategy, but then they face reality. They do not know
the local culture, they do not know the key people, they often struggle with the problems of logistics
and customs what is quite an issue. They just do not get into those networks. Especially in those
countries, where many governmental positions are held by certain families. You hardly have a chance
to get in. For example, Indonesia, I just have this case, I will keep the company name confidential.
United Machinery has now built up businesses hub in Indonesia; the Ministry for Transportation
Railway is help by a family since decades. They only do businesses with the members of the family.
Some of the members are somehow connected to organisations that produce the equipment for new
railway, infrastructures of building bridges and everything, and also the trains. Therefore, for example,
if you are a Swiss producer of certain part for train, you can go to OSEC and go the business hub,
even you have nice facilities but you could never do businesses. Because you will never be
considered by those people, they would tell you: nice guy, but I have been doing businesses with my
cousins for 20 years, what do you want here… This is one of the reasons why many of the
organisations are not successful. This is just an example; there are many other (reasons).
The CEO, our partners at United Machinery, head of supervisor report. An example in Russia, they
run this model…
(M) Sorry to interrupt, you mean the new businesses model, they just send people over to the country
building something like a representative office? They don’t do researches beforehand in Switzerland to
find out…?
(I) These things are difficult to find out. For example, in Russia, you can build up everything, have
good contacts or so, then you start selling your things, then you order them in Switzerland before
shipping them over, for example by air freight, but it depends on the number of days on the terminal
you selected. Whether those goods would stay in the terminal for another 3 months in the customs or
not? You don’t know that if you don’t have an expert. It can be if you have a new customer in Russia,
you promise you will have the products there within four weeks, they arrive within one week; but they
land at the wrong terminal, you don’t know whether it is the terminal your customer prefers to have a
close look, or having a smooth transfer. That may delay for months; like that you will lose your first
contact. This is crucial. You would not do any sales in a foreign country in the first one and half years
like this if you go there. So this information, getting access to those networks is absolutely crucial. And
this is also where the new concept comes in, you pretty much get an all-inclusive package – you are
not only provide with an office space, but also the people from the Umbrella concept, they have the
person there to looks out for a sales representative who could work for your company. And this is the
industrial expert, who knows the networks, who knows the people, and knows how to handle that.
They train these people, so they can pretty much immediately start to work. Normally within, the
research experiences of Russia, within 6 months of time they can start to sale. You save a year of
time. And normally, they also have people for logistics, also somebody locally, they know how things
work. This helps you to bring or keep away most of the trouble, because you lack of the local
knowledge, they search for you the most perfect person who is aware of that. And a lot of extra
services come along with that. Let’s now go into details. But this is the key new idea.
What is also important, well maybe this is one of the biggest advantages as well: If you open a
subsidiary, you have legal entity somewhere, that means you have to fulfil legal requirements, you
have also sometimes real big problems to close it down, for example when you are unsuccessful. This
could take years. Three or four years when could really close it down, coming along with
compensation pay to handle the people you hired there, it is quite a nasty processes. As you only
contact, United Machinery’s way of that, the contact runs 3 years, if you want to prolong, then that’s it.
You do not have a legal entity there. [14:40]
It is also interesting for the companies because: Normally, if you have a subsidiary, you have to show
some numbers: the revenue, the cost and everything to report to your management board. But if you
hardly have sales, in this case, you just get a bill from United Machinery every year, covering the
costs, and the salary costs of the local workers. So it’s not like you have a legal entity showing
somewhere the balance sheet, so you can easily hide it a bit. Nobody forces you to show the numbers
if it is not successful. This is a bit strange, but this is what people say they like about the concept, in
terms of risk management. The idea is you are given three years of the Umbrella concept, the goal is
that after three or four years the company is then successful in the market, then they can start their
own subsidiary while running and doing business and being profitable. The contract can be prolonged
for one year after three years, or can also make spaces for next steps to come in.
(M) What is your experience regarding Swiss SMEs that export to foreign market? How do you
describe the situation of Swiss companies that go international?
