Good practices of internationalization of Serbian SMEs

DOBA FACULTY
OF APPLIED BUSINESS AND SOCIAL STUDIES
MARIBOR, SLOVENIA
MASTERS WORK
Slavica Stojkovic
Belgrade, 2014
1
DOBA FACULTY
OF APPLIED BUSINESS AND SOCIAL STUDIES
MARIBOR, SLOVENIA
THE GOOD PRACTICES OF SME
INTERNATIONALIZATION
IN SERBIA
(Master's work)
Slavica Stojkovic
Belgrade, 2014
Mentor: doc. dr. Vilijem Pšeničny
Lector: Tatjana Stefanović
Translation: Slavica Stojković
2
Izjava
Dole potpisana, izjavljujem da sam autor magistarskog rada pod
naslovom “Dobre prakse internacionalizacije MSP u Srbiji” i da sam za
potrebe arhiviranja predala elektronsku verziju završnog rada u
biblioteku DOBA Fakulteta.
Magistarski rad sam izradila uz pomoć mentora i komentora. U skladu s 1.
stavom 21. člana Zakona o autorskim i srodnim pravima (Ur. L. RS, št.
16/2007) dozvoljavam da gore naveden završni rad bude javno dostupan.
Izjavljujem da dozvoljavam objavu ličnih podataka vezanih za završetak
studija (ime, prezime, godina i mesto rođenja, datum diplomiranja, naslov
magistarskog rada) na web stranama i publikacijama DOBA Fakulteta.
Potpis
Slavica Stojković
Beograd, 17.11.2014
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Acknowledgment
This work would have not been done without continues support from my family who never
stopped believing in me and my competence to accomplish this study.
My friends Milena, Tanja, Pedja, Ivan and many more have been there to give me support and
encouragement.
And last but not least this work could not have been done without DOBA Faculty which
introduced me to many interesting subjects and themes which broaden my knowledge and opened
new windows to the world of endless information.
November 2014
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Rezime
U današnjem poslovnom okruženju jedini način da se opstane jeste ostati u konkurenciji ili biti
ispred ostalih. Dobro je poznato da su mala i srednja preduzeća činioci i ključni faktori napredka
u privredi.
Ovim radom pokušaćemo da shvatimo fenomen internacionalizacije malih i srednjih preduzeća
(MSP). Izučavanjem raznih teorija internacionalizacije, kao i analiziranjem različitih načina
ulaska na strano tržište, ispitujući motive iza internacionalizacije i ukazivanjem na najčešće
prepreke pokušaćemo da damo odgovo na naše glavno istraživačko pitanje.
Koje su najbolje prakse internacionalizacije malih i srednjih preduzeća u Srbiji?
Kroz analizu primarnih i sekundarnih podataka, koristeći članove Udruženja izvoznika Srbije
kao našu ključnu studijsku grupu, nadamo se da ćemo doći do saznanja iz prve ruke o njihovom
iskustvu internacionalizacije preduzeća. Susrećemo se sa sličnostima i načinom obavljanja posla
u inostranstvu poređenjem najbolje prakse MSP u EU sa MSP u Srbiji. Putem konciznog
upitnika pokušaćemo da prepoznamo glavne motive i faktore prepreka u procesu
internacionalizacije, kao i njihove preporuke u vođenju posla van domaćeg tržišta.
Na posletku, nadamo se da će ova studija pomoći i ohrabriti druga MSP u Srbiji koja planiraju ili
su već otpočela poslovanje sa stranim tržištem. Gledajući sa optimizmom ovo će učiniti
poslovanje sa inostranim tržištem lakšim i manje bolnim, a dugoročno gledano dati malu pomoć
srpskoj privredi.
U prilogu navedenog, studija i istraživanje će stranim malim i srednjim preduzećima biti od
interesa i koristiće kao priručnik onima koji budu želeli i planiranju da započnu posao u Srbiji.
Najvažniji rezultati ovog rada su dobre prakse internacionalizacije indetifikovane putem ovog
istraživanja i predstavljene kroz ovaj rad. Dobre prakse primenjene u Srbiji, predstavljaju brži i
jednostavniji način izlaska na strano tržište prateći preporuke i iskustva MSP u EU.
Ključne reči: Internacionalizacija, globalizacija, MSP, preduzetništvo, preduzetnik, najbolje
prakse
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Abstract
In today’s competitive business environment the only way to survive is to stay in the arena or be
ahead of others. It is well known that small and medium-sized enterprises are holders and key
factors to raising the competitiveness of the economy.
Through this work we shall try to understand the phenomenon of small and medium size
enterprise (SME) internationalization. By examining various theories of internationalization and
analyzing different entry modes to foreign market, by exploring motives behind
internationalization and demonstrating the most common barriers to ‘going international’ we
shall try to answer our main research question.
What are best practices of SME internationalization in Serbia?
Through primary and secondary data analysis, using members of Serbian Exporters Association
as our case study group, hopefully we shall learn more about their firsthand experience on
internationalization of their business. We will find similarities and patterns in doing business
abroad by comparing best practices of EU SMEs to Serbian SMEs. Through structured
questionnaire, we will try to identify main motivation and obstacle factors in the process of
internationalization as well as their recommendations in doing business outside the domestic
market.
In the end, hopefully this survey shall help and encourage other SMEs in Serbia who are just in
the phase of planning or have just started to turn their business to foreign market. Optimistically
this will make an easier and less painful road to going international for small and medium size
enterprises and in the long run, give little benefit to Serbian economy.
In addition to the above, the study and research will be useful and interesting to foreign SMEs
who wish and are planning to do business in Serbia
The main results of the work are best practices of internationalization as identified through this
research and presented in this paper. The good practices implemented in Serbia are an easier,
faster way to going abroad by following recommendations and good practices of the EU SMEs.
Keywords: Internationalization; globalization; SMEs; entrepreneurship; entrepreneur; good
practices.
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Abbreviations
COSME
Competitiveness of Enterprises and Small and Medium sized Enterprises
EAS
Exporters Association of Serbia
EEN
European Entrepreneur Network
EIF
European Investment Fund
EIC
European Information Centre
EC
European Commission
SBA
Small Business Act
SMEs
Small and medium size enterprises
SIEPA
Serbian Investment and Export Promotion Agency
SECEP
Support to enterprise competitiveness and export promotion
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Table of Contents:
Izjava ......................................................................................................................... 3
Acknowledgment ...................................................................................................... 4
Rezime ....................................................................................................................... 5
Abstract ..................................................................................................................... 6
Abbreviations............................................................................................................ 7
Table of Contents: .................................................................................................... 8
1. INTRODUCTION.............................................................................................. 11
1.1.
Internationalization of SMEs .......................................................................................... 11
1.2.
The Research problem .................................................................................................... 12
1.3.
Research purpose and goal ............................................................................................ 13
2. MAIN RESEARCH QUESTION, SPECIFIC QUESTIONS AND
HYPOTHESIS........................................................................................................ 14
3. METHODOLOGY .......................................................................................... 15
3.1.
The research method ..................................................................................................... 15
3.2.
Case study ...................................................................................................................... 15
3.3.
Primary and secondary data collection .......................................................................... 15
3.4.
Validity and Reliability .................................................................................................... 16
3.5.
Problems that we may encounter .................................................................................. 16
4. FRAMEWORK OF THE WORK.................................................................. 17
5. CLARIFICATION OF KEY WORDS........................................................... 18
5.1.
Entrepreneurship............................................................................................................ 18
5.1.1
Entrepreneur ........................................................................................................... 18
5.2.
Internationalization ........................................................................................................ 19
5.3.
Globalization................................................................................................................... 19
5.4.
Small and medium size enterprises ................................................................................ 20
6. THEORIES OF INTERNATIONALIZATION ............................................ 22
6.1.
Some common theories of Internationalization ............................................................ 22
7. KEY MOTIVATION FACTORS OF INTERNATIONALIZATION ......... 25
8. ENTRY MODES TO FOREIGN MARKET ................................................ 28
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8.1. Export and import modes of entry .................................................................................... 29
8.1.1 Indirect export ............................................................................................................. 29
8.1.2 Export ........................................................................................................................... 29
8.1.3 Contacts with foreign partners ................................................................................... 30
8.1.4 Strategic alliance ......................................................................................................... 31
8.1.5 Licensing...................................................................................................................... 31
8.1.6 Franchising .................................................................................................................. 32
8.1.7 Joint venture ............................................................................................................... 32
8.1.8 Turn-key contracts ........................................................................................................ 32
8.1.9 FDI ................................................................................................................................. 32
9. BARRIERS TO INTERNATIONALIZATION ............................................ 34
10. EU BEST PRACTICES .................................................................................. 38
10.1. Available support services ................................................................................................ 38
11.
BEST PRACTICES IN SERBIA ................................................................ 44
11.1 Available support services ................................................................................................. 44
11.2 Other forms of support services in Serbia ....................................................................... 46
11.3. Projects supporting SMEs development in Serbia ........................................................... 46
12.
THE GAPS IN SUPPORT SERVICES ...................................................... 51
13.
ANALYSIS OF THE RESEARCH SURVEY ............................................ 53
13.1 Subject of research ......................................................................................................... 53
13.2 The research goal............................................................................................................ 53
13.3 Case study and instruments used for the research ........................................................ 53
13.3.1 Background information of EAS ............................................................................... 56
13.3.2 Personal interview with LOGO company – results .................................................... 57
13.4. Other interesting results from the questionnaire .......................................................... 59
14.
RECOMMENDATION FOR SERBIAN SMEs ........................................ 63
15. CONCLUSION ............................................................................................. 67
LITERATURE AND SOURCES .......................................................................... 69
Annex 1. Case study group questioneer .............................................................. 73
Annex 2. – Contact information of our case study group .................................. 78
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Graph contents
Graph
Graph
Graph
Graph
Graph
Graph
Graph
Graph
1. Obstacles most frequently encountered in the internationalization process ....... 37
2. Support measure received by the Government ....................................................... 45
3. Knowledge about support measures available in Serbia by SMEs ....................... 50
4. Identified gaps in support measures ....................................................................... 52
5. Should the Association continue its work ............................................................... 57
6. Time needed to turn from domestic to foreign market ......................................... 59
7. Main countries of export .......................................................................................... 60
8. Inner motivation factors to internationalization .................................................... 61
Table contents
Table
Table
Table
Table
Table
Table
Table
1. Advantages and disadvantages of INDIRECT export ............................................ 29
2. Advantages and disadvantages of DIRECT export ................................................. 30
3. Barriers to internationalization of SMEs ................................................................. 35
4. Key opportunities and barriers of SME internationalization ................................ 36
5. Summary of key support measures in the EU ......................................................... 42
6. Support services in Serbia divided by financial and non financial ........................ 44
7. Basic information of our selected companies ............................................................ 54
Picture contents
Picture
Picture
Picture
Picture
Picture
Picture
1. Criteria for determining medium size enterprise in Serbia ................................. 20
2. Uppsala model process ............................................................................................. 23
3. Different entry modes and plans to start the activity of internationalization ..... 25
4. Motives for internationalization of SME ................................................................ 27
5. Entry modes to internationalization ....................................................................... 28
6. Official logo of the Exporters Association of Serbia.............................................. 56
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1. INTRODUCTION
The main subject of the thesis will be good practices of internationalization of small and medium
size enterprises (SMEs) in Serbia.
From the very beginning of my studies, I was fascinated by the phenomenon of globalization and
internationalization process, what it has brought to today’s way of doing business and what
influence it has made toward better business opportunities.
What is globalization? What benefits has it brought to the society in general and business as a
result? Globalization has brought many benefits to the society. It has brought down barriers to
trade, it has further developed telecommunication and transport, and it has made easier and
cheaper access to internet. As per Pantelic et al., globalization has also brought many challenges
and dilemmas. Globalization has made better conditions for trade development; it has perceived
the environment and social stability, provided better health standards, perceived human rights
and cherished cultural identity. The globalization has made gap between the rich and the poor
less visible, but at the same time has made competition between the small and big fiercer. In
order to survive in this competitive yet challenging world, the small and medium size enterprises
have turned to finding new opportunities for their business.
Globalization has made SMEs turn from domestic to foreign market, these are the new business
opportunities and possibilities. With the benefits there is competition and the only way to survive
is to turn to foreign markets or to internationalize one’s business.
From this the following question can be derived. In what way does internationalization benefit
small and medium size enterprise business? How does an entrepreneur decide to turn to foreign
markets? What are the good practices of internationalization of one’s business?
The above questions have been a key guide and the reason for the thesis work.
1.1. Internationalization of SMEs
SMEs are key holders of the economy. By recognizing good practices of internationalization this
can improve business environment of SMEs in Serbia. The internationalization can be defined as
a “series of business activities outside national borders which are based on applying the notion of
international marketing” (Paunovic and Prebezac, 2010)
Globalization has put a strong influence on small and medium-sized enterprises’ and their
business philosophy. More and more SMEs need to think globally and act quickly in order to
survive the challenges and threats that competition in the globalization process brings. If there is
no action from their side, they may be exposed to a risk of disappearing or taken over by a more
resourceful enterprise. (Ibid, 8)
The European Commission along with its Member States has put efforts on identifying and
exchanging good practices in many areas of SME policy. The good practices have also been
rooted in the European Charter for Small Business (EC, 2014), and has further continued to
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expand under the priorities of Small Business Act for Europe1. The result of all good practices
identified, a database has been made2.
We shall look into some of the definitions of good practices in order to better understand the
main meaning and at the same time we shall able to identify them more easily.
By a simple definition, good or better known as best practices, as per Wikipedia, is a method or a
way which is often used and has shown the best results compared to other similar methods which
have not been so successful. Best practices is a business “buzzword” used to describe a process
of developing and following a standard way of doing things that other organizations can use.
(Wikipedia, 2014)
The European Commission defines “good practices” as an approach for policy makers and
practitioners for their attention and interest in order to inspire further change, while “better
practice” is defined when practitioners are looking beyond their local circumstances and national
boundaries. (Ibid, 2014) As EC explains, many member states have drawn inspiration from the
measures developed by other Member States and in this way are at the same time benefiting from
one another’s strengths in a “cross-fertilization of ideas”.
The main example that bear the witness to the success of the best practices are: Applying the
Think Small First principle, simplifying start-up procedures, internationalization of SMEs,
continuing education of entrepreneurship, reduction of administrative procedures. (Ibid, 2014)
By learning from EC proposal and recommendations especially from the review “Thinking Big
for Small Businesses”, Serbia and its SMEs can anchor its ship to sail on calm waters, to try to
escape or make fewer burdens for the road to SME internationalization. By using and applying
best practices of the European Union, and other non member states, Serbia as a candidate state,
can begin to prepare itself for membership by applying the same best practices to its promotion
and at the same time make sound business environment for SMEs in Serbia.
