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Going Global with the Right Business Model

September 26, 2018

 

Entrepreneurship in the 21st century is no longer about starting up a business. In this era, entrepreneurship is an international phenomenon. Limited by the size of our country and lack of a hinterland, overseas expansion is an essential step SMEs in Singapore must take to secure long-term growth. It is not a “nice-to-have” strategy. 

 

Internationalisation is fraught with risks and dangers. For many SMEs, getting into the internationalisation phase can be really daunting. With even large multinationals failing in their overseas ventures, internationalisation gambits by SMEs that are opportunistic without a clear alignment to the vision and purpose are not sustainable in the long-run and are set to fail. But, the risk of staying put and doing nothing could be even more risky.

 

SMEs need to first understand the primary motivations to internationalise. Different companies may be motivated by different reasons. Some of the possible motivations for internationalisation are:

 

  • to follow and support their clients’ overseas expansion;

 

  • to compensate for home market saturation or decline;

 

  • possibility or necessity of increasing sales;

 

  • to access resources and / reduce its costs of labour;

 

  • to diversify its operations and associated risks;

 

  • to take advantage of growth opportunities in other markets;

 

  • to exploit economies of scale and reach;

 

  • to gain knowledge about other clients and markets, the capacity and strength of competitors at a global level; etc.

 

Once SMEs are clear on their motivations, having the right business model can minimise some of the risks of internationalisation.

 

The business model canvas, created by Alexander Osterwalder of Strategyzer, is a great tool to help answer the business model question.  

 

Comprising of 9 Building Blocks, the canvas will lead to insights about how you create value, deliver value and capture value for your company.

 

The 9 Building Blocks are:

 

 

 

The answers to these key questions will help the company define its internationalisation strategy, which may be different from its home country’s strategy.

 

It is important to bear in mind that:

 

  • To sustain a competitive advantage over its competitors, the Value Proposition of the company must offer better value than its competitors in serving the needs of its customers. The value can be through differentiation, lower price or a combination of both.

 

  • Choose how to leverage on its Key Activities, Key Resources and Key Partners to deliver its Value Proposition in the foreign market. This can be significantly different from how the company operates in its home market.

 

  • Operating in a foreign market requires the company to adapt to local cultures, language, political and legal environments, including consumer behaviour, payment mechanisms, modes of distribution, etc.

 

The decision to internationalise is never a straightforward one. As it involves detailed planning, a lack of market information often adds to the uncertainty and challenge, requiring a great deal of adaptability and flexibility. Hence having a partner or guide who understands the market can help the SME navigate through the treacherous grounds.

 

Although internationalisation is fraught with risks and challenges, it also comes with opportunities. SMEs must, therefore, gather the courage to capture those opportunities, knowing that, with proper planning and the right guide, they can be successful in their efforts.

 

 

- Dr Patrick Tan Siong Kuan, CEO, Stratefix Consulting Pte Ltd - 

 

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