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(I) In general, first of all, Swiss companies are very internationalised. This is a fact, because we are in
the middle of Europe, the country is small in comparison. And most of the international trade
Switzerland involved goes to the neighbouring countries, German, France, Italy, and also goes to the
US, an increasing trend goes to the Asia. I would say, the companies in Switzerland, by origin, are
very international oriented. This is often you find the company language is English in Switzerland,
where is quite unusual for a German speaking country. For example, Volkswagen, they even have
German speaking company in Mexico, every manager is required to speak German there; and it
works, they are very successful. I don’t quite remember the number, but from a survey we did with the
Umbrella project, that more than 70% of the start-ups that we surveyed are Born-globals, from the
very beginning. On their strategy paper what is written: we are not only doing business locally or
nationally, we want to do business internationally. From the very beginning that was the basic idea,
and this is the majority of them. This is fascinating, because this might imply a certain form of
openness. However, the openness is partly restricted, due to the tradition to do business with
neighbouring counties, these are the countries firstly considered, that is somehow natural. There is
maybe also a psychological barrier to go too far away where it is not so easy. So mentally, it is easier
to trade with France, because if your business is in Basel, if you are there in 20 minutes. Rather than
doing business with Thailand, because you have the time gap, and you know less about the culture
there, and off course with the regulation. These create uncertainty.
The professor for the Umbrella project, Prof. Reiniken, he is doing consulting for businesses for 25
years all over the world, I think more than 60 countries. He knows how it works. And he told me, if he
would be a CEO of a company, he would prefer to go to Thailand than go to France, because he
thinks it’s easier.
(M) Why he thinks it’s easier?
(I) He said he has an insight in the regulations and everything, physically it’s closer, but he doesn’t see
the same opportunities there in an economic way. He said to me, word by word: if I would need to
decide to go somewhere, I would prefer to go to Thailand in comparison to France. But that’s his
personal perspective, as he knows 3 dozens of countries and their businesses environment. It’s also a
question of how much money and efforts you put on market research.
Not only the neighbouring counties are physically closer, but also you have a fixed business
environment in terms of European Union. So it doesn’t make a lot of differences, if you produce
products for France, Ireland, Italy or Poland.
(M) Did he say as well, maybe because of mentality? The French mentality in comparison with Thai
mentality?
(I) It’s not based on culture, but business aspects. For example, if you hire somebody in France, the
cost is higher than in other countries. Also if you want to get rid of people, it would take years in
France which cost a fortune. But in Thailand, it’s rather easy, like in US as well. Therefore, it has less
risks to start a business in Thailand than in France.
There is really mental hurdle for many companies to think about go to Asia at the beginning. Normally
it’s like they start up nationally, then go to the neighbouring countries, or they go to US. Because the
regulations are differet, maybe sometimes they think about ASEAN markets, also it depends on
products and etc. Often, it’s not the first thoughts to go to ASEAN
(M) Do you have specific examples, the experiences, of Swiss machinery SMEs that internationalise
to ASEAN markets?
(I) Not in details. Because the study was done anonymous, so we don’t the names of the companies in
details. And we didn’t analyse the data in a case by case way, instead we put all data altogether. It
was also because for the studies we conducted, the sample were 50-60 and the other were 70-80,
there were too many to analyse individual answers.
(M) You mentioned some reasons before, so for what reasons do you think Swiss SMEs export?
(I) There is off course a limitation of the local market – there is only 8 million people in Switzerland
which is not a lot. And if you created a niche product, there might not be a single customer for you in
this country.
Certainly another important reason I have seen for the past 2 years is the currency – weak Euro and
strong Franc. This is one of the driving forces that forcing them to diversify their set of customers; and
also to generate income from difference currencies to spread the risks.
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Also it depends on the structure of the company, for those who already produced internationally; they
may decide to go to ASEAN because of the low labour cost for production. It depends on the industry.
Also depends on the regulations, often in some country, you cannot sell things without producing
there. Then you are somehow forced to go there.
Do you refer here to the big companies or SMEs? For SMEs with less than 250 people, it might cost
even more, both time and money, to start up and building new facilities in the ASEAN countries.
It’s different definitions, some says 250, some says 500 and some says even 1000 employees. For the
study, we took the definition of 500. That’s quite a lot of people. For most of the studies I surveyed,
they are not producing in ASEAN, I had an impression that most of them would not think low labour
cost for production would be an issue for them to go internationally.
It may also connect to the whole business industry in Switzerland, often you don’t have mass
production here. The industry here is often the premier price segment, watches for example. Of course
it cannot be generalized, but it’s a tendency.
