Foreign Sales Subsidiary Strategies of SMEs - Cases from Finnish Metal Industry

Abstract

The involvement of Finnish SMEs in international business has been growing rapidly in the last couple of decades. Many SMEs have increased their commitment to foreign markets by establishing foreign sales subsidiaries. The aim of this study is to examine foreign sales subsidiary strategies of Finnish SMEs in metal industry. Since there are only limited resources available for SMEs their internationalisation seems to be influenced by development of business relationships.

In theoretical part of this study the internationalisation process model and the network approach to strategy are applied in order to describe internationalisation of SMEs as a development process affected by knowledge and learning. The factors underlying the establishment of foreign sales subsidiaries are categorised to firm and target market related motives. This study contributes to analysing the dynamics of internationalisation by exploring the development of foreign sales subsidiary strategies of SMEs. The study method used is a multiple case study. The empirical part analyses foreign sales subsidiaries of three SMEs from metal industry.

Empirical findings give support to internationalisation of SMEs as a gradual process of gaining knowledge and increasing commitment to foreign markets. The case companies had invested in sales subsidiaries in their most important export target countries, but also in markets with growing market potential. Foreign sales subsidiaries create value through improving firm’s marketing function and increase sales volumes being therefore important for export performance. Foreign sales subsidiaries contribute to developing customer relationships by providing market control, indicating commitment and transferring more information from target countries. The study results indicate that SMEs utilise various operation modes in different markets and through foreign sales subsidiaries SMEs can better contribute to goal achievement in the most important export markets.