Stages of internationalization of MSMEs

Internationalization involves different stages that involve diverse, if overlapping, challenges and constraints, requiring different policy emphasis.

The preparation stage involves pre-internationalization issues. For example, at this stage a key requirement is to make a credible case for internationalization; and key information needs relate to the benefits, challenges, and ‘best practice’ of internationalization; and identification and initial understanding of potential markets and customers. Basic capacity constraints on internationalization (e.g., managerial mindset, skills), and understanding of market entry requirements and options, are especially important. Constraints on working capital financing are of particular concern.

The active engagement stage involves the start of the implementation of internationalization activities. Key constraints at this stage relate to initiating contacts and ‘getting to know’ foreign markets and foreign buyers, e.g., through overseas trade offices, trade fairs, and missions; constraints on understanding and using cross-border logistics; knowing the rules and regulations for operating in foreign markets; and trade and supply chain finance.

The growth and expansion stage involves strengthening and enlarging product market position. Key constraints at this stage relate to improving competitiveness, expanding production capacity, expanding knowledge of relevant range of standards and certifications, and diversifying distribution and marketing channels. There is a relationship between levels of development and stages of internationalization in that a country at a lower level of development such as Myanmar, compared with a more developed economy such as Thailand, will have firms mostly at the initial preparation stage, facing related constraints.