The risk portfolio is one of the biggest reasons that diversify people of going internationally, especially
ASEAN. In Europe, people may afraid the currency may lose its value in comparison to Swiss Francs;
also they may afraid the people losing purchasing power. The economic situation in Europe, for
example, Cyprus, Greece, Spain and Portugal, this can be quite painful for companies. That’s why
they concern to diversify the customer portfolio.
(L) What do you think are the market entry strategies used by the SMEs?
(I) That’s also a very diverse thing. I was very surprised to find out that many simply export, via
Amazon or else, selling per order on internet. So you don’t need to set up. Many also follow the
traditional way to open up an office; even more to follow up the traditional agency approach, to follow
the Uppsula model. I think those are the most frequently used ways. Just using the M&A models is
not the way for SMEs, because of the cash flows.
For what I found very interesting is, most of the case is: it was not a pro-active approach. It’s not what
they decide to go there, but more like a forced to. For example, the potential customers there called
them whether they could sell the product; then they start to think about, maybe it makes sense to set
up an office in for instance in Hanoi. It’s very interesting that most of the companies driver came from
outside.
Or sometimes it’s because people who works in the company knows somebody from the other
country, and has contacts. Therefore sometimes, the informal beginnings can also be seen.
(L) Do you know some specific examples?
(I) I can give you an example. I knew a person who works for a big Swiss company producing gates,
not doors but gates, for example for airport or fire departments. They are very specialized like many
Swiss SMEs, which also means their products have very quality and very high price. They have limited
customer bases nationally, because there are not 20 airports here. Of course there are fire
departments here, but normally those gates last for 20 or 30 years, so it’s not something you need to
replace often. 20 years back, they saw a chance to go, like classical approach, they went to France to
sell, also the company built up production site just across the border close to Basel. Sorry I only have
the example within Europe. But they had other problem, which applies to many other Swiss SMEs.
The problem was they sell product with very high price, relevant complex and you really need expert
to build it up at the customer’s place. So it’s not like they just ship the door there and the customer to
install by themselves. This takes weeks, and professional experts to work together with the customers.
This is one of the limitations the person told me he has. He would love to think about going to Asia, but
the problem is he needs knowledgeable team that is capable of building up different doors. For that, it
takes weeks even months long trainings here. That’s the one thing, the second thing is they are
heavily depending on the capacity of building the doors. He told me that, we could go to Asia, but we
would not have the ability at the moment to build more doors. So this raise another question, maybe
we need another site to increase the capacity, but this is then about more investment and we are
talking about millions. Therefore, even though we are quite busy and successful at the moment and
there are maybe chances, but at the moment we totally out of the screen to do that because we don’t
have the capacity and the skilful labours. Especially, it’s not easy to recruit specialised people there.
(L) Do you know some other examples about companies that internationalise in ASEAN markets? And
the specific strategies they followed?
(I) Like I said I don’t have specific example, but more in general off the record. There are potential
customers that we involve them in Umbrella project, in the first step to Thailand. We corporate with a
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Swiss industrial association, I cannot name the industry, but it’s an industry that producing technical
products for infrastructure projects. What is interesting to them is, via the industrial association they
get contact with the local people in the ministries; as mentioned in Indonesia they face some problem,
thought in Thailand I’m not so aware of that. The person from the Umbrella concept talks to those
heads of the associations, together with the local high level contacts of ministries and departments
and people who decide which direction to go; and for the members of the associations, this is a
relatively easier way to go. Because the members of the associations would tell them some
information where has high potential for the industry and the association, and they could also tell some
information about the contacts. This is often something makes the association happy that the
members provide something, which save a lot of work. But I don’t know those companies individually,
so I cannot give you in-depth of the case study.
(L) If you could, what strategies would you suggest the Swiss SMEs of entering ASEAN markets.
(I) First of all, slightly change the mindset to realize that there is a real chance, also coming along with
the whole ASEAN issue, what could harmonize the regulations, what makes something, not simpler,
but going to the way of the European Union. So that it opens up the markets for you, gives you some
security in terms of how to proceed. It always better to think about those things before, before your
competitors. That’s the first thing, to really take time and efforts to think about that. As I said before it’s
really difficult to really discover a hurdle and hidden information. Talk to experts, go to the
associations, and learn from that.
Then think about the way you should enter. You should try to, to go at least to a business hub already
located there, because it could be quite painful to find a good location. You should before you send
somebody there, have a clue how the team can proceed. You should find out who they can start
talking to, who are the industrial expert there. The list of contacts should be made and called before
you go there. You need a fix agenda what they should do during the first month, to really push it
forward. I see this often late, because somehow people get excited upon arrival, they started with
something pretty much on hold. You need to get to know person, and get contact from for example
exhibitions, to build up a relationship with them before you can go to them and to sell to them. This
requires a lot of time.