1.2. The Research problem
The global economy can be characterized as an apparatus which stimulates competitive spirit in
the business world, it stimulates technology growth, it has developed and expanded ICT and it
has opened a door to more liberal trade.
Even though the European Union has created a unique market of over 450 million consumers,
and world globalization has taken down market barriers and reduced the price of transport,
1
The Small Business Act for Europe has been adopted in June 2008 and it applies to all independent companies that
have fewer than 250 employees which by the way consists 99% of all European businesses. This Act reflects EC
political will to recognize the central role of SMEs in EU economy and also for the first time puts into place a
comprehensive SME policy framework for the EU and its Member States. (EC, 2014)
2
Database access available at: http://ec.europa.eu/enterprise/policies/sme/bestpractices/database/SBA/index.cfm?fuseaction=practice.list
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communication and information, unfortunately the SME's still face difficulties to enter foreign
market. There is a tendency that the majority of SMEs still depend on the local market,
regardless of good opportunities and possibilities that internationalization brings. As an example
in EC, only one fifth of European SME's have export business, while only 3% of SME's abroad
have their offices, sub-offices and or joint venture investment. (EC, 2007:7)
As we said earlier, the globalization, as a phenomenon, has brought many benefits to the society
however it has also brought a more competitive and uncertain business arena. The business arena
is no longer centered only on the local market it has also turned to new undiscovered markets.
This is mainly due to the fact that the business which brought profit and growth to the companies
is no longer the same. The globalization has forced entrepreneurs to search new ways of finding
business opportunities and a way of securing their position in the market i.e. turning their
business abroad or going international. (EC, 2013)
In the internationalization process the SMEs, or better said their managers and directors have
turned to understanding and compiling with multicultural differences. It influenced managers to
tackle and prepare their business as per differences they encounter. For example the Hofstede’s
cultural dimensions theory has been used by many researchers to understand the effects of a
society’s culture on the values of its members. This is very important for international
management and cross-cultural communication when it comes to international business. The
dimensions of cultural values are analyzed in order to understand the differences of a certain
culture. The most common four dimensions analyzed and used are: individualism-collectivism,
uncertainty avoidance, power distance (strength of social hierarchy) and masculinity-femininity
(task orientation versus personal – orientation).
The importance of this is that cultural dimensions have a big influence on how people from
different cultures react (well or badly) on certain problems. The cultural dimensions show
different ways of problem solving or how the problem is being tackled.
1.3. Research purpose and goal
As we have learned at the beginning of the work, internationalization, as a product of
globalization, has a strong influence and benefit to the country’s economy, on its development
and growth. Having this in mind, we can say that in Serbia there is a slow but a steady growing
tendency that more and more SMEs are turning to internationalization of their business in order
to gain or sustain competitiveness.
The purpose of the thesis is to show, by following good practices of SMEs who have started
business outside the domestic market, the benefit that internationalization brings to a firm. We
shall see if the good practices would persuade other SMEs in Serbia to turn their business to
foreign market. By showing main benefits and opportunities of internationalization, hopefully
this will influence and bust other small and medium size companies to take a risk and turn their
business global. We will try to understand and explain what the main factors which make SMEs
turn from domestic to foreign market are. Some key motivation factors for internationalization,
as per OECD (2009) report are: growth motivator, broadening knowledge and establishing
networks.
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2. MAIN RESEARCH QUESTION, SPECIFIC QUESTIONS AND
HYPOTHESIS
Through a structured questionnaire we will try to get answers directly from the exporters,
members of the Exporters Association of Serbia (EAS) and their experience in the
internationalization process.
Here are some of the main questions that our entrepreneurs have been asked.
What were the key motivation factors to their internationalization? What are the most common
modes of entry to foreign market? What obstacles have they encountered on their way to
working abroad? What support services have they been exposed to and what support services in
the future would benefit them in their process of internationalization?
Upon completion and analysis we shall hopefully find answer to our main research question.
-
“What are the good practices of SME internationalization in Serbia?”
Why is that important? This will expectantly give us a “structure” or role model for other SMEs
who are planning to turn their business abroad or are in the process of internationalization. By
following the good practices of internationalization, the process should become more adaptable,
easier and to some extend faster. They will try to avoid the now recognized obstacles and avoid
possible difficulties which they will encounter during the process of internationalization of their
business.
Specific questions that we will draw from the main research question are:
What are the key motivation factors to internationalization of business in Serbia?
Can good practices influence entrepreneurs to internationalize their business?
Eventual hypothesis of our research;
 The internationalization process is the new modern way of business, especially the fast
growing SMEs.
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3. METHODOLOGY
3.1. The research method
The following steps have been taken for conducting this research;
I.
II.
III.
IV.
V.
Find and analyze accessible literature, reports, surveys and articles related to the
main topic
Carry out the theoretical part of the thesis
Collection and research of secondary data, analysis of additional data
Work on interpretation of data, checking the hypothesis of our work
Writing the practical part of the master thesis
Our case study sample will be exporters of small and medium size enterprises from Serbia.
The research will be qualitative; the number of cases for examination will be small – taken from
EAS in Serbia who have around 40 registered members at the moment of conducting this study.
The population is heterogeneous and therefore the research will not be random but it will be
purposefully selected from EAS, members who have firsthand experience and have been doing
business abroad for at least two years.
3.2. Case study
Who?
Small and medium-sized enterprises (SME's) in Serbia whose main business
is export
How?
Structured questionnaire and individual interview
Where?
Belgrade, Serbia – EAS -Exporters association of Serbia www.eas.rs
3.3. Primary and secondary data collection
Primary data will be gathered by a questionnaire, and personal interviews if time and
willingness of entrepreneurs or/ and managers of firms is feasible. The sample will be done on
roughly 40 exporters, as per the last figure of registered members of the Exporters Association of
Serbia (EAS). Our survey is limited to exporters who have had practice and experience in doing
business outside the local market with a minimum of two years of sales international.
15
Secondary data will be collected by desk research, involving summary, collation and/or blend of
existing research. Review of literature, surveys, reports, journals, and magazines, through
publicly available data. Gathering first hand data on export information and good practise such
as from the Serbian Business Registry Agency, Serbian Chamber of Commerce, Ministry of
Economy, National Agency for Regional Development, Serbian Export Credit and Insurane
Agency.
3.4. Validity and Reliability
By examining and analyzing good practices of internationalization of SMEs in Serbia we will try
to find out if there is a pattern or similarity compared to EU SMEs. And what were the most
common reasons to turning from local to foreign market. This information will give us further
guidance to be used for other SMEs in Serbia, to be made as “standardized system” for entering
the foreign market in a more trustworthy and promising way.
Internationalization is a process which is compulsorily for any company that wishes to become
competitive. This is a process which is most often lengthy and agonizing however it does not
mean it should be taken likely and not try to internationalize one's business.
Through this research we shall try to make internationalization more appealing and adjustable for
every small and medium size enterprise who wishes to try this so called internationalization
process, which has become a necessity and requirement in today’s business.
3.5. Problems that we may encounter
We may come across low response from exporters due to unwillingness to answer our
questionnaire. Not willing to release and share their international experience as well as to revel
the way the firm has started doing business abroad. Other problems that we may encounter are
difficulty scheduling face to face interviews.
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4. FRAMEWORK OF THE WORK
The master thesis is divided into five core and logical sections;
I.
II.
Introduction part – explains the research problem, purpose and goal. The main
research question, specific questions and possible hypothesis and the methodology
used to answer the research question,
The second part gives explanation of certain key words in order to have a better
understanding of the research problem,
III.
Focuses on the most common theories of internationalization, motives and barriers
encountered in the process of internationalization. Support services implemented
and analyzed in the EU and Serbia using a comparison method,
IV.
Compilation and analysis of survey results,
V.
Recommendation and conclusion
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5. CLARIFICATION OF KEY WORDS
In order to better understand the meaning of internationalization and the importance of SMEs to
turn to foreign markets, we will give a short but comprehensive explanation of key words which
we come across most often throughout the research topic. Hopefully this will help the reader
understand the internationalization process in a clear and comprehensive way.
5.1.
Entrepreneurship
The word entrepreneurship was first written in the year 1730, by an Irish economist Richard
Cantillon, in his essay explaining the nature of trade. He explained entrepreneurship as a
manifestation by taking risk when buying, paying a certain price with the aim to sell further with
unsteady value. Entrepreneurship can also be described by using the following attributes such as
professionalism, creativity, risk taking and competitiveness. Today entrepreneurship has a much
broader definition, describing each entrepreneur by his own unique way of performing business.
(Tomanic Vidovic, M, 2011)
The father of entrepreneurship is by so far Austrian economist Joseph Alois Schumpeter, where
he uses entrepreneur as a key place in his interpretation of capitalism. As per Schumpeter, the
entrepreneur is the answer of all economic changes and development (innovation). As we know
innovations are the main drivers of economic development, the entrepreneurship is a name for an
activity which consists of making innovations, and holders of those activities are entrepreneurs.
Entrepreneurship is defined as starting a business. Once the entrepreneur develops a business
model and acquires necessary resources, he or she becomes fully responsible for the success or
the failure of the business. That is why the entrepreneurship has been claimed as one of the major
drivers of economic growth in the world.
As per modern understanding of entrepreneurship David Birch, 1987 has identified the following
key facts: small enterprises are the motor of economy growth, they are creators of wealth and
employment through innovation, they provide mechanism for fair distribution of capital based on
innovation, diligent work and taking risk. (Tomanic Vidovic, M, 2011)
5.1.1
Entrepreneur
The word entrepreneur derives from French word which literally means one who undertakes a
certain task, entrepren to undertake. (Latin inter + prendere to take.)
Entrepreneur is a symbol of a leader or a person in charge who is not afraid to take risk,
exercise initiative, and takes advantage of market opportunities. He or she plans, organizes and
employs resources by innovating new or improving existing products or services.
Entrepreneur is a person who on time identifies chances, gets necessary resources, completes the
action plan and in return gets rewarded.
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The main characteristics of a successful entrepreneur can be defined by the following qualities;
-
A must for achievement,
Readiness to take risk,
Has high level of confidence,
Creative,
Innovative,
A visionary,
Relies on personal instincts. (Penezic, D.N., 2010)
5.2.
Internationalization
How can we define internationalization? What comes first in our mind when we come across the
meaning of international? What are the characteristics of internationalization?
The economy defines internationalization as a process of “increasing involvement of an
enterprise in international market”. (Wikipedia, 2014)
When we refer to internationalization we often think of business whose major international
business activity is export. Export is considered a way to increase growth of firms by tradition.
However, in the last decade, firms are involved in different business activities as a way of
internationalization in order to achieve competitive advantage. Some of these activities are:
partnership with foreign companies, direct foreign investment, cross border networking and other
activities in order to facilitate exchange of technology and knowledge enabling SMEs to
formulate a strong international business strategy.
Also, the internationalization is often used as a synonym to transnationalisation or
multinationalization defined and characterized by “transfer of re-localization of resources,
mainly capital and to a lesser extent labor – from one nation economy to another” (Daszkiewicz
N & K. Wach, 2012). The authors distinguish multinationalization as a narrower term than the
internationalization. Multinationalization is obtained or reached by direct subsidiaries,
acquisitions and other forms of cooperation while internationalization defines as any kind of
international activity. (Ibid, 8)
The EC 2010 Final report and study on European SMEs which included 9,480 SMEs in 33
European countries during the spring of 2009, categories’ and refers internationalization to all
activities that put SMEs into a “meaningful business relationship with foreign partner” (EC,
2010). This includes exports, imports, foreign direct investment (FDI), international
subcontracting and international technical co-operation.
5.3.
Globalization
When exploring internationalization we cannot ignore globalization. Globalization as a much
younger concept has become a popular theme in 1990s. Daszkiewics, N. & K. Wach (2012)
define globalization in macroeconomics as a “phenomenon of increasing globally diverse ties
between the economies, following the increasing size and growing diversity of transactions of
19
goods, services and international financial flows as well as technology transfers as a result”
A good definition of globalization by Stiglitz, (2002, 9) is a “closer integration of the countries
and peoples of the world which has been brought about by the enormous reductions of costs of
transportation and communication, and the breaking down of artificial barriers to the flows of
goods, services, capital, knowledge, and (to a lesser extent) of people across borders”.
As per Begg. I., et al., globalization is perceived and seen by the public as diverse developments
“starting from various cross-border economic activities through the progress in technology and
communication to social and cultural transformations.” (2008, 18).
5.4.
Small and medium size enterprises
The concept of small and medium enterprise (SMEs) refers to a firm in all sectors which does
not exceed a particular size. The most used quantitative criteria to determine if a firm belongs to
small or medium is the number of employees and turnovers.
The European Commission defines SME by the following category: “The category of micro,
small and medium-size enterprise is made up of enterprises which employ fewer than 250
persons and which have an annual turnover not exceeding 50 million euro”.
The category of SMEs in Serbia is also determined by the number of employees, annual turnover
and the value of the capital as per the Law on accounting and revision from 2006 year. (See table
below). Micro enterprises have up to 9 employees, small size enterprises have from 10-50
employees, while medium size enterprises from 50-250.
Picture 1. Criteria for determining medium size enterprise in Serbia
Average number of employees
Medium size enterprise Annual turnover
Average value of the capital
From 50 to 250
From 2.500.000 to 10.000.000 €
From 1.000.000 to 5.000.000 €
By looking at the medium size enterprise criteria, it is easy to determine the micro and small
enterprises if they do not fulfill the above criteria.
One of the main characteristics that determine and separate SMEs from large companies is the
dynamics and flexibility. Small and medium size enterprises are able to adapt faster and more
easily to risky and unstable economic conditions in everyday business ventures. In order for
SME to survive and stay competitive it needs to be able to adapt to challenges they face in the
era of globalization. Our interest is how and what steps do they take in order to react and adapt to
the challenges they face? As per Daszkiewics, N. & K. Wach (2012) globalization and
internationalization are both chances and threats for small and medium size enterprises.
However, we can see SMEs as enterprises which have advantages over large enterprises. One of
the key advantages is having no barriers in terms of hierarchy and flexibility especially when it
20
comes to making decisions, and need shorter period for response to the needs of the consumers
and the market. The SMEs are also characterized by making easier partnering with enterprises
which are suitable for achieving synergetic business results, as per Paunovic and Prebezac.
