Author : Zoubeyda Mahamadou
Affiliated Organization : Department of Management, European Business School, EBS Paris/INSEEC U, Paris, France
Type of publication : Research paper
Date of publication : 2021
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The importance of internationalization for companies from developed and developing countries is an established fact. This evidence is the result of many studies on the subject with however a greater theoretical base addressing the cases of developed countries. Besides, among those researches, the ones examining the internationalization of African firms are scarce and limited to few exploratory studies. Yet, the relevance of African companies as global players has considerably increased in the last two decades, some of these latter (i.e., Ecobank, Dangote, Attijariwafa Bank, etc.) even becoming serious competitors of western multinationals.
Moreover, one can observe that the current theories on the internationalization processes of African small firms are modeled on those of developed countries (Matenge, 2011). The internationalization is discussed in terms of downstream activities and would mainly consist of product marketing abroad (export). Firstly, it is necessary to ask the question of the applicability of these internationalization theories in the case of African SMEs. Indeed, emerging economies, particularly African countries, do not have the same ownership structure as those in developed countries (Amal et al., 2013). Africa’s economic environment is diverse in terms of political systems, resources, economic structures, and culture (Matenge, 2011).
Our article will provide answers to the following questions: What are the main internationalization paths of Ivorian SMEs and what are the reasons for these choices? More precisely, we will assess whether African SMEs’ internationalization strategies are specific or if they are mere copies of strategies discussed in the literature.
Our sample was selected using a multi-step approach. First, our survey frame was a list of Ivorian SMEs registered on Bureau van Dijk’s Orbis database. SMEs in sub-Saharan Africa are identified as companies with annual workforce between 10 and 300 employees (World Bank). Then, in a retrospective approach we carried out a second sorting to identify companies having or having had an international activity. Of this second sort, 72 SMEs were identified as potentially having international activities (identification criterion: import/export activity). Out of the 72 SMEs contacted, 7 agreed to participate in the study and only 6 were finally considered in our final sample because one of the companies has more than 300 employees.
The six SMEs in our sample have different sizes and belong to different sectors of activity ranging from building, pharmaceutical industry to computer engineering, wood, and so on. This introduces some variety into the sample. In addition, these companies export their products in various geographical areas. Their export turnover also varies strongly (from 0 to 50%).
Finally, our data collection were mainly based on interviews conducted with the managers closely involved in the conduct of the international activities of their company, and/or the export manager when this position exists.
Main results: Different Internationalization processes for Ivoirian SME’s
Almost all the companies in the sample (five out of six SMEs) imported before exporting. These imports consisted of their international supply in inputs (raw materials and components), machinery, spare parts, finished products but also technological know-how/R&D. We also observe that the perceived importance of these imports is related to the sectors of activity of the considered SMEs as well as to their strategic objectives.
For some SMEs, import is a necessity. This is the case for SMEs 1, 2, and 4 [Pharmaceutical industry, Construction and Food respectively] which, given their business, must import in order to consider any activity (production and distribution) on the local or international market. Moreover, their import activities began as soon as they were created and are recurrent.
Almost all the companies in the sample (five out of six SMEs) imported before exporting. These imports consisted of their international supply in inputs (raw materials and components), machinery, spare parts, finished products but also technological know-how/R&D
In other cases, the import has been and is mainly a means of strengthening the activities of companies in the local market.
First of all, it is clear that the main internationalization model is simple export or direct sales to customers and distributors. This for financial reasons and because of lack of knowledge about the foreign markets.
SMEs 2, 3, and 6 [Construction, Sales and Maintenance of Security Products/Training and Construction respectively] have an internationalization model similar to that of Uppsala, namely, a gradual and non-instantaneous internationalization process. Indeed, these three SMEs first focused on their domestic market for a certain time before internationalizing their activities toward countries with a short psychic distance (geographically close to each other, sharing the same language—French, with generally the same procedures and where the company has at least a network knowing the market).
Furthermore, the first activities of these SMEs in foreign markets were unplanned and responsive to external events. For SMEs 2 and 3, the export was made in response to customer requests and for the SME6, the internationalization process was motivated by a public tender opportunity.
Overall, it appears that the internationalization strategies of African SMEs are specific and adapted to their environments and characteristics
The analysis of our sample also allows us to underline two cases of SMEs having adopted a non-instantaneous internationalization model, but the process was much faster than that of the previous ones. These are SMEs 1 and 5. These SMEs waited to be well established in the domestic market before suddenly considering a rapid and proactive internationalization given market opportunities (needs in the foreign market), the saturation of the local market and their growth objectives.
Finally, we also observe in the sample a case of an SME presenting an early and rapid process of internationalization. SMEs 4 has, by the end of the year of its inception, marketed its products abroad. From the outset, this SME has in fact been created for export. It was intended to be the supplier of its clients and partners with whom the CEO had previously worked with.
Discussion of the results
Overall, it appears that the internationalization strategies of African SMEs are specific and adapted to their environments and characteristics. In addition, most Ivorian SMEs adopt upstream (import) and downstream (export) internationalization with import as the first mode of entry into foreign markets.
From a downstream perspective, it is clear that Ivorian SMEs are mainly reactive for their first international activity. For example, they react mainly to fortuitous circumstances and business opportunities that often arise from their networks without having any real strategic steps beforehand. These SMEs then become proactive considering their growth aspirations and the saturation of their local market.
Furthermore, our results highlight that simultaneous upstream and downstream internationalization (Kuada, 2006) is also possible for Ivorian SMEs which means that the companies can effectively continue their import activities at the same time as export, these two activities being mutually supportive. Finally, it can be seen that certain critical and specific incidents can lead SMEs that were previously concentrated in the national market to quickly internationalize. These factors include the arrival of a new leader, the development of partnerships, R&D, and so on.