You should not underestimate the risks, especially when you build up your own legal entity. Some
expert says like “you shouldn’t only have long nose there”, you need local people, who know the
market. Not to have the idea to have somebody who is internationally graduated and send the person
over there, because you will never fully understand the business without having at least somebody
locally strongly involved in that.
(L) This people can access to administrative services, or has an idea of the bureaucracy and dealing
with something as well?
(I) Exactly. There are so many troubles you would never think about before you arrived. That is also
why it is very interesting to talk to organisations who already went there. There are so many slight
small things, if you do one thing wrong and you have the police come to your place and confiscating
all your material, then you cannot work for half a year.
We also talk about issues about corruption. This is an issue. Organisations should be prepared to
know how to react. To be fully aware of that sometimes this is somehow required, and to know how to
act to find a solution.
I have an example of Moscow airport. One of the experts told me the story: it is wonderful you ordered
everything, and the freight arrived on time in Moscow and you are so happy. But then the customs
called you: “Hello, I’m from the customs, you have a package here. And I am totally into watches…” In
that case, you are supposed to answer something, if you are not prepared for that, you have a
problem. Don’t underestimate this issue. I don’t say you need to bribe, but you should figure out a way
how to deal with it. And it’s only that if you are well connected through business who may call him
back to the customs: “Listen, we know your supervisor, we could ignore what you have said in your
last call… ” Something like that… So preparations worth a lot. This is what I can say from the data.
(L) From what you just mentioned, the company should be aware of the capacity, should have local
contacts, understanding the local regulations and networks, so these are all the indicators to evaluate
the market. Then how would you prioritize these indicators?
(I) That’s a tough question. It’s hard to exclude things. I cannot give you the answers here.
(L) What would you suggest for an effective evaluation method? Or regarding the indicators?
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(I) In general, I think you need then be very specific on industries. You have to think about many
issues like the local law, regulations regarding exporting, and customs. Also this depends, if you not
shipping things over somewhere, you don’t need to consider the customs. Local labour law, capacity
or availability of locally skilled labour; facilities to develop your staff locally; look for the possibility to
know the people there, the trade fairs, check who may be interesting contacts regards of embassy or
promotional agencies. The thing I would pay attention to is the entire market study itself, to see
whether the product suits the markets, what the competitors look like, you may go to theories like 5
forces or whatever. Or you may want to check some providers of market research. I never have done
a full analysis of a country before, there are must be a long list, but these are the things to address.
(L) What is your opinion regarding the theoretical background, like the model you mentioned 5 forces,
or other theories. Do you think the marketing managers of Swiss SMEs, they know? Do they have
such background? If they don’t have, do you think they should get relevant trainings?
(I) That’s also an issue. You should have somebody who is knowledgeable to deal with that. The
smaller the company, the smaller the chance to have people who has the knowledge to proceed there.
This is also, you know, why there is relatively good environment in Switzerland for education
especially in the area of exporting, as this is a tradition of the country to export. But certainly you need
to have the HR capacity in the company, not only the knowledge in the countries, and also language
skills which is beneficial. But yes, I think it’s interesting and valuable if you aware of different models,
but this is theory, you need practices. It makes sense to do yourself or create a 5 forces analysis for
market, to understand the competition, but you need to make sure you have all the right sources, to
really get the full picture. So you should have somebody who has done it before. I think those models
are very important mostly to streamline your thoughts, to not forget something. But it’s not like they
cover everything, you always have to look out for other dimensions, and always, always try to speak to
people who has been there; or localized expert there. Those models may not provide you 100% view
of the market, there is always a limitation.
(L) You talked about legal aspect, own capacity, knowledge to proceed in the market, also HR
capacity and resources, what do you think are the additional Success factors? Or do you think these
are the most important successful factors?
(I) These were just the things that came to my mind immediately. But we did not ask these factors in
the studies. Just some random things I thought about, don’t take it as something equal to somebody
who works in the business. I say it because of some of the insights I got. It’s totally not a full picture.
This question should be somebody who really in the business or have done market researches could
tell you.
(L) What do you think are the future opportunity indicators in ASEAN market?