(2011, p.60)
The above mentioned characteristics are also, at the same time, motivation factors that make
SMEs go abroad. The same authors point out that there are four basic motives for SMEs going
international; unique product, technological advantage over competition, achieving economies of
scale and wanting to use all potential business opportunities in foreign markets.
21
6. THEORIES OF INTERNATIONALIZATION
In order to understand the process and the phenomenon of internationalization we shall look at
and observe different theories of internationalization. By looking into different theories we aim
at getting a better understanding of the main reasons why SMEs turn to new foreign markets on
their road to internationalization.
After many approaches to research of SME internationalization, no single theory of
internationalization has been received as universal. There are many classification criteria of
existing models and the attitude of the researchers towards the theory of SME
internationalization and has been changing through the past decade.
Up to 1970s internationalization of business as a research topic has been more concerned by the
transnational corporations and large enterprises and not SMEs. This fact was due to many trade
barriers which SMEs could not overcome such as capital, personnel and skills.
Overcoming barriers to international trade by trade agreements such as: EC (European
Community, NAFTA (North American Free Trade Agreement), ASEAN (Southeast Asian
Nations) and ESM (European Single Market), have changed managerial view towards
internationalization. As managerial view changed so did the SMEs. They turned to foreign
markets. The internationalization of the economies and globalization has also influenced the
researcher’s perception of small firm internationalization.
The most famous model of internationalization and also the pioneer is Johanson’s and Vahlne’s
research proposal dated 1977 or better known as the Uppsala School of internationalization.
6.1.
Some common theories of Internationalization
Various theories of internationalization process suggest that certain types of SMEs
internationalize by following the ‘stage model’ expressing a cautious and progressive behavior
(Uppsala model), whereas other types of SMEs are known as “born globals” where they
internationalize from the very start of their establishment or foundation.
The best known and most popular theory of internationalization is the Uppsala school of
internationalization (later referred as Uppsala model) This theory states that a company first
begins from their home or local market and gradually turn to foreign market and start to
internationalize. The company gradually builds up its knowledge regarding foreign market
including (culture, language, political system, level of industrial development and all other
necessary information) until it turns to foreign market.
The Uppsala model is also called the incremental internationalization model. The firm goes
gradually through stages acquiring specific knowledge in each of the stages. The first stage is
obtaining knowledge about the foreign market by doing business in that very market. This first
stage is important because it directly influences deciding to move to the next stage. The first
22
foreign contact is usually initiated by a direct order from a foreign market. When the orders
increase the company meets the demand through an international agent. If all goes well the
management of the company move to the next stage or third stage by establishing a subsidiary
abroad. The final stage or internationalization process is opening a manufacturing facility in the
foreign country. (Paunovic and Prebazac, 2011)
Picture 2. Uppsala model process
Source: Internationalization theories, internet
The Uppsala model of internationalization was the result of research made in Scandinavia by
Johanson and Vahlne, made on industrial enterprises in 1977 under the title “Internationalization
Process of the Firm”. No matter how often this model is used as model for all companies that
started their business abroad, and used as comparison for many researchers it has found criticism
also. The reason for its criticism was and still is due to not giving clear explanation as to why
some small and medium size firms start to internationalize and others stay in the domestic
market. Besides that, it is also unclear why some international firms slow down their expansion
while others continue their expansion in different markets.
In today’s business this model, the Uppsala model, either cannot be fully connected or it does not
reflect today’s global market and reasons why SMEs internationalize.
There are other models of internationalization of which the following are the most frequently
mentioned in research studies.
 The Systematic planning models see internationalization as a systematically precise and
planned process that happens gradually (step by step) and that uses analytically precise
market research to increase international performance enterprises. (Paunovic and
Prebezac, 2011)
23
 The Accidental perspective model implies that the internationalization process is
dependable on the present situation of a company. The environment and the industry
structure of a company determine and is part of the marketing strategy of the company.
When conditions meet for going abroad the company goes international.
 Hybrid model of internationalization – created by integrating experimental learning of
the Uppsala model and the systematic planning model.
 “Born globals” – or International new ventures (INV) global start-ups and instant
exporters. Born global phenomenon is more common today as internationalization is less
complicated; it involves less risk because of low trade barriers and cheaper, faster
transportation and communication. McDougall and Oviatt in 1994 suggested that some
SMEs are international from the very start or at founding and they do not follow the
successive stages as Uppsala model.
24
7. KEY MOTIVATION FACTORS OF INTERNATIONALIZATION
Why internationalize?
Globalization, technological, political and economic changes have long ago been the main and
still are the key drivers for escalating internationalization of SMEs today.
The small and medium size enterprises are aware that in order to stay competitive and not fall
behind the market they need to enhance their position. One safe way to become competitive is to
go global. Another important reason as well as motive for SMEs to be “export oriented” is
because it showed a higher growth of turnover and employment, and it brought higher level of
innovativeness. (EC 2014, 61)
Even though the SMEs are aware of the benefits that internationalization brings to their business
and overall existence, there is still not enough activity towards going global. As per the findings
of EC Survey 2009-2010, Opportunities Internationalization SMEs, 25% of SMEs in the EU
have been active in exporting but only 13% are active in markets outside the EU. EC (Ibid, 61)
This clearly shows that there is still a need to support internationalization process and a need to
make the environment suitable for SME internationalization.
Picture 3. Different entry modes and plans to start the activity of internationalization
Sources: EC (2014)
25
Internationalization is a process that can happen rapidly and often starts in stages. When it
happens, it is a major change for the company. However, before the process of
internationalization happens, and the entrepreneur decides to move to a foreign market certain
preconditions must be met. The preconditions which likely determine the moves are; the size of
the local market, the market position and the enterprise flexibility, development of the sector,
management knowledge and capabilities and similar. Nevertheless, all of the above is not
possible if the enterprise does not have a good marketing strategy.
Even though the multinational companies (MNCs) 3 mostly control the market through
standardized products and services, there are still numerous highly specialized niche markets for
SMEs to try and enter the foreign market. (Svetličič, M. et al, 37)
There are many motives for turning to foreign market. By reaching foreign markets the
enterprise gains many benefits and profits from it. It gives access to new and larger markets, it
promotes enterprises’ growth, it improves competitiveness and it acquires knowledge and or
technology.
Here are some of the most common motives of SMEs that have gone global, as per the EU
survey SME Observatory (2012).
As per Paunovic and Prebezac, (2010) the basic motives for going international of an enterprise
is having a unique product and technological superiority, and or, new opportunities on foreign
market or potentially better sales.
To go abroad another very important condition needs to be met in the firm. The firm must have
the so called “entrepreneurial factor”. The entrepreneurial factor is described as a wish from the
manager/ director of an enterprise to expand its present business and to try to gain growth by
turning to foreign market. This scenario usually happens when the growth of a firm is no longer
possible or when the domestic market is saturated and the owner of the firm wishes to strengthen
the enterprises’ sales outside its home. (Paunovic and Prebezac, 2010). This motive is known as
the push factor. There is also a pull factor when a company recognizes an opportunity in foreign
market or if there is a demand for a product of the company in a foreign market. (Daszkiewics, N.
& K. Wach, 2012, 14).
For an enterprise to turn to foreign market there must also be “stimuli”. It means that something
or someone, from outside or inside must initiate the process of internationalization. An
opportunity of a certain foreign market has a strong influence on the enterprises’ willingness to
internationalize. As per Cavusgil, 1982 explanation, when n enterprise receives certain internal
or external stimuli and when both internal qualities as well as environmental factors are
favorable they will be the stimuli for turning business outside the domestic market.
3
Multinational cooperations (MNC) or multinational enterprises (MNE) are defined as organization that has
ownership on products or services in more than one country outside their home country.
26
Moving from old routines to new ones towards internationalization
Internationalizing enterprise must unlearn old routines and practices before new routines and
practices can be learned and established. Organizational inertia is often a function of enterprise
age. The older an enterprise the more established the routines and practices are and the higher the
level of organizational inertia. It is important therefore that SMEs internationalize as soon as they
are ready, instead of waiting for an unnecessarily longer period of time. SMEs face a lower
threshold of organizational inertia and can make easier departure from existing practices and
learn more quickly in international markets.
Picture 4. Motives for internationalization of SME
Stimuli or Motives
Access to larger market,
New knowledge and technology,
Innovations,
Introduction of new product or service
Benefits for the enterprise
Firm growth,
Competitiveness,
Flexibility,
New management and staff skills
Access to new culture and language
27
8. ENTRY MODES TO FOREIGN MARKET
As we have learned there are many motives behind internationalization of SMEs. The most
frequent motive is to gain access to new and larger markets in order to achieve growth. As
McDougall & Oviatt state (1966) the most common goal which attribute to international
expansion is enterprise growth and improving enterprise profitability. In order to remain
competitive, enterprises go abroad to have access to know-how and technology. Different
internationalization processes are undertaken by enterprises in order to achieve different strategic
goals.
Before the entrepreneur considers going abroad it is necessary and important that he/she makes
three basic entry decisions;
 Which market?
 When to go abroad?
 The scale, the enterprise can enter large or small scale depending on the involvement of
commitment the enterprise is willing to have.
Choosing in which way to enter a foreign market is a complex matter. The choice of modes of
internationalization greatly depends on internal and external factor. Deciding which mode of
internationalization to implement depend on the following: the scope of capital commitment, the
management commitment, the scope of control and risk, potential profits and input costs.
(Daszkiewicz & Wach, 2012, 57)
Also the entry modes differ in the degree of risk they present, how much control and
commitment of resources is required and the return on investment it promises. (Wikipedia, 2014)
There are two types of entry modes: equity and non-equity modes. The non-equity modes include
export as well as contractual agreements, while equity modes include joint venture and wholly
owned subsidiaries.
Picture 5. Entry modes to internationalization
Different entry modes to foreign markets
Exporting,
Importing
Licensing,
Franchising,
Turnkey contracts,
International agents,
Source: Own study
28
Strategic alliances,
Joint ventures,
FDI
8.1. Export and import modes of entry
The synonym for export and import modes of entry of a firm to foreign markets is also referred
to as sales internationalization. These activities are associated with low risk. This is the most
frequent mode of internationalization conducted by SMEs. This entry mode, export or import
modes, begins usually when a business reaches all its capabilities on the local or domestic market
and has achieved an appropriate volume of production. During this phase the enterprise can
expand its market and begin to export (push motives), or the company can be motivated to enter
into foreign market to make profit (pull motives). Exporting can be direct or indirect.
8.1.1 Indirect export
An indirect export is characterized by exporting through domestically base export intermediaries. In indirect exports the company or exporter has little or no control over its
products in the foreign market. The indirect export can be made by export trading companies
(ETCs) or export management companies (EMCs), by export merchants, or confirming houses
and nonconforming purchasing agents. In the charts below we show what are the advantages and
disadvantages are between direct and indirect exports.
Table 1. Advantages and disadvantages of INDIRECT export
Advantages
Disadvantages
Fast market access,
Low risk,
Low entry cost,
Low staffing requirements,
No marketing costs,
Management team is under less pressure as the
export team is outsource,
No direct handle of export process
Dependency on domestic intermediary,
Little knowledge about the foreign market,
Little control over distribution, sales,
marketing,
Possible making wrong choices of distributors,
The intermediary can find a better provider or
start a production in the country
Source: Own study
8.1.2 Export
Direct exporting is mainly characterized by having no intermediaries. Direct export is the most
basic mode entry made by an enterprise capitalizing on economies of scale in production
concentrated in the home country and affording better control over distribution. Direct export can
be made by sales representatives or importing distributors.
Export is considered an easy and a fast way to enter foreign markets because of its low
commitment and risk. When an enterprise decides to export, it does not need to make substantial
resource commitments to a foreign market as it is the case when making foreign investment.
When exporting, SMEs do not have to deal with complexities of establishing a foreign subsidiary.
29
Exporting provides SME faster access to a foreign market because it uses existing production
facilities to serve its foreign market rather than building a new one in the new foreign market.
(Lu, W. Jane., 2002) p. 87
Direct export can be done through a foreign agent or distributor. The advantages of this kind of
entry mode is low entry cost, little or moderate financial risk, the agents are there to overcome
difficulties of entry to foreign market, low staffing requirements and marketing costs. The
disadvantages entering foreign market through an agent or distributor is high dependency on a
foreign agent, high costs for representative office and transport costs, potential trade barriers,
inability to gain international experience and knowledge.
Table 2. Advantages and disadvantages of DIRECT export
Advantages
Disadvantages
The enterprise has control over the selected
market as well as a choice of foreign
representative companies,
Start-up costs are high,
Is able to get good information feedback which
helps them develop and maintain good
relationship with the buyers,
Requires more investment of time, resources
and personnel as well as change in the
enterprise itself (organizational change),
Protection of trademarks, patents, goodwill as
well as other intangible property,
Need more information,
Potentially greater sales and profit
Higher risk,
Need more time to enter the market opposed to
indirect exporting.
Sources: Own study
8.1.3 Contacts with foreign partners
Another form of internationalization of SMEs is by implementing cooperative relations entering
into contacts with foreign partners. This could be licensing, franchising, subcontracting and more
sophisticated forms of cooperation such as joint operating with foreign partner.
At a higher level of internationalization a company can open a foreign branch or a foreign
subsidiary (joint venture, wholly-owned subsidiaries). Investments in branches and subsidiaries
provide lower production costs and direct presence on foreign markets4.
4
Foreign subsidiaries can be in two ways: by acquiring a local company known as Brownfield investments or
investment realized from the beginning (Greenfield investments).
30
8.1.4 Strategic alliance
A strategic alliance is a whole series of different relationships between companies that market
internationally. It is a non-equity based agreement where companies remain independent and
separate. Basic element of the term alliance is that each company included in partnership remains
independent besides the partnership agreement.
The main advantages of alliances is to reduce risk, to reduce the time of innovation of a product,
easier and faster access to the market especially for companies with no or little experience,
access to technology, rationalization of production (if two companies produce similar products
by combining their productivity activities they are able to reduce costs per unit which may result
in mass production), cooperation. Strategic alliances can be in different forms such as licensing,
franchising, joint ventures.
Most often examples are shared manufacturing, research and development arrangements (R&D),
distribution alliances, and marketing agreements.
Alliances are different shapes of partnership such as licenses, cooperation’s and mutual
investments (Djordjevic & Djordjevic, Milisaveljvic, 1992, 42)
8.1.5 Licensing
Licensing is defined when an organization charges a fee for the use of its technology, brand and
or expertise. It is characterized by sales of rights which are covered by a patent or design
(intellectual property) to be used for commercial purposes.
Deciding to go internationalize through licensing the enterprise has relatively low entry costs as
well as financial risk. From the beginning it provides a strong presence in the foreign market
through the commercial brand and logo.
