SME Entry Strategy in Foreign Markets : A case study of Aura Light, Slipnaxos and Norba

Abstract:   The internationalization of firms in is an occurrence increasing in a rapid pace and during the last 20 years firms have changed their orientation from domestic to international. Geographical expansion is interesting to view from a single firm´s standpoint since it provides possibilities for the firm which allows it to grow and achieve a higher profit. SMEs roughly accounts for 99 per cent of all firms in Europe and approximately 50% of local and national GDP, 30 % of export and 10 % of foreign direct investment (FDI) worldwide. Entering a foreign market through an intermediary becomes particularly interesting from a SMEs point of view since it is often the best or only alternative in an initial step towards exploring a new foreign market. Managing the relationship towards the intermediary is an important and interesting topic since research has shown that the relationship quality between the exporting firm and its intermediary in the foreign market is positively related to the export performance in the foreign market. The theoretical framework Is based on three main concepts: Business Marketing Entry Strategy, Relationship development and Knowledge development. The entry strategy is seen from a process perspective in which the relationship with the intermediary are in focus. Moreover, how knowledge and information are handled and developed during the process are also in focus. This thesis is built around four main problems concerning: distances and uncertainties prevailing in the exporter –intermediary relationship, the trade off between the linkage strategy the firm has towards customers and the one towards the intermediary, problems of opportunistic behaviour of the intermediary and information asymmetry. Solving these problems is seen as a base for enabling the firm to perform a well functional relationship with the intermediary and thereby enable the firm to achieve a successful entry process. Furthermore, by having been provided with an insight of how our case companies Aura Light, Slipnaxos and Norba have experienced these problems we present factors that are important to consider in the entry process