(I) You should always have an open ear and open eye. Especially in Asian, you should always pay
attention to what’s going on politically for example regarding ASEAN; this is a revolutionary change in
the economies there. (In this aspect, you may find Xavier’s research helpful…) Paying attention to the
changes could create a lot of benefits. Websites and press release could provide a picture.
It is really crucial to not only focus to the current market, when you plan or to think when to expand.
You should have a culture in the company that you automatically open your ears when something
going on. I know this might be a problem of many companies, because often most energy is used by
operational work. What most likely to happen is, people saying: yea, sure we should pay attention to
this strategy, but first I have to finish the 20 pages for now… this is on the desk and urgent, although
it’s not really important. This is a challenge to the mentality.
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Interview No. 9 - Expert Interview
Interviewer(s)
Ruppim Sukpanich (R), Maria Mountaki (M)
Interviewee
Mrs (A)
Role
Consulting specialist for the SEA Region
Company
OSEC
Confidential
Yes
Language
English
Date
23.05.2013
Type
Expert Interview
(M) What is your professional background?
(A) I’m a generalist. This means I started 10 years before in 2003 as an assistant of 2 senior
consultants of the whole region of Asia Pacific. The market was growing. China and Japan were
growing but not as intense like now 10 years after.
I spent 6 years to develop network.The most important thing is to know people and where to find them.
The networking is the most important things especially in Southeast Asia. A lot of
work/research/information come from this network.
Become part of this network and 6 years after I was at the stage where I was able to find the right
people for the right enquiries. I have this network and became consultant for South East Asia. We split
the region 2-3 years ago because it is very big so you cannot be specialist for China at the same time
for Japan and Thailand. Now we are 3 consultants.
So it begun with being a generalist then coming down through the network and come down to a
specialist in one area.
This area is, as you know, quite big and it’s challenging to know the different characters of each
country. I take always now the example with Thailand. If you work with Thailand, there’s a completely
different way to work with Vietnam. They are in the same region but completely different market. This
is a lot of work that you have to bring until you know a little bit about different sectors.... I am a
specialist in 10 South East Asian countries. But for sure I know a little bit about Japan and China and
other neighboring countries.
(M) Could you describe your everyday responsibilities and tasks
(A) Usually I have contact with company who has an enquiry. It could be just information of how can
they get new partners, what are the hurdles, or if they have problems with their import documentation
or sometimes it is really daily business that the customers really don’t know how to proceed or
company really plans to find partner and to enter the new market. I start my day with phone call with
my colleagues in Asia early in the morning considering time difference with partners in SEA just to
know what happens, or if i have enquiries to update and to know what to do.
We have meetings with customers, expert (very important for our network), we sometimes have follow
up with our key customers. We also have key account company so we take care of them and see what
happens even if they are entering the new market and not your own but just to take care about the
company.
Share a lot of information in the consulting team and what also happens Daily/weekly update with
regional directors. We have 3 regional directors, one is the director of Asia Pacific, he’s the senior and
the one who really picks out the important things that happen in the region. We share a lot of
information. For example, delegation who will join, trade fair where we go and set up booths for swiss
companies, set up future project, we decide if we have to do industry reports.
For example, ICT is a very strong sector in Malaysia and Singapore. We have a lot of specialists and
well established company and then we decided to a market research in this sector in order to present
these findings to the SMEs. We always think what SMEs are looking for and what are the good
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opportunities for our SMEs in Switzerland and so we sometimes think in advance and hope we get
information for these SMEs.
I make 2 to 3 trips per year to visit experts, sites, special regions/zones.
(M) How do you describe situation of Swiss SMEs that are going international?
(A) Since we have the financial crisis in 2009, the problem was the SMEs especially the very small
ones started to export to the next[nearby] country. For example, Germany because of the common
language, knowledge, and distance. Usually they start with Europe and that’s fine because they have
to learn a lot of how to do business and how to export. But with the crisis they realized one to two
years later that they were losing money, and they had to think about the next steps and they started to
go one step further and see what happens in the next 3 gens. So what happened was they started to
think about to go abroad to Asia.
They know that financial crisis can happen again and so they want to distribute their channels into
different areas, currencies, countries to avoid this (crisis) this is the situation for many companies.
There’s not so many of swiss companies starting with Germany anymore. Now there are a lot of born
global companies. young people who think my product is perfect let’s go to Asia, South America,
Africa. Newcomers think more than 5 years. They learned that they don’t have to stick to one location.