Advantages are the knowledge of local conditions by the licensee. The company can avoid
possible risks involved when developing a product and the market, by using the already
developed product, market.
Licensing is a good way for internationalization of small companies with little capital and no
experience, and no other way of going international. The user of the license receives access to
resources of the foreign partners (name, experience, technological process, patent, business
secrets etc.) with little investment. At the same the giver of the license has access to other foreign
market. However there are also disadvantages which should be considered if a firm decides to
go abroad through licensing.
The biggest fear is losing control over technologies and know-how, threat of disloyalty of
licensee, lack of control over maintenance of the quality on the foreign market, as well as
relatively low income in this type of entry mode.
31
8.1.6 Franchising
Franchising is a more complex package than licensing. Franchising is when an organization the
franchiser provides branding, concepts, expertise in one word most facets that are needed to
operate in an overseas market to the franchisee. Management tends to be controlled by the
franchiser (good examples are Coffee Republic, McDonalds’s Restaurants etc.) The advantages
of franchising are by all means a possibility of rapid foreign expansion both to near or simple
expansion or to large/distant markets. Disadvantages are difficulties in maintaining uniform
standards and quality, sharing profits gained and possible conflicts between the partners as well
as possible franchisee’s disloyalty.
8.1.7 Joint venture
Joint venture subsidiary (JV) – tends to be equity-based, a new company is set up with parties
owning a proportion of the new business. It is a creation of a foreign subsidiary jointly controlled
by the parent company and a foreign partner. Reasons why companies set up joint ventures are
mainly to assist them to enter a new international market. The companies may want to access
technology, core competences or management skills, gain entry to foreign markets, access
distribution channels (manufacturing and R&D are most common form of JV.
One of the main reasons for forming JV is the need to involve human resources with adequate
knowledge necessary for successful internationalization.
The advantages of joint venture mode of entry are to share knowledge as well as the risk between
the exporter and the partner. High costs and risk, possibility of conflicts and registration
procedures are some of the disadvantages.
As per the Eurobarameter EC (2007) one of the main reasons for EU SMEs investing in foreign
subsidiaries or joint ventures is dominantly geographic. In this way they are close to the final
customer or the key business partner. Another reason for engaging in foreign business
partnership is to reduce labor costs, one of the many constraints that EU SMEs face. (Ibid, 21).
Low taxes, less red tape and lower administrative burdens are also some of the reasons for such
foreign investments.
8.1.8 Turn-key contracts
Turn-key contracts – strategies to build large plants, where is often included a training and
development of key employees when skills are sparse. The advantages of this entry mode is
gaining higher profit, a chance of permanent presence on foreign market after completion of the
investment and ability to earn returns from technologies. The turn-key agreements have high
costs, financial risks and are often difficult to implement.
8.1.9 FDI
Foreign direct investment (FDI) – is an entry mode when a company wants to own an overseas
plant, machinery and labor. This way the business becomes localized meaning the company
manufactures for customers in the market in which is trading. By FDI the firm gains local market
knowledge, is able to adapt products and services to the needs of local consumers, however it
always involves risk associated with the local market.
32
FDI can be another option of growth strategy. Various tariff and non-tariff barriers by host
country governments can influence the net benefits achieved from export strategy. By
establishing subsidiaries in foreign markets and internalizing markets for proprietary assets
exchange, FDI enables firms to minimize transaction-related risks. Also, FDI in diversified
locations can contribute to development of new knowledge and capabilities by providing access
to various location based advantages.
33
9. BARRIERS TO INTERNATIONALIZATION
We have learned what the most common motives to internationalize are and what are the
different entry modes to foreign market nevertheless there are still many obstacles that slow or
even stop SMEs going international. The importance to know and at the same time understand
the barriers will make the internationalization process much more inviting and promising for
other future SMEs who are willing to turn to new larger market.
Many research surveys have been done in order to find out what are the most common barriers to
internationalization of an enterprise. By targeting them and understanding the background of
their existence we might come to making the road to internationalization much easier and
reachable. Some problems are characteristic for all SMEs and others are a product of constant
changes in business, politics and economy. Support programs and services for SME
internationalization are important as they play a major role in helping SMEs adjust to constant
changes in the global economy.
Many SMEs have gone through the experience of having obstacles to their road to
internationalization, in some way or another. As per Paunovic and Prebezac (2010), one of the
key barriers to internationalization of SMEs is the lack of expertise relating to entrepreneurial,
managerial and or marketing skills.
Second on the list of barriers to internationalization is complicated bureaucracy. Other stepping
stones are difficulty in obtaining financial resources or funds, little or insufficient access to
information and knowledge about the new market, language and cultural differences they
encounter, lack of government incentives for internationalization and so on. (See table 1)
According to the findings of EU Observatory of European SMEs 2006/7 survey, one of the main
obstacles to international expansion is lack of market knowledge. (Figueira-de-Lemos, F., et al,
2010). But even when managers/directors do get the required knowledge to operate in a foreign
market, many of them face another challenge and that is how to best use the knowledge they
have gained from the fast changing world. Usually time is crucial when it comes to making
decisions. And, little time is given from the time it takes to learn and to make a decision. Usually
this means the managers must make fast decisions based on the achievable knowledge within a
massive lack of knowledge (Ibid, 143). That is why they say that internationalization is a process
outcome of adjustment to changes within an enterprise and the enterprises’ environment.
Also, important to mention and to know, by the EU SME Observatory survey 2006/7, less
important constraints that SMEs faced were different regulations that exist and lack of
management resource. Unfortunately we can say these two mentioned constraints, different
regulations and management resources are still very present and are put on the list of obstacles
for SMEs. (Eurobarometer EC, 2007)
34
Table 3. Barriers to internationalization of SMEs
Source: UNECE, 2002
A survey done by the World Bank in year 2001 has given us an overview of the average level of
obstacles for different size companies and has come to the following conclusion. Regardless of
size, country or region the main obstacles for doing business are funds, regulations and taxes,
policy instability, inflation, exchange rate, corruption, street crime and organized crime.
(Schiffer, M. & B. Weder, 2001)
Recommendations from Serbian Chamber of Commerce on new economic policy for the period
2012-2016, have pointed out obstacles which SMEs face in Serbia. These are the key obstacles
which, if eliminated can bring, and contribute to making promising business climate and or
creating a good environmental space for entrepreneurs.
Creating a business environment which is inspiring for SMEs means, in the first place, reducing
costs of business where foreign investments are attractive and sustainable. As per Serbian
Chamber of Commerce, one of the key obstacles is having too many regulations, or so called
“hyper production” of regulations. In this scenario the entrepreneurs have little or in many cases
no time to be involved in the process of their establishment and in the later stage their
implementation. (SCC, 2012)
35
The regulations are often, as per the report, complicated, incompatible to the current business
environment, the language is often written in “difficult to understand” language, because of
taking regulations word by word from the EU legal acquis, without truly understanding core
meaning and mechanism for which it is used. (Ibid, 2012)
In order to have regulations that would help and protect entrepreneurs they must be used and
adapted in such a way that they are adapted to the present economic development as well as
fitted as per the administration capacity. (Nova ekonomska politika, p. 5)
The SMEs lack the capacity to follow up all changes in the regulations. Having scarce financial
resources the SMEs are unable to engage experts or consultant services outside their company,
who would help them, tackle the web regulations. Often the case is that small companies are
introduced to new regulations for the first time only when they receive a fine. (Ibid, 7)
Table 4. Key opportunities and barriers of SME internationalization
Opportunities
 There are no barriers to hierarchy
 Flexibility in decision making process
 Partnering is made faster and easier
Barriers




market knowledge,
managerial and or entrepreneur skills,
inability to use the knowledge gained,
little time to learn and to make decisions,
making fast uncertain decisions
 financial resources, funds
 language and cultural differences
 governmental initiatives for
internationalization
Source: Own
In our questionnaire, one of the questions (see Annex 1) that we have asked our study case group
was –
 What were the most common obstacles in their internationalization process?
The results were as following;
Not surprisingly, the results came out to be very similar compared to EU SMEs.
The most common obstacle in their process of internationalization is by all means limited
financial resources and insufficient knowledge of the foreign market with a percentage of 28%
each. The third obstacle that our study group pointed out was difficulty in overcoming problems
in terms of administrative regulations (bureaucracy) in foreign countries. Interestingly
managerial or entrepreneurial skills were not among the top three obstacles in the
internationalization process. (See graph below)
36
Graph 1. Obstacles most frequently encountered in the internationalization process
Managerial skills
28%
0%
Financial resources
0%
Knowledge about foreign market
Adequete labour force
28%
Administrative regulations
17%
27%
None of the above
Source: Our survey – SME questionnaire
Regardless of the percentage and difficulty it has on the scale, it is important that all of the above
obstacles listed should be taken seriously and should be recognized when creating support
measures for SMEs that have business outside the local market. This is important in order to
secure that any enterprise going or planning to internationalize its business overcomes these
barriers from the start. This will make their process of internationalization much easier and at the
same time more inviting. Also, the SMEs should be ready in advance, knowing which obstacles
they may encounter when going international.
37
10. EU BEST PRACTICES
10.1. Available support services
Having understood the importance of internationalization, not only for the company, but for the
country’s economy and overall better standard of living of its citizens, a number of support
measures have been implemented in order to stimulate internationalization for SMEs among the
EU Member States.
The importance of SME internationalization is very descriptively expressed in the EC (2014)
report
- “in 2013 across EU28, some 21.6 million SMEs in the non-financial business sector
employed 88.8 million people and generated €3,666 trillion in value added. Or to put it simpler
99 out of every 100 businesses are SMEs, as are 2 in every 3 employees and 58 cents in every
euro of value added” EC (2014, 6)
The final EC (2011) report on Opportunities for internationalization of SMEs, a total of 310
support measures have been identified. The support measures that were mostly present were in
the following areas:
-
Grants and subsidies for various activities to help SMEs enter new markets;
Information about internationalization on market opportunities or and regulations;
Information on trade missions, trade fairs and events such as matchmaking;
Advice and consultancy. (Ibid, 31)
A problem that still remains present in EU is that very few SMEs are doing business outside the
European market. As the backbone of the European economy and as the “vehicle to restoring
growth in the EU”, the EU has realized the need to support SMEs in internationalization process
and to provide support services is a priority with a focus on doing international business with
third country markets. (ECSIP, 2013).
It is of outmost importance that SMEs are given help in receiving necessary information on how
to expand their business outside the EU, improve the consistency of the activities and to fill the
gaps in the existing services. (Ibid, 11) Promotion of internationalization of SMEs and helping
them go international is defined in one of the seven flagship initiatives of the Europe 2020
strategy.
Interestingly, when the EU business community was asked ‘what type of support’ they recognize
as that of the highest value, the answer was very high on: marketing and promotion, and support
to sector programs. For effectiveness, high scores were given to managerial and staff trainings.
(EC, 35)
The ECSIP report Study on Support Services for SMEs in International Business has made a
survey for the European Commission on available support services provided to the EU members
and third countries. It is interesting to look what support services are provided in the context EU
38
– Serbia. The study was done accessing the scope and availability of support services for EU
SMEs inside and in 25 countries outside Europe which included Serbia.
The Small Business Act of 2008 requires that SMEs have to be supported in doing business on
third country markets. The internationalization principle of the SBA expects the “EU and
Member States to support and encourage SMEs to benefit from the growth of market outside the
EU in particular through market specific support and business training activities”.
As per the report ECSIP (2013) a number of 25 organizations and support services have been
identified. (Ibid, 31)
Support services to EU SMEs, general programs are the Your Europe Business Portal and the
Enterprise Europe Network (EEN). The EEN has a large network of contact points in the third
countries to help EU SMEs expand into these markets.
The Your Europe Business Portal and European Small Business Portal contain valuable
information for EU SMEs on support services available in the EU, However they don’t provide
direct support to SMEs going abroad.
Another support organization is EUREKA5, managing the Eurostar programme offering financial
support to EU SMEs targeting international research. The Eurostar main aim is to stimulate
SMEs to lead international collaborative research and innovation project by offering easier
access to funding and support measures. By focusing on the needs of SMEs, helping them to
develop new products, processes and services, they provide them with access to international
markets. (EUREKA, 2014)
Companies that want to do business abroad, wish to establish new and lasting business
relationships and want to share their experience should visit B2fair 6 . This powerful support
measure helps them form new partnerships in foreign markets worldwide. The ideology of this
web site is to the respond to the trend of globalization and competition. By matchmaking they
provide assistance to companies in exploring new business opportunities. It is made friendly
user, a company only needs to make an online registration giving their portfolio which is
automatically accessible to other registered companies in the b2fair.
Business environment
For SMEs it is very important that they have a sound business environment, in which
entrepreneurs are encouraged to start their own business, to create a platform, where the SMEs
are welcomed and are helped in various forms including internationalization of their business.
Due to bad experience of previous entrepreneurs, who started their own business and due to
obstacles such as inability to finance or return credit loans, or lack information regarding
potential partners or financial institutions they had to close down very soon as well as decided
not to start their own business right from the beginning before going international.
5
6
http://www.eurekanetwork.org/
www.b2fair.com
39
In 27 EU member states the type of service offered by public and private organizations are
mostly in terms of providing seminars and workshops (355) or 12% ; business cooperation and
networking 338 (11%); advice and consultancy 370 (12%), information on rules and regulations
286 (9%); trade missions, trade fairs and matchmaking events 280 (9%); identifying and
arranging meetings with potential clients 264 (9%); the lowest service provided is insurance
services 69 (2%) in the public sector. The private organizations mostly concentrate on providing
service such as advice and consultancy 51 (14%). Along with providing information on market
opportunities, business cooperation and networking, identifying and arranging meetings with
potential clients, seminars workshops and staff training. (ECSIP, 70)
Progress has been made in the EU on creating a SME friendly business environment. Member
states have substantially improved the business environment for SMEs, especially from the best
practice exchanged in the context of the European Charter or Small Enterprises endorsed in
Feira in year 2000, by implementing the 2006 Spring European Council conclusions i.e. one-stop
shops for company registration reducing the time and costs required to start a business. (Ibid, 2)
In March 2008, the European Council has expressed strong support for an initiative to further
strengthen SMEs known as the “Small Business Act” – SBA.
