Small and Medium Enterprises: Blue Tomato Company - Case Study Example

Blue Tomato Company – SME General Outline Introduction to Blue Tomato 2. How it has moved into internationalization phase in the past three years 3. SME’s general barriers in internationalization (both organizational and environmental) 4. Conclusion Introduction to Blue Tomato Blue Tomato is the Austrian company which is devoted entirely to the trend sport of snowboarding. The Blue Tomato company has the philosophy much similar to what is actually described below. Blue Tomato can be considered as one of the medium-sized company from the national point of view. From the international point of view it could be still classified as the small company. The cornerstone of this company was laid by Gerfried Schuller who was a former European snowboarding champion as he opened a snowboard school and also a snowboard test centre. The first of such shop was opened in the year1994, covering 70m2 (and thereby extended to 350m2 in 2000), in the ski resort of the Schladming, and this was only followed a year later by the steady expansion to the several other Austrian ski resorts. Parallel to what stationary retailing, early consideration was just given to how the internet could be used as sales channel. How it has moved into internationalization phase in the past three years Internalization in SMEs Internationalization and international entrepreneurship SMEs has remained an issue of considerable relevance, principally to the observed growing effects of cross border venturing (European Commission, 2007). This realization was at the heart of the 2007 OECD-APEC study on at removing barriers to the SME Access towards the International Markets that provided general findings on the major barriers to SME internationalization as perceived by the SMEs and policymakers in the OECD and APEC member economies.1 Internalization and Blue Tomato The first internet presence happened with the international purchasing facilities in the year1997, and in 1999 this was when the first full scale online shop of Blue Tomato was opened. In its broad tendency, the Blue Tomato Company belongs to the born international group. In the year 2001, the second generation of internet shops then went online, making Blue Tomato as one of the leading snowboard mail order retailers in the subcontinent of Europe. The new shop generation was defined by the company as the internet shop, which was based on a completely new technology. Along with these were the test centers and snowboard schools, which were also grounds for direct customer contact. Today, the internet helps the Blue Tomato Company in internationalization through providing 90 per cent of the company’s total sales. This continues to take the upper trend. There are several sorts of SME’s barriers that causes trouble in their internationalization, these are listed below: Shortage of working capital to finance exports Limitations in the finance and the related physical resources have continued to be highlighted as the leading barrier to the internationalization of SMEs. The pertinent evidence would include the observed disadvantages faced by the Canadian international new ventures or the earlier stage SME exporters, relative to their more of an established counterpart, in regard to the access of the operating and term loans and the terms thereof. A similar primacy of the financing barrier was thereby reported by the Blue Tomato Australian business planning their first international operations. Lack of the capital requirements and other firm resources along with the limited access to the key infrastructure are the ones reported by SMEs recently investigated in the China, Finland, India, Indonesia, Ireland, Russia, South Africa, Spain, Sweden, and Turkey. Limited information to locate/analyze markets Inadequate knowledge of the overseas market also emerged as one of the top barriers in the recent study of Australian firms (EFIC, 2008). This factor was thereby highlighted as the most cited internationalization barrier among the responding firms, suggesting that this information gaps remain a critical challenge for SMEs even in the current era of the extensive information availability. Inability to contact the potential overseas customers Recent surveys also reinforce the very importance of this barrier. Among the studies reporting the relevant evidence are the separate UK research by the Crick (year 2007), Barnes and colleagues (year 2006), and Kneller and Pisu (year 2007). Crick (year 2007) highlighted the difficulty of thereby locating or obtaining the adequate representation in the target export markets while the other two studies identified finding an appropriate foreign market partner as the key impediment to the internationalization of the SMEs studied. A survey of the Swedish exporters by the name of Rundh (2007) also reported the difficulty of getting access to the suitable distribution channel in the international markets. Lack of the managerial time, skills and the knowledge Difficulties arising from the limited managerial knowledge base emerged as among the top barrier to SME internationalization in several recent surveys. A study of the American and Canadian firms, for instance, reported that managerial risk perceptions and the lack of knowledge about the international markets were the major reasons for not engaging in an international trade (UPS, 2007). Limitations in the managers‟ internationalization knowledge similarly emerged as one of the leading obstacle to the export initiation among the Russian and the South African SMEs studied by the IBF International Consulting (2008) and the AMSCO (2006) respectively. Differences in the managerial perceptions among Indian and American engineering firms were also found by Mr. Smith et al. (2006) to cause the observed variations in the exporting activity. Further research among the Korean and Spanish SMEs similarly highlighted the salience of experiential or international market knowledge in explaining the internationalization process of the SMEs. Other studies that alluded to the intensity of managers‟ perceptual or the psychological barriers to internationalization include Crick (2007) and Vivekananda and Rajendran (2006). Other studies carried out and effect on Blue Tomato being an SME The firm specific resource limitations had seem critical whatever the sector A recent study that was seen among Finnish software SMEs concluded that most of the observed barriers are mostly firm specific and mainly related to the firms resources and the capabilities to operate in the market. Another of the investigation among the Indian knitwear apparel exporters had also found managerial perceptions of difficulties associated with the international markets to be the biggest barrier to internationalization of the SMEs studied. (Ojala and Tyrvairen (2007) and Vivekananda and Rajendran (2006). A few of the additional barriers to SME internationalization are highlighted in a number of recent surveys, notably the administrative and the technical difficulties, exchange rate, the documentation and the payment problems along with the foreign market competition. However, it is even suggested here that these barriers are much of the essentially perceptual or psychological as their overall incident tends to decrease as the firms develop further experiential knowledge in the international markets. This is very much consistent with much dominant theories for explaining SME internationalization behavior, notably the stage of development models (Johanson and Vahlne, 1977) and the resource based viewpoint (Ibeh, 2005; Ibeh and theWheeler, 2005). This centrality of the knowledge is even reinforced by the research evidence on the born global firms and the accelerated internationalizing SMEs, most of that tend to rely on the critical knowledge assets or belongs to the knowledge based and knowledge intensive sectors (Harris and Li, 2005). Overall, the present review and the analysis of the recent relevant evidence suggest that the top barriers to SME internationalization are mostly consistent with the findings of the OECD APEC 2007 study. Two of the additional points need to be highlighted. First, that there is some indication that firm within certain sectors face particular industry specific internationalization barriers. Second is heightened prevalence of the resource limitations, particularly of the financial kind, among smaller, newly internationalizing firms. This provides the continuing justification for the segmentation or needs based approach widely adopted by the export credit agencies (ECAs) and trade promotion organizations (TPOs). Indeed, the characteristic are the lack of key resources among SMEs – overseas market access, requisite managerial skills finance, technology, and knowledge - underscores the need for policy thinking to, facilitate the increasingly observed trend towards the integration of SMEs into production or supply systems and the value chains of the larger firms and the foreign affiliates. As the recent OECD report on the topic of “Enhancing the Role of the SMEs in the Global Value Chains” observes, these linkages might represent the way for the SME sector, or would at least for its segment with the ones having the highest growth potential, to access a series of critical missing resources and to engage in the mutually beneficial relationships (OECD, 2008). Sector-specific barriers There are even sector specific barriers for instance the research among the SME software exporters had concluded that some of the apparent entry barriers observed are different from the findings of that of the earlier investigations, which have mainly involved that of the larger manufacturing firms. The sector-specific barriers highlighted generally relate essentially to that of the intensive information flow and customization needs of the software products and the localization needs and the requirements of international software markets. (Ojala and Tyrvainen 2007) Conclusion Blue Tomato is a SME Company though it has expanded over the period of past three years yet it can face the barriers to further internationalization as that highlighted in the above paper with the help of different studies performed. Blue Tomato should continue internationalization process but only with ways planned beforehand to tackle these organizational and environmental barriers. Work Cited 1. Crick, D. (2007), "SMEs Barriers Towards Internationalisation and Assistance Requirements in the UK”, Journal of Small Business & Entrepreneurship, 20 (3), 233-244. 2. Ibeh, K.I.N., (2005), “Toward Greater Firm-level International Entrepreneurship within the UK Agribusiness Sector: Resource Levers and Strategic Options”, Management International Review, 45 (3,Special Issue), 59-81. 3. Ibeh, K.I.N. (2006), “Internationalisation and the Smaller Firm”, in S. Carter and D. Evans (eds), Enterprise and Small Business, Second edition.Harlow: Financial Times and Prentice Hall, 465-484. 4. OECD (2008), Enhancing the Role of SMEs in Global Value Chains, Paris, Organisation for Economic Cooperation and Development (OECD) Publishing. 5. OECD-APEC (2007), Removing Barriers to SME Access to International Markets Paris, Organisation for Economic Cooperation and Development (OECD) Publishing. 6. OECD (1997), Globalisation and SMEs Vols 1 and 2, Paris, Organisation for Economic Cooperation and Development (OECD) Publishing. 7. Ojala, A. and Tyrväinen, P. (2007), “Entry barriers of small and medium-sized software firms in the Japanese market”, Thunderbird International Business Review, 49(6), 689 – 705. 8. Rundh, B. (2007), “International Marketing Behaviour amongst exporting firms”, European Journal of Marketing, 41 (1/2), 181-198. 9. Smith, D. Gregoire, P. and Lu, M. (2006), “Managers Perceptions of Export Barriers: A Cross-Cultural Perspective of Service Firms”, Journal of Transnational Management, 12 (1), 51-68. 10. Thomas Foscht, Bernhard Swoboda and Dirk Morschett, “ Electronic commerce-based internationalisation of small, niche-oriented retailing companies” from The case of Blue Tomato and the Snowboard industry 11. Vivekanandan, K. and Rajendran, R. (2006), “Export marketing and the world wide web: perceptions of export barriers among tirupur knitwear apparel exporters - an empirical analysis”, Journal of Electronic Commerce Research, 7 (1), 27-40. Read More