Globalization of production and some degree of globalization in markets has changed the nature of the competitive environment in many industries. It’s been argued that there has been a “Global Shift”.

“Global Shift” is the trend towards the globalization of production in which corporations have been dispersing their productive processes around the world in order to take advantage of national differences in costs of production and quality of factors of production. This creates interdependencies across national borders. Markets too are becoming increasingly global in some industries.

A genuinely global market is one in which there has been a convergence in consumer demand so that there is no need to differentiate between products and marketing strategies to suit different national requirements. It is argued that modern technologies and the communications and transport infra-structure with which they are associated, have created the conditions for a convergence in consumer tastes. This is creating a trend towards a global economy in which there is a declining need for differentiation. Levi Strauss jeans, Coca-Cola soft drinks, Sony television sets and McDonald’s hamburgers are cited as examples of standardized global products which satisfy a global market.

Some companies do appear to have found a homogenous global market niche in which they can sell undifferentiated standardized products. However, national differences in consumer tastes are very strong for others. There are companies which have successfully bucked the trend towards convergence in consumer demand by differentiating their products. National differences can arise fro ma variety of sources – buyer preference is only one. There is a range of other differentiating factors. Infrastructural differences can give rise to higher transport costs. Also, the quality and costs of factors of production can vary from country to country. Differences in distribution channels can impose different macro economic conditions upon the business units of the firm and political, legal and cultural factors are not globally homogenous. In a nutshell, the viability of a genuinely global approach is, for many corporations, questionable.

Internationalization for the SMEs may be considered to be a growth strategy. However, very few firms launch into their first international foray by means of an investment in a subsidiary abroad. For the majority, the first international venture is likely to be exporting, that is to say, their international strategies are at first usually based upon manufacturing in the home market for sales abroad, or distributing their products and service offerings abroad. Typical home-based exporting strategies include:

Indirect Exporting
This method deploys an intermediary between the manufacturing firm and the foreign market. For example, a home-based export agent or a foreign based import agent

Direct Exporting
This cuts out the middle man. When a company has located customers in foreign markets and has gained sufficient knowledge, it may decide to deal with a number of foreign customers directly;

Know-how Exports
This would include technology sales and licensing, franchising, etc.

Service Exports
These can include banking services and insurance services. Many service exports are not therefore undertaken by small firms, but by large institutions

Not all companies that embark upon export strategies will expand beyond this point. However, some may decide to increase their international involvement by investing directly in expansion overseas. Marketing investments may include:

1) Sales promotion subsidiaries
2) Warehousing units
3) Service units
4) Sales subsidiaries

Foreign production strategies may include international subcontracting, either with or without an equity holding, as well as a range of cooperative and joint venture operations in addition to the wholly owned subsidiary.

Edward Whistler International through the I-Biz program has helped many companies successfully pursue international expansion strategies. Our consultants working with the clients would develop a road map for internationalization by adopting a sequential process, even though it may be one that is in some respects unique to the company. The sequential process may begin with exports, then progress to some sort of contractual agreement or cooperative venture with a foreign party and then eventually to the point of an equity investment in a joint venture or wholly owned subsidiary.

Regardless of the changes that may occur in the company as it expands internationally, the SME internationalization process is usually sequential and EWI will work with the client on a variety of strategies that may be adopted along the way for those that pursue internationalization route to the point of becoming a Singapore International company.