“A climate in society should be made where entrepreneurs are recognized, where individuals
consider the option of starting their own business as attractive and understand that SMEs
contribute substantially to employment growth and economic prosperity”. (EC, 2006)
The “Small Business Act” aims to improve the overall policy approach to entrepreneurship to
anchor the ”Think Small first” principle in policy-making from regulation to public service and
to promote SMEs growth by helping them overcome problems which slowdown their
development. (Ibid, 3)
The Small Business Act is a wide ranging set of pro-enterprise measures designed to make life
easier for SMEs. (SBA, 2011). Consisting of four legislative proposals; the member states have
signed a set of 10 SME-friendly principles which should be used to guide the conception and
implementation of policies of both EU and national level all for the purpose of enabling SMEs to
release their full potential. (Ibid, 2011) The main plan is to ‘Think Small First’ placing SMEs in
the forefront of policy-making to ensure that new regulations do not add more burden to their
business. The SBA has helped deliver billions of Euros in new finance to SMEs, help SMEs win
public procurement contracts and access EU research funding. It also helps people start their own
business and company easier.
The SBA has helped SMEs in many ways like drawing distinction between micro, small,
medium-size and large companies guaranteeing that any burden on business is proportionate.
Support such as reduced fees, simplifying VAT invoicing, cutting down on administration
burdens, reducing red tape or administrative burden (too much time is spent on paper work
instead of doing business), etc.
One-Stop Shop – is a service helping entrepreneurs turn their ideas into business. EC aims are to
reduce a maximum of 1 month to grant business licenses and permits for starting a company and
or business. A good example is Slovenia with electronic one-stop shop offering business people
40
to register a company in three days or less saving €10.2 million per year for Slovenian SMEs.
(SBA, 2011) In 22 countries there is a ‘single point of contact’ helping companies that want
services across borders. The European Commission is helping Member States make fully-fledged,
user-friendly eGovernment portals all with the aim to spend less time on administrative
procedures.
Another big challenge that SMEs face is by all means, the lack of appropriate type of financing.
The European Commission has recognized this and has set up a SME Finance Forum bringing
together organizations representing SMEs, banks and other financial institutions in order to
address issues in access to finance for SMEs. Making easier access to loans by supporting
financial intermediaries (banks, leasing companies, guarantee funds, mutual guarantee
institutions, promotional banks and other) in the Member States will provide loan guarantees
reducing SMEs risk and providing them credits.
The guarantee facility for small business is under the Competitiveness and Innovation
Framework Programme (CIP) administered by the European Investment Fund (EIF). They offer
loans up to €25.000, for creating new businesses and opportunities for people that cannot start
otherwise.
The Enterprise Europe Networks7 helps SMEs go international.
It brings together 589 business support organizations across 47
countries. The Network helps organize partner-finding events also
acting as one-stop shop for expert’s advice on various issues.
Recently the Network has opened 15 contact points in China and
South Korea providing European SMEs easier access to these new
attractive markets. (EEN, 2014)
This user friendly network contains a database with thousands of company profiles helping
SMEs find and meet potential business partners. The moment a person registers with the
Network giving its offer or request the data is immediately put into the database. Soon the person
will receive updates on all companies who are interested in the same kind of cross-business.
For Serbia a good example of the Enterprise Europe Network is that it has seven contact points
in Serbia such as; Mihajlo Pupin Institute, National Agency for Regional Development,
University of Belgrade, University of Nis, University of Novi Sad, Serbian Investment and
Export Promotion Agency and Serbian Chamber of Commerce.
One of the many advantages of the Enterprise Europe Network is providing services to SMEs
that want to go international or as they call it ‘going-international’.
The support is by organizing matchmaking events across Europe where SMEs can meet potential
business partners in person and exchange ideas for their future possible business.
The Enterprise Europe Network is divided into sectors in order to help SMEs establish contact
with the sector of their business. One of the sectors is women entrepreneurship which is
7
http://een.ec.europa.eu/
41
identified by the European Union as political priority in the Small Business Act. Already a
number of activities have been launched in order to encourage women entrepreneurs to start their
own business. At time of writing this survey a Women Entrepreneurship Group is being set up by
the Enterprise Europe Network and SME Internationalization portal is being made.
COSME – Competitiveness of Enterprises and Small and Medium sized Enterprises is an EU
support program, running from 2014 to the year 2020, with a planned budget of €2.3bn.
Support to entrepreneurs is one of the key priorities and objectives of the COSME. This resulted
in an Action plan – Entrepreneurship 2020 Action Plan which has improved three main
initiatives: Entrepreneurship education, improving business environment for entrepreneurs to
grow and flourish and role models and outreach to specific groups such as young people, women
or senior entrepreneurs.
The support to SMEs is given by providing better access to finance, access to markets, and
support to entrepreneurs and creating favorable conditions for business creation and growth. (EC,
2014)
The European Commission and the European Investment Fund (EIF) have signed an agreement
with the aim to help SMEs by providing them funding opportunities in the amount of €25bn.
Under COSME it will be possible to mobiles up to €25bn via leverage effects from financial
intermediaries in the period of next seven years. This will provide equity and debt financing for
SMEs. This will work in a way that EIF will open call for expression of interest to eligible
financial institutions that can apply (banks, guarantee institutions, funds etc.). After diligence
process the EIF will be the one to select financial intermediaries which are able to make new
finance available to European SMEs of all sectors. (EC newsroom, 2014)
The previous program Competitiveness and Innovation Program (CIP) expected that 90% of
beneficiaries with 10 or fewer employees with an average guaranteed loan of about €65.000 had
difficulties getting a loan. This will probably be the same case with COSME and they must
prepare to make the program more adjustable to that category of SMEs. Also the part of COSME
budget will be invested in funds for venture capital to SMEs which operate or plan to do so
across borders. Around €4bn will be invested for equity for SMEs growth and expansion.
Table 5. Summary of key support measures in the EU
EU Support measures
EUREKA – Eurostars Programme
Enterprise Europe Networks – Onestop shop
COSME
What kind of support
Financial support to EU SMEs targeting
international research.
European Joint program dedicated to
R&D performing SMEs
Helping SMEs go International
Database on thousand company profiles which is
divided by sectors
Entrepreneurship 2020 Action Plan
Support to entrepreneurs. Education, business
42
environment, outreach to specific groups
Source: Own
43
11. BEST PRACTICES IN SERBIA
11.1 Available support services
As per the 2013 EU Final Report, Serbia is continuing the implementation of the Small Business
Act and it participates in projects under the European Entrepreneurship and Innovation Programe
(EIP). The legal framework for access to finance has improved, as stated in the report, by
providing small credit-guarantee schemes and public start-up by the Development Fund.
However, there still needs to be more effort put in SMEs relation to the company’s registration,
business incubators and easier access to finance. (Progress report, p.36)
By ECSIP (2013) survey, in Serbia there is a number of support services for internationalization
process. For export services there are 18 in total, for import services 6, for technical co-operation
17, for setting up a subcontract 8, for becoming a subcontractor 6 and for foreign direct
investment (FDI) 6. Twenty-four organizations provide all of the above mentioned services for
SME internationalization process.
From the above we can conclude that there is a relatively wide range of support services already
present in Serbia. However it is up to the SME to find them and use them appropriately in their
process of internationalization.
The numbers of services by service characteristics are divided by financial support and non
financial support. Below table 6 shows the service sector and number of institutions and
organizations provided in Serbia.
Table 6. Support services in Serbia divided by financial and non financial
NON FINANCIAL SUPPORT
SERVICES
FINANCIAL SUPPORT
SERVICES
35 – business cooperation and networking
32 – advice & consultancy
30 – seminars, workshops
25 – staff trainings
24 – sectoral programs
21 – trade missions, trade fairs and matchmaking
events
28 – information on rules and regulations
27 – information on market opportunities
24 – identifying and arranging meetings with
potential clients
8 – credit guarantee scheme
18 – subsidies, grants
7- tax incentives
9 – other low interest credits
2 - Insurance services
Source: ECSIP, 2013 page 50
44
When asked about the general experience of Serbian companies the majority of the services offer
support to both existing and new businesses. However when looking at international experience
of companies the majority of the support services are both starting and experiencing businesses.
In Serbia there are only 9 support services which are specifically meant for doing business
abroad or starting to internationalize. (ECSIP, 64)
SIEPA, as a governmental organization promotes Serbian goods and services on foreign markets.
Related to internationalization SIEPA maintains investment and exporters databases, helps
Serbian exporters’ service international markets, and assists in promoting domestic products at
international fairs. (SIEPA, 2014)
Another important support body is the Serbian export credit and insurance agency (AOFI)
(www.aofi.rs) an official export credit agency of the Republic of Serbia established for the
purpose of export promotion and development of foreign economic relations. (AOFI, 2014)
The agency with other institutions works on the improvement of business operation conditions
for export economy in Serbia. Their mission is to promote export of Serbian companies by
financing and insuring export projects, all with the aim to improve the competitiveness of the
home economy and reach new markets. (AOFI, 2014)
As per our survey results the majority of Serbian SMEs have answered positively when asked
how well are they are informed about support services in terms of SME support programs or
projects.
Fifty six percent (56%) have answered YES to the question. Only a small number have answered
that they have been slightly informed about excising support measures and 20% have answered
that they have no knowledge regarding available support measures in Serbia.
Another important question that we asked our case study group was if they have received support
directly from the state or government. The majority, 67% have answered positively when asked
if they have received government support measure from the government and only 33% have not
received any aid. (See graph below)
Graph 2. Support measure received by the Government
33%
67%
YES
NO
Source: Own survey
45
Those who have answered positively have been asked to circle what kind of support measure
they have received from the government. The results show that support measure in terms of
financial support such as subsidies and grants are mostly present, the next support measure was
providing certification of products, systems for quality control and organizing participation in
various trade fairs and business events.
11.2 Other forms of support services in Serbia
An important and easy to access center in Serbia that provides information related to doing
business in the EU is the EU Info Centre – (EIC)8.
The staff at EU Info Centre is well informed about everyday problems that SMEs in Serbia face
and are there to give information as well as to motivate them in the best way using the
opportunities that the European market offers.
They have connections with experts of various profiles, and the EIC provides answers to all
questions regarding doing business in the EU. In average, the EIC gives answers to around 500
thousand questions a year, where each answer is prepared separately and has up to date
information. The EIC also foresees questions that might come up so they provide various
publications regarding short-term and long-term business. The information is usually given by
web site, as well as plan and organizes seminars and meetings regarding current economy in the
region. The EIC provide consultancy services covering wide spectra of sectors such as public
procurement, financing opportunities, marketing research, European law system, establishing
partnership and other useful information on internationalization. (EIC, 2014)
The European enterprise network (EEN) is already present in Serbia (www.een.rs). The site is
made available to all Serbian enterprises and entrepreneurs who are planning or already doing
business in the EU market. They provide information on various events, seminars, fairs,
matchmaking and similar. Those interested must become members of this network.
11.3. Projects supporting SMEs development in Serbia
Serbia has received many EU support projects for the development of SMEs in Serbia. The
majority of projects provide support measures such as help in organizing trainings, seminars,
establishing contacts with potential buyers, sellers and other business partners all aimed at
helping SMEs to become more competitive in the overall business arena.
Below are some of the key projects that have given support to SMEs in the field of capacity
building and doing business abroad.
8
(http://www.euinfo.rs/en.html)
46
 Support to Small and Medium Enterprises Development in Serbia
The project “Support to Small and Medium Enterprises Development in Serbia”, with the
starting date July 2013, has earmarked €3.5 million for a three year program. The project is
facilitated by the EU and carried by the European Reconstruction and Development Bank
(ERBD) through its Small Business Support team. The project, funded by the government of
Netherlands is known as EBRD Business Advisory Services programme (BAS). The overall
goal of this project is to connect more than 240 (two hundred and forty) Serbian SMEs with EU
consultants from leading European companies.
The main aim and plan is to provide advice to Serbian entrepreneurs by EU experts by
introducing them to new knowledge and skills, introducing them to top standards all with the aim
to win new markets. Hopefully, this project will increase productivity of SMEs.
The methodology of the program will be that experts from leading European companies come to
Serbia every six weeks and spend a week with their Serbian peers, providing them with
developing financial strategy, win standards, organize their business, raise the level of
competitiveness, deal with human resources, and so on.
 Improved SME Competitiveness and Innovation Project (ICIP)
This two year project started in May 2010 with 3 million Euros from pre-accession funds. In
collaboration with the Ministry of Finance and Economy, National Agency for Regional
Development (NARD) and other institutions and organizations. The project has made significant
progress in the system of support for SMEs and entrepreneurs. The project focused on supporting
competitiveness and innovation through capacity building of government institutions and
specialist Business Innovation Support Organizations (BISOs). Here are some of the main goals
of the project;
 Improve the quality, range and availability of business support services in Serbia for
SMEs and entrepreneurs, by creating a standardized model strengthening the business
support infrastructure, developed on the basis of an assessment of actual needs of
companies
 Establish and implement the Quality Standards for delivery of Business Support Services.
 Pool of international and national experts held several series of theoretical and practical
trainings for representatives of government institutions and business support
organizations as well as for businessmen. Implementation of provided know-how should
foster development of innovative and competitive SMEs.
 The special emphasis of the project was placed on raising awareness and disseminating
information on various support programs for SMEs to access to the European funds and
programs, as well as on the cooperation of academia and industry, aiming to increase the
innovation of SMEs.
47
 EU Project Support to Enterprise Competitiveness and Export Promotion (SECEP)
Another EU funded project implemented from 2009-2012 in value of €3.5 million. The main aim
was to improve the business competitiveness and export capacity of SMEs in Serbia.
One of the many benefits of this project was tackling the challenges of internationalization of
Serbian business creation of exporters association the - Exporters Association of Serbia (EAS)
the members of which have been used as case study for this research. With the creating of this
association the project wanted to raise SME’s awareness and skills in trading in foreign markets.
Besides this the project contributed in development of Serbian cluster networks enabling their
interaction with foreign clusters. SECEP project supported Serbian enterprises in B2B contacts
with foreign companies to provide opportunities for new export oriented business. And
promoting and providing participation of Serbian enterprises and partners in EU programs
fostering innovation and know-how transfer through international collaboration. (SECEP, final
report 2012)
The EAS is supported by the Ministry of Economy and Regional Development (MoERD),
SIEPA (Serbia Investment and Export Promotion Agency) and SECEP project. The first
conference was held on January 25th 2012 on the occasion of the Founding Assembly of the
Exporters Association of Serbia9.
The project’s Internationalization component was to help Serbian business, especially to
exporting SMEs, to increase their knowledge of foreign markets, establish new business linkages
and to make access to participate in international programs funded by the European Commission.
 Serbian Association of Small and Medium Enterprises (SA SME)
The Serbian Association of SME is a non-governmental, non-profit, non-political organization
founded in 1999 /2000, as the answer to the Strategy of the EU development of the region and
SMEs, entrepreneurship, as well as improvement of national policy of the region.