(M) You mentioned one reason why SMEs export can you think some other reasons why?
(A) Switzerland is very small. If you want to sell more then you should move to other countries.
Sometimes they have product that maybe doesn’t fit to the Swiss people. We are very innovative and i
can also imagine that if all of us do the same, the competition is so high and the price would rise that
you can’t never afford all this price level and you have to be competitive and innovative and you have
to move to other market to rise your product in terms of quantity. But mainly i think it is because
Switzerland is so small.
(M) Why do you think Swiss SMEs are exporting specifically to SEA market?
(A) Sometimes I think I am at the end of chain because usually companies that want to go to
Southeast Asia are companies who are already active in big countries in Asia such as China and
India. And somehow this region is still the white part in the map (gap). I think a lot of SMEs start first
with China. Everybody wants to go to China. Some of them do it well and some have to change
strategy because China is not the cheapest location anymore then they come back to me. China is
one of the main reason for this strategic move to SEA. China became more expensive and you need a
lot of people behind the whole work because small company cannot afford production in China. You
need manpower, money and some companies they had to move to smaller countries. Vietnam
became little China.
SEA somehow became the rest of Asia for anyone who wants to fill the gap or because they have
challenges in big countries. A lot of companies want to have productions in one of those countries
such as India but have office in Singapore because singapore is like switzerland everything is
organized and regulated. They realized there’s an opportunity. Anything more administrative can be
set up there.
Big China to Little China in Vietnam is now focused because of its low cost. If you are in textile
industry, you go to Vietnam. Lots of SMEs try to optimize but you need a lot of effort, communication,
travel, and have to really care about the people. If you don’t go and dont visit them they don’t work.
They are like Latinos and Italians. All these little countries have their own hurdles but they also have
opportunities. Japanese automotive industry relocate to Thailand because the car industry is going
down and they don’t have so much money. Price is really a big issue.
(R): what do you think market entry strategies that SMEs use?
(A) It depends a little bit on the sector. Let’s say IT, software, banking sectors, they need market who
is settled and organized and they have money they for sure would start in Singapore.
For sectors which need manpower, manufacturing they need space and usually have to be on a lowcost price level. They need space for less money and people. So they would go to Malaysia. So it
depends really on the sector.
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Another strategy is follow your customers. If the big boys are somewhere on an island you have to be
very close to this. so your customers are very important. A lot of companies follow the customers. they
never think about entering SEA but because of their customers, they have to be there.
The country tells me which sector is strong
(M) what are the strategies for Swiss SMEs in selecting new market?
(A) First you have to analyze what is your product, what is your service and then you can go into
trends in specific countries. For example, in Philippines they have a lot of young people who speak
perfect English and they have a lot of universities regarding the IT sector. If your service/product fits
this trend, you go to Philippines.
(M) What strategy would you suggest SMEs to take
You cannot defy strategies if you don’t have plan at all. You need to follow many things, sectors,
trends, customers, and you have to check if you need manpower or not then you have to defy the
strategy, the best way to go. There are a lot of information needed in order to see what kind of
strategies you need to use. It is difficult to say one way. My job is not to give them strategies so I
cannot give you specific answer....
(M) What is the percentage of Swiss SMEs that address you before they go to emerging markets?
(A) I can give you the figure later...
(R) As you have mentioned that you do ask companies the reason behind their decisions in going to
specific countries, what are the majority answer?
(A) sometimes it’s because of the gap, sometimes it’s because they are already in Asia and looking for
optimization of their channel. Or to have sale office or manufacture plant. Sometimes, it is because of
the price issues, if we want to stay competitive, we have to keep our price low. And they know that in
Asia they also have good quality so....
(R) When the companies come to you do you also inform them about risks associate with those
specific markets they would like to enter?
I try to explain the hurdles, for sure. Let’s say if it is the language, know-how of the people, the
education and maybe also corruption (yeah it’s something you have to mention) and also the timeframe that they really need somewhat time. usually they think we can just go in and everything is fine.
For example, Indonesia is a very complicated country. In terms of everything. It’s a very complicated
market. But everybody is speaking only about the 250 MIllion of people and everybody only sees the
figures. Then you have to go down and say yes ‘keep calm’ it is not too easy to go in because there’s
still corruption, the channels are not yet well established, I mean they have so many islands. You have
to really show them a little bit of what happens in the region. Also the risk here, to have people who
are taking care of this project in the beginning. the first thing i say is after we selected the partners. are
you ready? It’s the first time that you have to buy a ticket and go to these countries so it’s the first step.
