International competitiveness and
the challenges of internationalisation
for the SMEs
Prof. A.Sinatra
a.a. 2011/2012
The concept of international competitiveness
•
A sector is competitive if it contributes to the national welfare through the
optimum use (i.e. more productive) of capital and available resources.
You must carefully consider certain indicators, e.g.:
High trade balance or
export share
They may result from a
low-cost transfer of
national resources
Low related prices
Job creation
It should mean the
absence of competitive
advantages and a poor
profitability
It should mean the
inability to innovate the
manufacturing
processes
International competitiveness: the
enterprises and their "National Base"
•
The sigle Co. , not the industry, compete in the international markets;
•
Although some of them develop an international organisation, they all have a
"national basis“, that is defined as:
• The country where the strategy is developed;
• The place where we can find the crucial phases of the value chain ;
• The “physical space" that hosts the distinctive skills.
The characteristics of the "national base", along with the specific skills and strategies
of the companies, explain the international success of a sector.
The country basis is a complex system, hard to imitate for foreign competitors
The determinants of international
competitiveness of an industry
strategy, structure and
competition between
companies
Demand
inputs and production factors
(labour, capital)
The related industries
characteristics
The role of
Government
and of the
external
factors
These factors create a dynamic system in evolution: in the advanced sectors,
competitiveness depends on the degree of consistency between the variables
and the rate of innovation.
production factors
•
Availability, cost and quality of
human resources
•
Availability, cost and quality of raw
materials
•
Availability of scientific,
technological and market
knowledge
•
Availability, accessibility and cost
of financial capital
•
Kind, quality and cost of available
infrastructures (e.g. transport,
communications)
A sector can create a strong and sustainable
competitive advantage if advanced and
specific factors are available in the national
basis
The competitive advantage that is based on
basic factors is temporary and not sustainable
Disadvantaged situations related to the basic
factors can stimulate innovation if the other
elements of the system allow it (selective
disadvantages)
The availability of advanced and specific
factors is not given but it is the result of a
process of long-term creating
Demand
•
Very sophisticated and demanding
customers and distribution channels
•
Customers and distribution channels that
anticipate the needs that will rise in other
Nations
•
High number of independent buyers with
high variety of needs
•
Fast saturation of domestic market
•
Fast internal market growth
•
International mobility and cultural
influence of the national consumers
National demand
strongly shape the
skills and strategies of
companies!
Related industries
•
Qualified suppliers are key
development of innovations
•
“Non captive” suppliers
knowledge in the sector
•
Global suppliers that exchange the information
collected on foreign markets
•
Complementary industries developing segments
of the value chain (research promotion,
distribution channels, etc…)
for
that
a
joint
develope
The international
success of many
Nations, especially
Italy, is based on
clusters of related
sectors!
Strategy, Structure and Competition
•
Presence of a strong and free competition among
local companies
The competition drives firms:
to improve themselves and to go
beyond the benefits deriving from
the national resources
•
Culture and proprietary structures that promote
long-term strategies
•
Long-term oriented financial institutions
to saturate the internal market
more quickly
•
Low entry bariers for new competitors (spin-off,
non traditional competitors)
to experiment with a variety of
strategies and solutions
not to compete for government
aid and favors
This is the most important element for the
success of the industry
Evolution of the national
competitive advantage
Investments driven
•
•
•
•
•
Acquisition and
enrichment of foreign
technologies
Expansion of the
productive basis
Still unsophisticated
demand but growing
quantitatively, very fast
Increased internal
competition
Strong direct support of
the Government
Innovation driven
•
•
•
•
Selective disadvantage
factors are emerging
Companies are forced to
create innovative
technologies and
strategies
Development of the
related industries
The domestic demand is
becoming sophisticated
and internationalising
Wealth driven
•
•
•
•
•
Less entrepreneurship
Under-investment in the
sector
Tendency to acquire (more
than to conquer) new market
share
Tendency to seek for the
protection of the Government
Success based on the
cumulation of past
investments (image,
technology)
The transition from a stage of growth to the next one is not automatic but
assumes a "leap" of strategy and the appropriate boundary conditions
How to avoid the «richness
syndrom»?
FROM STATIC DEFENSIVE GAMES
TO DYNAMIC PROACTIVE STRATEGIES
Focusing on the "non price" factors
 The shrink of the margins (price competition) shows the
difficulty to benefit from the traditional geographical
mobility (opportunistic strategy)
Competitive conditions on "non-price” factors require an
increasing attention to the long-term strategies:
 Non occasional cultivation of the markets
 Stable relationships with customers and local distributors
LONG TERM STRATEGIES
The short-term orientation produces the typical
"vicious circle" which leads to failure
We think in terms of
Italy + export (as a
“tank market”)
automatic translation
of the national model
Replicate the
successfull
strategy
Disappointed from
the foreign market
Limted success and
failures
limited resources
Short time orientation
& Unacceptance of
the "rules of the
game" of the new
market
harvest immediately
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SMEs critical issues
 growing importance for the export of factors linked to:
 Distribution
 Marketing
 Logistics
 Promotion
 Certification
 Quality after-sales service
 There are still entry barriers to large-scale distribution
13
Sme’s critical issues 2
+ High rate of development of new competitors (eg. BRIC)
 Investment in R & D, grown in absolute terms, does not
reduce the distances for the main competitors
 Delays in product innovation
 Continued dependence on imported technologies
 Poor critical mass
 Little external economies
 Few "competitive assets" for agreements-mergers-acquisitions
 Few opportunities to use the European public support
14
SMEs Opportunities
The traditional flexibility, creativity, adaptability of italian SMEs
continue to be a valuable and irreplaceable heritage but it is
inadequate to meet the competitive challenges of the coming
years. It’s necessary ...
... to use the opportunities offered by a negative cycle to develop
and consolidate the SMEs export position, especially working on
the downstream of the production process (distribution, marketing,
quality assurance, logistics, promotion and after-sales service).
15
The challenge is to move ...
… from “export” ...
… to internationalization
16
It requires deep changes
How to go international:
Export managed by the national structures
Low
Export managed locally
Licenses
Agents
Representatives
Joint-venture
High
Direct investments
Deep Change ... 1/4
CULTURE
 Legitimization of diversity
 Create commitment towards different contexts
 Competitive game concept (Dynamic vs. static)
18
Deep Change ... 2/4
CHOOSING A SUSTAINABLE STRATEGY
 of business portfolio
 geographical presence
 strategies differentiation
 alliances (with allies and opponents)
19
Deep Change ... 3/4
THE ABILITY OF MANAGING COMPLEXITY
 Computerization
 Under-optimization of the micro projects and optimization of the
macro-project
 Multi-cultural learning
20
Strategic Vs Operational Management
Complexity of
operational
management
Complexity of strategic
management
21
Deep Change ... 4/4
… MANAGEMENT
 No news in structural landforms
 Significant innovations in operating mode
 Resource management
 Decision-making processes
 metamanagement
22
The challenges for the SMEs
The challenge for the management of the small and medium-sized enterprise is:
 To develop a true entrepreneurial
Learning how to invest
 To use the flexibility of enterprises
Learning how to
change their business
model
 Exceed the limits of the small size
Learning how to
create and manage
networks and business
systems
culture to foreign markets
and their creativity to meet more
effectively the needs of users
by collaborating with others
23
Strategic Issues of Made in Italy
Questions ?
Prof. Alessandro Sinatra
a.a. 2011/2012