Since its foundation the SA SME, has developed cooperation with the following organizations;
World Organization for Economic Cooperation and Development (OECD LEED), Union of
Small and Medium Enterprises EU (UEAPME), and World organization for the support and
development of small and medium enterprises (INSME). The cooperation with the above
organizations helped the association in international tendencies of globalization with significant
results on development of entrepreneurship.
The main mission and vision is to advocate and defend SME interest as holders of Serbian
economy.
9
http://www.europa.rs/en/projects/projektne_aktivnosti/1363/Founding+the+Exporters+Association+of+Serbia.html#
sthash.luWyaUnJ.dpuf
48
The association helps build stimulating business environment through implementation of Small
Business Act and Think small first principle. Supporting and helping SMEs in their appearance
on foreign markets, directing policies towards growth oriented measures, assuring prosperity at
all levels.
As one of the biggest problems of SME sector is access to assets for business development and
placement of goods on national and international markets, the Serbian Association of SMEs is
strongly oriented toward making Serbia modern helping their members’ access to EU funds and
programs. (SA SME, 2011)
The Serbian SMEs are provided with general advice and support by Business Service Providers
(BSPs) in areas such as business planning, organization development, human resources and
leadership management, marketing communication, market research, branding and PR, and
consultancy for start-ups. This is still not enough; there is limited management capacity across
areas such as organization and strategy, finance, production, marketing and sales, quality, access
to new markets etc. (EU, 2011)
The general consulting offered by local consultants is not adapted to the specific individual needs
of the SMEs. The Serbian SMEs need high quality professional support services targeting
improvements in productivity and efficiency levels in order to become competitive on foreign
markets. They need to focus on long term development of the SME sector giving information on
market opportunities, new technology and best practice management (ibid, 2)
When it comes to competitiveness in economy, Serbia scores the lowest in the range.
The importance of empowerment of competitiveness by improvement of educational system is
essential in order to make our ideas into something visible and sustainable stated prof. Pitic.
(Blic vesti, 2014)
The need to include a new subject in Serbian curricula at faculties is “Entrepreneurship” as a
priority and a must stated at an intellectual gathering covering the subject “Institutional
development of entrepreneurship and innovations in Serbia” held on FEFA (Faculty for
economy, finance and administration) September 25th, 2014. (Ibid, 2014). Prof. Goran Pitic,
representative of FEFA council, has pointed out the importance of entrepreneurship development
and making of intellectual-business-research cluster in order to enhance the business ambient in
Serbia.
One of the questions in our survey was how informed they are about existing support measures
available in Serbia. The answer was positive, 55% are aware that there are numerous support
measures available in Serbia, while only 22% have little knowledge of support measures and
22% have not enough information about where to gain such services. (See graph below)
49
Graph 3. Knowledge about support measures available in Serbia by SMEs
5
4
Awareness of
support
measures
3
2
1
0
Good
Little
Not enough
Source: Own survey
Even though the majority of our case study is aware of the support measures available in Serbia,
work on providing information and easier access to various measures should be continually
updated and provided to all SMEs, especially those planning to go international.
Continuous work should be done on reducing the number of those who know little or not enough
about the available support measures in the country.
50
12. THE GAPS IN SUPPORT SERVICES
As we have seen the support service mechanism in the EU is well developed. However there is
always room for improvement and with constant feedback from the entrepreneurs, the support
services can be tuned down to exactly the right measure and to the sufficient scale meeting the
needs of the SMEs.
Besides the support measures in terms of projects and programs in Serbia, in the last couple of
years, various research and reports have come to a conclusion, that unfortunately, there has not
been a move upwards when it comes to business environment in Serbia.
As per World Bank, in the Doing Business report Serbia is on 92nd place out of 183 places when
it comes to business environment.
The USAID project, in 2011 year has asked 913 entrepreneurs if business conditions have
improved in Serbia. The result was that one of the greatest obstacles still remains in the field of
administrative procedures, the second place hold para fiscal charges, taxes on income and
salaries. (Ibid, 7)
In the EU Final report 2011, Opportunities for Internationalization of SMEs, following support
gaps have been identified as priority:
-
There is still a gap on information on local business environment ( especially in
countries with an unstable regulatory environment );
Assistance in matchmaking events and finding reliable business partners;
There is lack of coordination between organizers of trade mission;
Entrepreneurs need assistance to identify human resources when doing business in some
countries;
On-line information portal with reliable, consistent and regularly updated information
in English;
Providing coaching such as contract negotiation practice and similar are some of the
needs for SMEs in the EU. (EU, 2011)
These support services and gaps are a good basis to be used as references for Serbian SMEs. To
be used as guideline when establishing a support service mechanism or office that can help
SMEs in their venture in going international.
 We have asked our SMEs the following question – What gaps in support services have
they encountered during their business abroad.
The results from our survey indicate there is still a need for support when making business
agreements and contracts with foreign business partners or so called ‘matchmaking’ process.
There is lack of available information about the foreign market, as well as trainings and coaching
when doing business abroad. They lack adequate staff and e-portals that could give them
accurate information about foreign markets. (See graph below)
51
Graph 4. Identified gaps in support measures
12%
Foreign market
23%
Matchmaking
17%
Human resouces
E-Portals
18%
18%
Trainings
Other
12%
Source: Own survey
During my personal interview with company LOGO, one of the major gaps in the support
services was lack of connectivity and information flow from the main point of contact– Insitute
Mihailo Pupin and other potential partners.
Adequate information on products and services that LOGO provides is not fully given to
potential partners. More work should be done on matchmaking and once the first contact is
establish a follow up should be made on what business agreements or contracts have been placed.
This would greatly help SMEs such as LOGO to establish new business contacts and make new
business partners.
52
13. ANALYSIS OF THE RESEARCH SURVEY
13.1
Subject of research
The research survey has been conducted among exporters, selected members of the Export
Association of Serbia (EAS). We have picked a selection of 20 members aiming at only SMEs
who have been in the export business for at least two years and have gained certain experience
which will help us answer our main research question,
– What are the best practices of SME internationalization in Serbia?
The remaining 20 enterprises, also members of EAS, are large size companies and some are
suppliers. These are the reason for not including them in our research.
As mentioned previously, the EAS was established from the EU support project SECEP, in the
year 2012 making a foundation for future expansion of the association for all enterprises,
regardless of size, which are in the export business or have turned their business to foreign
markets.
13.2 The research goal
The main goal of the research is to find out what are the good practices of internationalization of
the selected SMEs. By pinpointing best practices, from firsthand experience, and by comparison
to the best practices of EU SME, we will hopefully find a similarity or a pattern which will be
used as a guide to all other SMEs in Serbia that are in the phase of internationalization.
13.3
Case study and instruments used for the research
In the below table (see table 7) we have given basic information about our case study group.
We have given information regarding their size, in terms of whether they are small or medium
size company, the number of employees, the main sector of their business, the foreign markets
they are currently operating and their future target markets of interest.
Coincidently, the companies are divided almost evenly by their size (small size enterprises 9, and
medium size 11) totaling 20. The number of employees range from 21 to 60 for small size
enterprises while medium has a range from 70 to 157 employees.
The instruments used for the research were structured questionnaire and a personal interview
with the LOGO company.
53
Table 7. Basic information of our selected companies
Company
1
Small/medium No.
employees
1
Berko
Service
sector
Export market
Target
market
Manufacture and
designing of
agricultural
machines
Russia, Moldavia,
Georgia, Ukraine,
Hungary
South Africa,
Azerbaijan
Lighting
equipment
EU, Russia,
Azerbaijan, Ukraine,
Kazakhstan, UAE,
Montenegro, BIH
and Croatia
EU,
MENA region
Led displays
USA, Canada,
EU, Russia
EU
ICT equipment
BIH, Macedonia
Montenegro,
EU
Food production
(bread and
pastry)
France,
Montenegro
Sweden,
Switzerland,
EU
Clothing
Europe
Norway,
Russia,
Switzerland,
USA/Canada,
EU
Clothing
Austria,
BIH,
Canada,
Croatia,
Czech,
Germany,
Montenegro
EU
Urban Street
furniture
Azerbaijan,
EU
Fiber Optic
solutions
Austria,
Macedonia,
Montenegro,
Slovenia
Middle East
Fashion clothing
BIH,
Croatia,
Montenegro,
Norway
Russia,
Canada,
Denmark
24
2
Buck
3
DMV
4
Enel PS
1
70
1
32
1
90
5
Hera
6
Ivkovic
1
25
1
150
7
1
Kooi Knit
8
Korali
9
Logo
50
42
1
1
80
10
Luna
1
132
54
Slovenia
11
MTK Metal
1
12
Nip Spasic
1
13
Patent
Production of
hard metal tools
and steel tools
Russia, EU,
Ukraine, India, Iran,
Algeria, BIH,
Montenegro,
Croatia, Slovenia
EU
Plastic material
for construction
works
Austria
BIH,
Hungary,
Russia
Production of
food for
domestic animals
Russia, Belorussia,
Kazakhstan, EU,
Sudan, Peru,
Thailand, Mexico,
Finland
Production of
machinery for
agriculture and
forestry
Kazakhstan,
Moldavia, Ukraine,
Russia, BIH,
Croatia, Bulgaria
BIH,
Macedonia EU,
Russia,
Thailand, Peru,
Vietnam,
Mexico, Brazil
Turkey,
Azerbaijan,
Georgia,
Mongolia
IT equipment
EU, USA, Canada
Taiwan, Hong
Kong,
Canada
Russia,
Thailand,
Office and home
furniture
BIH
Germany,
Holland,
Sweden,
EU (Austria,
Belgium)
Visual
information
technology,
(stamps, brands,
logos)
BIH,
Croatia,
Macedonia
Montenegro,
Belorussia,
Kazakhstan
Russia,
Equipment for
distribution and
supply of
electricity
Bangladesh, GB,
Cyprus,
Malta, Tunisia, EU
Poland,
Slovenia,
Austria,
Germany
Manufacture of
Electrical
appliances for
home
BIH,
Kosovo
Montenegro,
Croatia,
Macedonia
Romania,
Broaching tools,
Welded
constructions
South-East Europe
EU
50
30
1
85
14
Poljostroj
1
15
Positive
1
60
29
16
SCS Plus
17
Slovo
1
18
Tehnoplast
1
19
Termorad
1
121
21
49
1
105
20
1
UNIOR
Components
157
TOTAL
9
11
55
Picture 6. Official logo of the Exporters Association of Serbia
Source: EAS site www.eas.rs
13.3.1
Background information of EAS
The main mission of the Association is to support exporters in Serbia to become competitive in
foreign market by mutual networking and connecting with potential partners. The Association
works on enhancement of business environment by providing access to quality export services.
In the very beginning of its establishment a set of services and elementary needs were placed for
exporters, with the purpose of increasing services after the growth of the Association. (EAS,
2014)
The services have been grouped under five strategic goals;

Increase cooperation and exchange of experience among the exporters by organizing
thematic gatherings, internal communication system, meetings with other export
associations;
 Business environment development by collecting and analyzing information regarding
difficulties in exporting and working on removing barriers in export business;
 Cooperation development with key actors in export, provide information about
favorable business, financial, and export certification services that exist in the Serbian
market – through organized trainings;
 Increased value and geographical coverage of export markets by Serbian exporters Co-organization of B2B events and trade shows;
 Work on further strengthening of the Association, the organizational, financial,
technical capacity of the Association by organizing annual meetings and conferences,
strengthening the financial viability of the Association, and information services.
At the time of writing and working on this research, the EAS is only formally active, meaning
the web site is registered until end of 2014, however very little activity has been done after its
establishment in 2012 upon closing down of SECEP project and after the year 2013. The result
of such behavior is mainly due to lack of funds and interest from the members, and governmental
organizations and institutions which were involved in its establishment.
Our conclusion as well as recommendation, regarding the situation of EAS, is that the
Government along with SME need to distinguish and realize the importance of having such an
Association. Funds must be found and allocated for continuation and strengthening the
Association as a key holder and motivator for promoting SME development and helping SMEs
go international. The Association should be there to follow and provide SMEs with the necessary
firsthand information that are in the process of ‘going’ international or have started to work in
foreign markets.
56
Knowing the importance for the existence of such association, we have, in our questionnaire,
asked our case study group the following question –
-
Do you believe that it is necessary that the Association continues its work?
Three choices were given for the answer - Yes, No, and Maybe – but in a different shape
(meaning not like it is presently). The results came out as following. (See below graph)
Graph 5. Should the Association continue its work
6
YES
5
4
NO
3
2
1
Maybe but in different
shape
Maybe but in
different shape
0
Exporters association of Serbia
Source: Own study
From the above we can see that our case study is aware of the importance of having such an
association, or 67% to be exact. Half of them think a similar export association in Serbia should
exist but in a different shape. This is promising, as we believe that even though the work of the
present Association is not active, in the near future hopefully there will be initiative from one or
more SME to continue the work of the Association or independently establish a similar
association regardless of help from the Government or not.
13.3.2 Personal interview with LOGO company – results
A personal interview has been conducted with Ms. Nevena Conic, as marketing specialist.
LOGO has its main office in Belgrade, at Bulevar Kralja Aleksandra 261, while production and
service centers are located in Borca, street Bratstva i jedinstva 30. It has been working since
1990 year or over 24 years.
Background information
LOGO is a medium size company, who has over 80 local staff. It started as a small private
family company, specializing in cables for transmission of electricity. It was the first optical
company in the country and in the region, Yugoslavia at that time. With hard work, following and
listening to the requests and demands of the market, LOGO managed to become a successful
enterprise providing specific technological solutions in domain of fiber optical systems for
communication, security and information. LOGO is established in 1990 year as limited liability
57
company, specializing in engineering, production, sales and servicing.
In 2006, the company has changed its business model, again answering the now new demands
and requests of its growing partners and clients. Because of its specific high-quality products, it
has introduced and standardized its products as per ISO standards 9001:2000.
LOGO is also very well aware and has sensitivity for the environment. It has introduced
environmental standards and requirements for health protection and occupational safety. (Logo,
2014)
LOGO has over 20 years of work experience and continues to work on educating its personnel, it
follows the demands of its clients and partners, continually upgrading activities such as IT
engineering, production and servicing. (Ibid, 2014)
Internationalization process of LOGO
Key export markets of LOGO are Austria, Slovenia, Macedonia and Montenegro. Targeted
export market is Middle East, with emphasis on Japan and Asia.