Do you know that you have to start with this first trip. Sometimes we coach them even in how to
behave or how to do the first communication or first meeting. so this is something they have to be
prepared here otherwise it’s a risk that they would lose the partner because they don’t have the
resource and manpower.
(R) Speaking of corruption, i think it is one of the most challenging problems in SEA, how do you help
the company cope with that?
(A) We never say never do something that you think it is corruption. The problem is it is a very
sensitive topic. We have some companies that have big problem regarding this issue and we cannot
help them. what we can do is try to coach. It can be a big issue that ends up in a court but it also can
be small things. It is not direct corruption. For example, you have your network but how do you take
care of your network is very important. If you want to get something you have to be nice. It is more of
relationship building. Sometimes you need your counterpart. and OSEC opens that door for
companies.
(R) What would you say is the most important success factors for swiss SMEs going to SEA market.
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(A) Networking for sure a good thing and to be innovative. Swissness helps that is already given for
SMEs. I think it is all about network it’s all about taking care of the counterparts that’s why we also say
a lot of..our recommendation has always been ‘you now have new partner and you have to take care
of them otherwise they’ll forget you and take care” to become friends and in usually in ASEAN you first
become friends then become business partners. The network between is very important. The problem
is Swiss people don’t do it so we have to tell them how to do it. They never take care of people....it’s
the mentality.
(R) What do you think are the further opportunities of SEA in the future that would be attractive for
Swiss SMEs.
(A) Well for sure, population they have something like 500-600 millions, there is still market. The
character of regions that every country is different so it depends on your stage of your product. In the
benging you can set up for one country then go to the next. SEA, the quality is becoming higher and
higher and it matches with a lot of swiss companies and europeans companies so they can find more
counterparts which can work in the same level. regarding the marketing, people are getting richer and
richer. Similar situation is in Africa.
These are the white spot on the map of the whole world that is potentially good for Swiss export
companies. It is not only SEA, it’s all emerging markets.
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Interview No. 10 - Expert Interview
Interviewer(s)
Linna Ji (L), Ruppim Sukpanich (R)
Interviewee
Mr (M)
Role
Professor
Company
FHNW
Confidential
Yes
Language
English
Type
Expert Interview
(L) Where do you think you are expert in, regarding exporting of SMEs?
(M) Whenever I consult SMEs I tell them, you cannot compete with Chinese prices. You have to have
super quality to get premium price.
Small companies need to concentrate their resources in a few areas.
(L) What is your experience regarding Swiss companies that export to ASEAN market? How do you
describe the situation?
Very difficult. China is difficult, there is also a risk in Vietnam that you get copied. The intellectual
property issue is considerable. So I always suggest my clients – outsource to China, or have
produced in China or Vietnam the low value items; keep the high value item, which is the patterned
thing in Switzerland then export the final product, or assemble in China to make sure your intellectual
property stays protected.
(L) Is the market you are talking about also including countries like Thailand, Malaysia, Indonesia and
etc.?
(M) Vietnam. I have not done market researches in other countries. Indonesia, I saw pharmaceutical
industry there. Vietnam is a big issue, everything is fake and copied.
(L) Do you have specific example?
(M) What happened to me, an example in Indonesia is the pharmaceutical business. I was selling
voltaran, a painkiller. votaran had a large market share, only I didn’t sell any. Because somebody else
started to supply “fake” voltaren into the market.
Then I had the active substance of voltaren produced in mainland China, what happened was, on
Sundays they continued working and selling to somebody else – so I had a parallel market of my own
products, and they sold it for cheaper price.
(L) Can you sue them?
(M) I wouldn’t try to sue a Chinese company in the Chinese market. Unless I have unlimited time and
money.
(L) For what reasons do you think Switzerland exporting to emerging markets like ASEAN?
(M) Germany and Switzerland have what the world needs, the advanced technology. China is more a
low cost supplier; Switzerland is a high value supplier for instance watches; that is a prestige.
Germany has a lot of machinery which is high value. The emerging markets have huge need with
respect to infrastructure and learning, that’s why we teach in Vietnam, and also with respect to
building the industrial base. The advanced machinery in Germany and Switzerland come in to be
helpful.