Presently the company provides to its foreign market, services such as consulting, projection and
completion of works as well as maintenance. In year 2010, LOGO has opened a sister
organization in Banja Luka, mainly to answer the needs of their BIH partners.
LOGO has started its internationalization process when they have made business arrangements
with their partners from Switzerland, becoming their export vendor. LOGO was able to provide
highly educated and experienced local staff that was used to assemble specific optical cables for
their foreign Swiss partner. Once the cables were assembled they were exported further in
Europe.
When asked what were the main obstacles to their internationalization process, LOGO without
hesitant has put lack of financial resources as the main obstacle, especially in the beginning of its
turning to the foreign market. Later they encountered difficulties on lack of knowledge about the
market, language difficulties and problems with following and handling administration
regulation in the foreign marketplace.
LOGO is very well aware of all the support measures provided in Serbia. It has received
subsidies and grants from the government. It has attended many seminars, trainings and events
related to improving their business in foreign market. It has been user of EU support projects.
However, gaps still remain and are present in support services. As per LOGO these gaps need to
be addressed soon in order to alleviate the road to working outside the local market.
Fining new partnership and business ventures is done mainly through private connection, in our
case through the management skills and knowledge of the LOGO owner and manager. There is
little support given from the governmental institutions when it comes to matchmaking and
establishing partnership with foreign enterprises.
Difficulties in finding adequate staff for the work in the foreign market are also a problem. The
58
staff must be trained and continually educated according to the needs and fast change in the
foreign market. - “Once you lose your step and fall behind, it is very hard to return to the same
market position and have the same credibility that you had previously.” – emphasized Ms.
Nevena Conic.
The need to have e-portals which would provide information about various foreign markets has
now become a necessity. These e-portals must be regularly updated giving key information
which will help the companies work with foreign markets with fewer obstacles and burdens to
overcome.
There must be continues two way communication, in this case with the Institute Mihailo Pupin.
The institute is the bridge and contact point between SMEs in Serbia and the SME in EU, like
our enterprise example Logo.
Logo believes that more action on the side of Institute should be done, acting as bridge and
connection for all present and potential business partners. The Serbian Chamber of Commerce is
not active in enough when it comes to matchmaking. Information on worldwide ICT conferences,
events and partner days must be regularly followed and send to interested companies in Serbia.
Logo is aware of the need for innovation in their work. The information and new innovation
changes and equipment are provided from their vendors, the Swiss and Japan. They know the
importance of this and use to the best advantage in their production line, always looking for new
ways of improving and satisfying their client needs.
13.4. Other interesting results from the questionnaire
In order to make a comparison and see which internationalization theory could correspond to our
targeted SMEs we have asked our case study group the following.
-
How long had you been working on the domestic market before turning to foreign
market?
Graph 6. Time needed to turn from domestic to foreign market
6
5
Three and more
4
3
2
1
0
SMEs response to question 1
Source: Own research
59
One year
Two years
Three and more
Foreign directly
Not surprisingly, the majority of the SMEs, or 67% of them, had been doing business on the local
market for a period of three or more years before they turned to foreign market. Only one firm
has answered that their business turned to foreign market from the very beginning or from the
establishment.
By analyzing this information we can confirm that the theory of “Uppsala model” can be still
seen and is a process that many small and medium size enterprises go through. We can say that
there is a tendency to learn first, by going through stages and acquiring knowledge about the
foreign market.
When asked what countries they export to mostly, we have received the following results;
Not surprisingly the EU countries are the main destination of their export or 42%. Next on the
list are European countries, non EU members, the Near East, North America, and Asia. (See
graph 7. below)
Graph 7. Main countries of export
Near east
11%
Non EU
21%
Asia
16%
America
11%
EU
41%
EU
Non EU
Near east
America
Asia
Sources: Own research
From the table of basic information of our case study (Table 5), we see that EU countries remain
to be the present market of export as well as the future target market, even though there are other
that wish to start business in former Soviet countries, Russia, the Middle and Near East, Thailand,
and Canada.
For that reason, when creating support measures for enterprises that are going international, the
measures should be tailored toward EU countries, as the future member of the EU. However, this
does not mean that support measures for other countries as target markets should not be made
and followed as well as updated, such as Asia and the Far and Near East. These are specific
countries with their culture and customs which must be followed and implied if the SMEs want
to be successful in their internationalization process.
When our case study group was asked, what were the key motivation factors to turning to foreign
market were, the answers were mostly to acquire new knowledge (innovation, technology) or to
achieve company growth (better price, new product or service). Other motivation factors or
60
stimuli for internationalization were networking and alliances.
By all means we can say that internationalization and innovation go hand in hand. Innovation is
one of the motivation factors for entering a foreign market as per the questionnaire to our case
study group. We can find in many research literatures that innovation and export are linked. That
both exporting and innovating simultaneously increase together with productivity. Also imports
are related to innovations as, it is found, that all innovating firms import, “more innovative firms
sources more foreign products” (Altomonte, C. et al, 2014)
We learned that motivation factors come from outside, however they can also come from the
inside too. We have asked our case study group, to circle one out of four possible answers to the
question what was the most common factor for turning to foreign market. Besides acquiring
more knowledge and skills, the other factors were. (See Graph 8)
Graph 8. Inner motivation factors to internationalization
Systamatisation change
Enchancement of
knowledge and skills
New labour
Inner
motivation
factors
New management
0
1
2
3
4
5
6
7
Sources: Own
To acquire knowledge and gain new skills is the most common motivation factor inside a
company to turn to foreign market. New staff and management is not a big motivation. However
it has influence to the manager to turn to new markets.
For a company to turn to foreign market it must have a certain degree of flexibility, meaning it
needs to adjust to the changes that encounters during its process of internationalization. Our case
study group is very flexible in their business when going abroad or can be flexible if the
circumstance in the new market demand, as per the survey question no. 13. (See Annex 1.)
Our case study group has been asked, what would they do if they had, in their
internationalization process, encountered strong competition? The majority answered the
following listing the most common answer as the first option and so on (see list below)
61
Encountering strong competition in foreign market, the enterprise would;






Increase the quality of their product / service,
Increase product differentiation or find new market niche,
Enhance marketing services,
Form strategic partnership,
Look for new markets,
Reduce price.
62
14. RECOMMENDATION FOR SERBIAN SMEs
As per the research study results we can conclude that it is very important that all support
measures are tailored and prepared as per the needs and recommendations of SMEs. This can be
achieved, as per OECD report (2009, 31) only by closely applying results from various support
programs, projects and studies. Information and feedback can be gained from various SME
associations and organizations that have direct contact from the entrepreneurs.
The Government place a key role in SME development and competitiveness. The Serbian
government should continue working closely with SMEs, it must nurture open mind and
flexibility to the special needs of the SMEs. It must have understanding to all of SME requests,
suggestions, appeals, and complains. When making new policy measures, it must follow the
recommendations of SMEs, in this way avoiding possible discrepancies between present
situation and regulations. Questions such as; Do support measures address obstacles identified
among SME in their internationalization process? How well does the support provision match
EU best practices of internationalization? Are support programs suitably visible online? What
needs to be done in order to improve awareness and worthiness of support programs for SME
internationalization. By addressing these questions the overall business platform can be adjusted
and tailored to the needs of the SMEs.
 Plan internationalization activities
SMEs when planning to go international must perform certain activities before they actually turn
to foreign market. As per the SME Observatory (2003) report, the following activities were
identified as important before the firm internationalizes its business. EU (2003, 34)





Identify potential sales
Get to know the competition
Prepare appropriate strategy for market entry
Make necessary production or service adjustment
Learn about socio-cultural factors
Even though most SMEs are aware of the importance of planning before going international,
they do not execute planning activities. The reason for this is, as per the research, lack of time,
management skills and financial capacity. (Ibid, 35) This is especially important to point out to
SMEs that are planning to go international.
A successful international process can be only achieved by clear strategy planning, with timely,
comprehensive communication with employees and stakeholders.
 Use all existing support measures
Currently, SMEs in Europe do not fully benefit from the opportunities provided by the Single
Market largely because of the lack of information on business opportunities and applicable rules
in other Member States, as well as insufficient language skills. The costs and risks involved in
63
having to deal with several different national legal systems often prevent companies from
expanding their activities abroad.
This is the case with Serbian SMEs. There is still difficulty in acquiring knowledge about
potential markets. A link needs to be made so that information on potential markets are clearly
presented to SMEs and timely updated.
The entrepreneurs are unaware of the importance of e-business utilization and complying with
EU standards. The consultancy services that are present often do not reflect the specific
individual needs of SMEs. Consultancy services need to be accessible, high-quality and tailor
made in order to strengthen SMEs’ abilities to grow, develop and export.
 Enhance managerial skills
As per the EU project “Support to SME development”, the SMEs in Serbia still face obstacles in
business development. One of the key obstacles is lack of management skills especially among
the owners or managers of enterprises. There is lack of knowledge among entrepreneurs which
results in unability to evaluate their own problems and to define their needs.
There is little attention given to strategic planning and management in order to maintain and or
improve market position. Market research is not used enough.
The technology is mostly out of date and limited automation of manufacturing process. There is
almost no or little level of progress on innovation.
Raising awareness on lifelong learning, on constantly upgrading their knowledge and skills in
innovation and using e-business is still very low and needs to be further enhanced.
Providing mentoring, long term coaching programs, providing trainees with international
experience will help enterprises gain necessary knowledge and skills to approach business
partners in the best and most successful way.
 Strong business environment
The Serbian Ministry of Economy has performed state administration activities which among
other encourage policy measures for the development of SMEs, provide loans and insurance for
export and investments abroad. It continues to implement financial and other measures for
encouraging business competitiveness and liquidity of commercial entities in the Republic of
Serbia.
There must be given a certain period for adjustment to entrepreneurs. In terms of placing new
regulations involving SME during the process of their establishment and implementation. This
should be introduced as a regular practice adjusted as per the need of the business environment
and from the initiatives from the entrepreneurs.
64
Effective support for internationalization of SMEs means giving support individually to SMEs.
This can be done by analyzing the company in whole and preparing an individual plan using a
range of support measures10.
 Provide easy access to information
SMEs need to have easy access to information regarding foreign business opportunities, potential
foreign practices, procedures for export and import regulations, standards and product
specifications, laws and regulations, to know the marketing requirements. In this way SMEs will
minimize the initial high cost of going international as well as risks that come with this process.
As per the EU the following aspects have been highlighted to help SME plan their international
strategy. Support programs on matchmaking give information on foreign markets, cross-border
cooperation and networking information services.
According to the European SMEs survey, more and more SMEs are doing business in markets
outside the Single market. The key target markets are by far most China, Russia and India.
Barriers for international business activities are payment risks, difficult paperwork i.e.
bureaucratic procedures, lack of financing, lack of adequate market information, laws and
regulations in foreign markets, different national technical standards. (EU, 2011, 6)
The fact that three quarters of all internationally active EU SMEs are not aware of existing
support measures is disturbing. The EU has placed, as per the study, 300 support measures
mostly of general nature focusing on the Single Market, however about 100 measures focus on
the outside EU market.
The type of support that SMEs expect from the EU and see benefit from are mostly in the field of
getting assistance with identifying business partners, providing adequate information on market
opportunities, and providing adequate information on rules and regulations.
Interestingly, SMEs that have used support programs have managed to improve their business
activities significantly in the way such as;
 Had more international business because of the support (42%)
 Would not have started the activities without the support (25%)
 Started international business activities earlier (25%) (EU, 2011, 7)
10
A good example is the Austria’s ‘Go international program of the Austrian Federal Economic Chamber and
Austrian government, or Enterprise Ireland designed to take account of all the companies needs in order to better
position them for internationalization.
65
 Work on enhancement of entrepreneurship
In 2007 the Flash Eurobarometer on entrepreneurial mindsets showed that only 45% Europeans
preferred to be self employed, while at the same time the entrepreneurial mindsets from USA
showed 61%. I believe that the situation today has not changed considerably.
There is still a need to emphasis the importance and call for entrepreneurship or self-employment.
Self-employment is an attractive career option as well as an opportunity where one’s ideas and
ambition can be made and turned to successful ventures. Today with high unemployment rate in
Serbia, self – employment seems to be the only solution.
It is very important to make people think about self-employment and entrepreneurship at the very
beginning of their educational years. The education system must have in its curricula more on
entrepreneurship and benefits regarding running or starting small business. For example,
providing future and new entrepreneurs with basic skills which would be used as a stepping
stone, creating an environment where entrepreneurship is more appreciated from the beginning
of the education years.
The EU 2020 Strategy highlights the need to introduce creativity, innovation and
entrepreneurship into the curricula. In Small Business Act for Europe the need for introducing
entrepreneurship into the education system in school curricula was mentioned, so that children
from the very start appreciate and understand, as well as gain necessary skills to start their own
business upon completion of education. (EU, 2012 Guidebook Series 1) It is also important by
stimulating innovative and entrepreneurial mindsets among young people, in order to “establish
cooperation with the business community and develop systematic strategies for entrepreneurship
education at all levels”. (EU 2012, 11)
The key competence in the framework ‘Entrepreneurship and sense of initiative’ is lifelong
learning defining as “individual’s ability to turn ideas into action” Ability to be, at the same time,
creative, innovative, and not scared to take risks as well as to plan and manage projects in order
to achieve objectives.
 Continue raising awareness about internationalization
Many SMEs are still scared or think it is too costly and risky to go international. By advocating
on all the benefits of internationalization of one’s business and raising awareness of existing
support programs could make more SMEs turn to foreign market.
66
15. CONCLUSION
Having said all of the above we will see if we can answer our specific research questions.
What are the key motivation factors to internationalization of business in Serbia?
Without doubt we can conclude that the key motivation factors to internationalization of business
in Serbia are to gain profit, by accessing new and larger markets. Motivations factors such as
enhancement of enterprise growth, improvement competitiveness, acquire knowledge and access
to new technology are all motivations that drive enterprises to turn to new way of business. To go
international.
We have learned that in order to turn to foreign market the enterprise needs to have a unique
product or service and technological superiority. However to accomplish this certain conditions
must be met.
The enterprise must have the ‘entrepreneurial factor’. A wish and desire must come from the
management or the owner of the enterprise to turn to foreign market and gain growth. This is
also called as the push factor. If the enterprise recognizes am opportunity in foreign market it is
called the pull factor.
Besides having the entrepreneurial factor there must be also internal or/and external stimuli to
motivate the entrepreneur to turn to foreign market. When the enterprise received certain stimuli
and environmental factors are favorable the enterprise will turn the business to foreign market.
Another important motivation factor that turns business from local to foreign market comes
when the enterprise unleashes old routines and practices, embraces new ways and practices that
it learned and accepted in running business. The enterprise must react fast and not wait on
unnecessary long period of time before it turns to new foreign markets. The more flexible
enterprise is the fast it will turn to foreign market.
Can good practices influence entrepreneurs to internationalize their business?
Our second specific research question is promising as good practices can by all means influence
entrepreneurs to internationalize their business. By acquiring new managerial and staff skills the
entrepreneurs will gain necessary confidence and assurance making them decide to turn to
foreign market, or to internationalize their business.
By following and using existing support measures from Serbian government and being
beneficiary of the EU projects supporting SME development and internationalization this will
help entrepreneur internationalize its business. The enterprise must continuously think ahead and
make the necessary first contact towards potential business partners. The contact can be easily
made and establish by attending matchmaking events, trade manifestations, B2B fairs, and other
support measures which will help the entrepreneurs make the first step in transforming and
turning business to foreign market.
67
From our study we have learned that entrepreneur are flexible when making decisions and there
is little or no barriers to hierarchy which greatly helps the road to internationalization.
The entrepreneur must gain necessary knowledge, it must acquire managerial skills in such a
way to be able to use the knowledge appropriately and to make right and on time decisions to
turn to foreign market. Once the entrepreneur gains confidence and security, with the right
marketing strategy the entrepreneur can be influenced and forced to turn to new market outside
the local. During its business the entrepreneur must understand and accept the difference such as
language and culture of the new market. It must continually adapt to the new market
requirements and procedures in order to succeed in the new territory.
And to see if our hypothesis can be confirmed
 The internationalization process is the new modern way of business, especially the fast
growing SMEs.
International process is a new necessary way of business in today’s modern globalized world. In
order for any enterprise to succeed it must be open and flexible to fast changes in the business
arena. It must be able prepared to answer and react to all barrier and obstacles that business
brings. By doing this it will succeed in being ahead of others it will gain growth, profit. It shall
obtain good managerial and staff skills which will help the enterprise stay among the best.
68
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http://ec.europa.eu/enlargement/pdf/key_documents/2013/package/brochures/serbia_201
3.pdf. Last accessed: 22.07.2014.
15. EC (2014) Annual report on European SMEs Performance Review 2013/2014: - A partial
and fragile recovery. Final report July 2014. Brussels. Available at:
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performancereview/files/supporting-documents/2014/annual-report-smes-2014_en.pdf. Last accessed:
[13.10.2014]
16. EC (2014) Newsroom. Available at:
http://ec.europa.eu/enterprise/newsroom/cf/itemdetail.cfm?item_id=7673&lang=en
17. ECSIP (2013) Study on support services for SMEs in International Business.
18. EEN - Enterprise Europe Networks. Available at: (http://een.ec.europa.eu/). Last
accessed [23.08.2014]
19. Emins (2008) Halo, Pomoc. Mala i Srednja preduzeca. Available at:
http://www.emins.org/sr/publikacije/evropa-plus/arhiva/serija1/broj33/5halo.htm. Last
accessed: [31.07.2014]
20. EU (2012) Guidebook Series How to support SME Policy from Structural Funds.
Building Entrepreneurial Mindsets and Skills in the EU. EC. Brussels. Available at:
http://ec.europa.eu/enterprise/policies/sme/regional-smepolicies/documents/no.1_entrepreneurial_mindsets_en.pdf. Last accessed. [21.07. 2014]
21. EUINFO - EU Info Centre. Available at: (http://www.euinfo.rs/en.html) Last accessed
[23.08.2014]
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http://www.eurekanetwork.org/activities/eurostars. Last accessed [13.10.2014]
23. Eurobarometer EC (2007) SME Observatory survey, Summary. Flash Eurobarometer 198
– The Gallup Organization. European Commission. Available at:
http://ec.europa.eu/public_opinion/flash/fl196_en.pdf. Accessed [7.01.2014]
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24. European Delegation (2011) Support to SME Development. Available at:
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27. Pantelic I., Pavicevic,V., Petrovic V., Milovanovic, G. (2010) Aspekti Globalizacije.
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28. Paunović, Z. and Prebezac, D. (2010) Internationalization of SMEs. Faculty of Economy.
Zagreb. Croatia Vol 22 No. 1. Pages 57-76
29. Penezić, Nenad. D. (2010) Preduzetništvo Savremeni pristup. Akademska knjiga. Novi
Sad.
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godine. Beograd.
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http://www.pks.rs/PoslovnoOkruzenje.aspx?id=815&p=0. Last accessed [4.01.2014]
32. SA SME (2014) Available at: http://srb-smeasoc.org/english/about-us
33. Schiffer, Mirjam, and Weder, Beatrice (2001) Firm Size and the Business Environment:
Worldwide Survey Results. Washington, DC. World Bank and the International Finance
Corporation. Available at: https://openknowledge.worldbank.org/handle/10986/13988.
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40. Svetličič, M., Jaklič, A., and Burger, A. (2007) Internationalization of Small and
Medium-Size Enterprises from Selected Central European Economies. Eastern European
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41. Tomanič Vidovič, Maja (2009) Preduzetništo i kultura preduzeća. Gradivo DOBA
Fakultet. Maribor. Slovenia
72
Annex 1. Case study group questioneer
Beograd, septembar 2014
Poštovani izvoznici,
Zahvaljujemo se na izdvojenom vremenu i što ste pristali da učestvujete u ovoj anketi. Vaše
kontakt informacije dobili smo od Udruženja izvoznika Srbije. (www.ear.rs)
Pred vama je petnaest kratkih pitanja vezanih za vaše preduzeće u procesu internacionalizacije.
Putem ovog istraživanja pokušaćemo da dođemo do saznanja koje su dobre prakse poslovanja na
stranom tržištu odnosno internacionalizacije poslovanja u Srbiji?
U cilju što kvalitetnijeg rezultata istraživanja, molimo Vas da odgovorite što iskrenije.
Napominjemo da će vaši odgovori biti korišćeni samo u svrhu ovog istraživanja i garantujemo
anonimnost.
Kada popunite upitnik, molim da isti pošaljete nazad na istu e-mail adresu.
E-mail adrese: [email protected] ili [email protected]
Srdačan pozdrav,
Slavica Stojković
Student/Istraživač
Master studije DOBA Fakulteta, Maribor Slovenia
Smer : Međunarodno poslovanje
Mobilni: +381 –(0)63-368-667
73
Upitnik za izvoznike MSP
1. Koliko dugo ste radili na domaćem tržištu pre nego što ste prešli na strano
tržište? (Odgovor podvući ili zaokružiti)
a.
b.
c.
d.
Godinu dana
Dve godine
Tri i više godina
Od početka radim sa inostranstvom
2. Koja je glavna zemlja destinacije vašeg izvoza? (Zaokružiti odgovor, može biti
više odgovora).
a.
b.
c.
d.
e.
f.
g.
h.
i.
Države EU
Evropske države van EU
Bliski istok
Severna Amerika
Južna Amerika
Azija
Afrika
Australija
Drugo
3. Da li ste imali neku od navedenih prepreka u procesu internacionalizacije?
(Odgovor zaokružiti, može biti više odgovora).
a.
b.
c.
d.
e.
f.
g.
Nedostatak menadžerskih veština
Nedostatak finansijskih resursa
Nedostatak znanja o stranom tržištu
Nedostatak adekvatne radne snage
Problemi sa administrativnim regulacijama
Drugo
Ništa od navedenog
74
4. Ukoliko ste u predhodnom pitanju označili “Drugo“ molimo da navedete
koje ste druge prepreke imali?
---------------------------------------------------------------------------------------------------------
5. Koliko ste dobro upoznati sa programima ili projektima podrške MSP?



Dobro
Malo
Nedovoljno
6. Da li ste imali pomoć države u procesu internacionalizacije? (Odgovor
zaokružiti ili podvući)


Da
Ne
7. Ukoliko ste zaokružili „Da“ u prethodnom odgovoru, molim vas da
podvučete ili zaokružite koju vrstu pomoći ste primali od strane države?
a.
b.
c.
d.
e.
f.
g.
h.
Subvencije
Pravnu pomoć
Učešća na sajmovima / privrednih misija
Dizajn internet prezentacija
Sertifikacija proizvoda / sistema upravljanja kvaliteta
Otvaranja inostranog predstavništva
Korisnik nekog od EU projekata
Drugo
75
8. Koji su nedostaci programa podrške po vašem mišljenju? (Odgovor
zaokružiti ili podvući)
a. Nedovoljno informacija o stranom tržištu
b. Nedovoljno poslovnih susreta „matchmaking“ i stupanja u kontakt sa
potencijalnim poslovnim partnerima
c. Potreba za indentifikovanjem potrebne radne snage u procesu
internacionalizacije
d. Elektronski portali koje daju ažuriranu neophodnu informaciju o stranom
tržištu
e. Nedostatak obuke u vezi pregovora kod sklapanja poslovnih ugovora ili
sličnih potreba
f. Drugo
9. Koji od navedenih motivatora je bio ključan za internacionalizaciju vašeg
poslovanja? (Odgovor zaokružiti ili podvući, može biti više odgovora).
a.
b.
c.
d.
Rast preduzeća (bolja cena, novi proizvod ili usluga)
Akumulacija novog znanja (inovacija, tehnologija)
Umrežavanje /sklapanja alijansa
Drugo
10. Da li ste imali susret sa inovacijama u procesu internacionalizacije?
(Zaokružiti ili podvući odgovor)


Da
Ne
11. Koji spoljni motivatori su bili ključni u Vašem procesu internacionalizacije?
a. Veze kao što su umrežavanje i lanac vrednosti
b. Socijalne veze
c. Sektorski i regionalni faktori
d. Drugo
76
12. Koliko su unutašnji motivacioni faktori uticali da promenite način vašeg
poslovanja?
a. Promena rukovodećeg kadra
b. Angažovanje nove radne snage
c. Unapređenje znanja i veština preko obuka, seminara i sl.+
d. Promena sistematizacije poslovanja
13. Koliko smatrate da je vaša firma fleksibilna u razvoju poslovanja sa
stranim tržištem?



Veoma fleksibilna
Fleksibilna po potrebi
Nije dovoljno fleksibilna
14. Šta bi preduzeli kada bi se susreli sa jačom konkurencijom? (Zaokružite
jedan ili više odgovora)
a. Povećali kvalitet proizvoda ili usluge
b. Pojaćali proizvodnu diferencijaciju / tražili marketinške niše
c. Osnažili marketinške aktivnosti
d. Smanjili cenu
e. Oformili strateško partnerstvo
f. Uveli dodatne smene rada
g. Tražili nova strana tržišta
h. Smanjili proizvodnju
i. Drugo
j. Ništa od navedenog
15. Da li smatrate da je neophodno nastaviti sa radom Udruženja izvoznika
Srbije?



Da
Ne
Možda, ali u drugom obliku
Zahvaljujemo se na Vašim odgovorima i odvojenom vremenu! Želimo Vam puno uspeha u
daljem radu.
77
Annex 2. Contact information of our case study group
78
Company
Contact person
Address
E-mail
Sasa Matic
[email protected]
+381 69 4070213
Jelena Karalejic
[email protected]
+381 63 443770
Djure Danicica 35,
Mol 24435
Milorada Jovanovica [email protected]
9, 11000 Beograd
www.buck.rs
DMV
Dusan Sarkovic
+381 63 402215
Kraljevica Marka
bb,
18000 Nis
www.dmv.rs
ENEL PS
Sladjana Ilic
[email protected]
+381 63 686187
Omladinskih brigada [email protected]
102,
11070 Beograd
www.enelps.com
HERA
Vesna Jevtovic
+381 62 289888
Gornja Trnava,
18404 Prokuplje
[email protected]
www.hera.rs
IVKOVIC
Milos Ivkovic
[email protected]
+381 63 225943
8.marta 23, Bolec
11307 Beograd
[email protected]
www.ivko.com
KOOI KNIT
Ksenija Vuletic
[email protected]
+381 69 5205300
Save Kovacevica 57, [email protected]
24430 Ada
www.kooi-knit.com
KORALI
Ivana Knezevic
[email protected]
+381 36 821788
+381 63 1193088
Director:
[email protected]
Sanja Veljkovic
[email protected]
+381 11 2042113
[email protected]
(interview)
Konarevo 206,
36340 Kraljevo
[email protected]
www.korali.co.rs
Bulevar Kralja
Aleksandra 261,
11000 Beograd
[email protected]
www.logo.rs
LUNA
Biljana Jovanovic
[email protected]
+381 63 373020
Baja Sekulica bb,
12000 Pozarevac
Luna.pozarevac@gmail
.com
www.fashionluna.com
MTK Metal KOMERC
Mirjana Selakovic,
[email protected]
+381 65 5151999
Nikole Tesle 89,
31000 Uzice
[email protected]
www.metalkomerc.r
s
NIP SPASIC
Marija Novcic
[email protected]
+38162399691
Kralja Petra I
Oslobodioca 68,
35230 Cuprija
[email protected]
www.nipspasic.rs
BERKO
BUCK
LOGO
79
[email protected]
Web site
[email protected]
www.berko.rs
PATENT co
Marko Vasiljevic
[email protected]
+381 63 325 573
[email protected]
POLJOSTROJ
Gordana Stanimirovic
[email protected]
+381 63 7137332
POSITIVE
Stanislava Ilic
[email protected]
+381 63 428702
Vlade Cetkovica 1A, [email protected]
24211Misicevo
Branka
Krstmanovica 24
11000 Beograd
Kardordeva 34,
25250 Odzaci
www.patent-co.com
[email protected]
www.poljostroj.co.rs
Danila Kisa 5,
21000 Novi Sad
[email protected]
www.positive.rs
Tamara Jovic,
[email protected]
+381 60 5013231
Knjaza Milosa 9,
19350 Knjazevac
[email protected]
www.scsplus.co.rs
SLOVO
Tatjana Bogdanovic,
+381 11 3690544
Bulevar Vojvode
Misica 17/5,
11000 Beograd
[email protected]
www.slovo.co.rs
TEHNOPLAS
T
Nebojsa Zubovic
[email protected]
+381 3 540470
Zdravka Jekica 119,
22305 Stari Banovci
[email protected] www.tehnoplast.com
TERMORAD
Vlade Rajevic
[email protected]
+381 62 345631
Cestobrodica bb,
31210 Pozega
[email protected]
www.termorad.rs
UNIOR
Components
Ljubinko Mijailovic
[email protected]
+381 65 6442900
Kosovska 4,
34000 Kragujevac
[email protected]
www.uniorcomponents.com
SCS PLUS
80