There was a recent example: a Swiss company had an outdated technology made in Switzerland, they
hoping to sell it abroad. But then when people noticed the technology is not the state of the art, and is
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not the thing they need, then you cannot get the price you want. So I recommended, stop it. Find
some innovation which the customer willing to pay for.
Another reason would be the prestige of Swiss quality, because the high quality and the real thing
makes the customers feel safer. For example, the watches.
(L) What are the market entry strategies used by the Swiss SMEs?
(M) Try exporting first – the least expensive.
Second is franchising – this will gives you the money right away. Because building a factory cost a lot.
(L) What do you mean “try exporting first”?
(M) OSEC helps in finding partners in the markets. Also for example, there is a Swiss-Shanghai
Business Hub. You may go and contact the business hub for help.
Consulting companies in HK and Shanghai, they could help to find customers.
We export knowledge to Vietnam. They come to Switzerland for diplomat and Swiss knowledge.
(R) What strategies would you suggest for Swiss SMEs?
(M) We have the fairs in Switzerland. That’s the potential customers come to Switzerland, so the
watch makers could benefit from the fairs.
(R) From your experiences, what indicators do Swiss SMEs use to evaluate the market?
Typical indicators are income per capita, of target or specific customer segment. For example, the
middle class of Vietnam is growing. The average income in Vietnam is hundred dollars per month,
that’s nothing, but there are huge differences. If you looking at the number of BMW and Benz in Ho
Chi Ming city, so you can see few people earn more than that. And in India, the middle class is
growing rapidly. That will probably happen in Vietnam as well.
Communication is also an indicator. You should be able to communicate. Like the language barriers.
For example, Vietnamese is impossible to communicate. And they don’t really speak French - 50% of
population is younger than 25, maybe only a few very old people able to speak French. Vietnamese
pronunciation of English is virtually impossible to understand.
In teaching, I found them write a lot better than speaking. Or I can better understand them in writing.
So I asked them to write to me via Email. Their education system is very poor.
Also, Cultural closeness is important. For instance, when the French was still running with the
Americans in Vietnam, there was a cultural closeness. However, geographic distance is also an issue,
because of the time difference. That’s a barrier. So try to find closeness both culturally and
administratively.
Vietnam is politically a communist country where state-owned enterprises dominate everything. As a
foreign company, you rarely get a fair chance; because the state-owned companies are preferred by
the government and many other companies. So having a free market system is clearly a big help to
entry.
(R) What would be the best methods do you suggest the Swiss SMEs when choosing the market?
(M) Some tools like CAGE framework and the ADDing model. Why do I want to go? Do I want to
increase sales? Reduce cost? Or do I want to leaning something specifically?
For example, some active pharmaceutical companies, they are trying to combine the traditional
Vietnamese and Chinese herbal medical with the western medical. So you may want to go there to tab
into a knowledge base where you cannot get it here. And also to get a lower cost, cause the experts
there are lower paid than here.
Tabbing into knowledge base, or workforce, which is trained or cheaper.
Do companies really use these models in reality?
Most people just have gut feeling, or like or dislike. But I recommend them to use these processes.
(R) What risks are involved in going to these emerging markets?
(M) First, I may not get paid. Secondly, they may borrow your technology, and then turn around selling
the similar products at lower prices.
How about the legislation aspect, and human capacity aspect, could these be a risk?
What happen to me was mainly in China, Taiwan and HK. The experience was the people leaves
immediately when somebody else offering a higher salary, so the fluctuation rate was high. This is a
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problem. It cost a lot to retrain, and also they embody the knowledge. If a local manager who has been
working many years and suddenly left, he pretty much know my business and could start his own. So
you lost your knowhow.
(R) What do you think are the most important success factors when exporting to the Southeast Asian
market?
(M) You need to have a competitive product, which is competitive on quality, not on the cost or price.
So uniqueness, or the case of watch – prestige. Swissness also counts.
(R) What do you think of the indicators for future opportunities in ASEAN markets?
(M) My guess is there will be all growing substantially in the next few years. My feeling is they would
be in need of the products made in Switzerland, for instance in infrastructure, building the industrial
base.
One sector is automotive suppliers. Everybody would want to have a car there. For example, Porsche,
they just opened a shop last year in Vietnam. So there could be opportunities in machinery and
engineering, you name it.
(R) How would Swiss SMEs benefit from exporting to ASEAN?
(M) Sales volume
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