The current issue and full text archive of this journal is available at www.emeraldinsight.com/0265-1335.

htm

SME retailer internationalisation: case study evidence from British retailers

Karise Hutchinson and Barry Quinn
University of Ulster, Coleraine, UK, and

SME retailers

25
Received October 2003 Revised August 2004 Accepted October 2004

Nicholas Alexander
University of Wales, Aberystwyth, UK
Abstract
Purpose The internationalisation of large multinational retailers is well documented and much research attention has been given to their motives and strategies for expansion. Yet, no research in this eld has specically addressed the internationalisation of small- to medium-sized companies (SMEs) operating in the retail industry. The theoretical insights from the literature revealed important gaps in extant research, which relate to the barriers, stimulants, drivers, facilitators, process, and market entry strategy of retail SME internationalisation. Design/methodology/approach This paper aims to ll these gaps. Since the intention of this study was not to describe, but rather to build theory from an unexplored area of research, an in-depth case approach was deemed most appropriate. Therefore, the paper presents the ndings from a number of case studies of SME retail internationalisation operating from the UK. Findings Key ndings from this study not only conrm that smaller British retailers have both the potential and capability to enter international markets successfully, but provides initial insights into how they overcome the constraints of size and establish an international market strategy. The ndings from this study also offer insights into the SME sector of the retail industry in the UK in terms of their experience and adoption of government exporting programmes, and details the main implications for managers of small international rms. Originality/value Although knowledge on SME retailer internationalisation, as it stands, is at a very early stage of development, this analysis of actual company activity in the UK retail industry provides important insights into a neglected area of international retail study and should help to develop the body of knowledge on SME internationalisation in general. Keywords Small to medium-sized enterprises, Retailers, International business, United Kingdom Paper type Research paper

Introduction There is now a developed body of knowledge on the internationalisation of retail operations (Williams, 1992a; Sternquist, 1997; Vida, 2000; Goldman, 2001), however, it is interesting to note that the majority of studies have focused, either implicitly or explicitly, on the activities of large retail organisations (Burt, 1986; Alexander, 1990; Williams, 1992b; Sparks, 1995; Arnold and Fernie, 2000). Despite this orientation in the literature towards large retail operations, various authors have shown that, with respect to the retail sector, size is by no means a signicant impediment to internationalisation (Hollander, 1970; Williams, 1991; Vida et al., 2000). If retail small- to medium-sized company (SME) internationalisation has not been invalidated in the literature, the rst question at the outset of this study inquires; can

International Marketing Review Vol. 23 No. 1, 2006 pp. 25-53 q Emerald Group Publishing Limited 0265-1335 DOI 10.1108/02651330610646287

IMR 23,1

26

small- and medium-sized retailers expand their operations overseas? At the beginning of this study various examples of successful retail SME internationalisation were found. European examples of retail SME internationalisation include Neals Yard Remedies (UK), Godiva Chocolatier (Belgium), LOccitane (France), Jil Sander (Germany), Bitte Kai Rand (Denmark), La Cicogna (Italy) and Lundia (Netherlands). It has been argued that these smaller retailers have greater potential in international markets than larger retailers weighed down by organisational preconceptions (Alexander and Quinn, 2001). The fact that dynamic smaller retailers (such as those aforementioned), with strong concepts, formats and products have shown themselves capable of rapid international growth has been essentially ignored in the literature. Therefore, empirical research and academic review of small- and medium-sized international retailers merits attention in the literature. While the attention given to company size has been minimal in the body of literature on international retailing there does, however, exist a strong body of knowledge on SME international expansion (Reuber and Fischer, 1997; Wolff and Pett, 2000). Evidence from exporting, marketing, and international business and entrepreneurship literatures demonstrates that small rms are, contrary to the expectations of many scholars, active players in the international arena (Kohn, 1997). Within this literature it has been shown that a successful exporter does not have to be a big exporter (Namiki, 1988; Bonaccorsi, 1992; Reuber and Fischer, 1997; Coviello and McAuley, 1999) and that SMEs have the potential to focus resources and efforts narrowly enough as their export-effective larger counterparts (Ali and Swiercz, 1991; Wolff and Pett, 2000). The majority of empirical research in the eld of SME internationalisation has focused on the manufacturing industry with a few exceptional studies on the service sector (OFarrell et al., 1998; Coviello et al., 1998; Masurel, 2001). This study, which explores SME internationalisation within the retail industry, then further provides unique insights into a previously unexplored sector in the eld of international SME research. If retail SMEs can expand internationally, and successfully, then what are the key differences between large and small retail rms in terms of the barriers and incentives to international development? A review of both retail and SME literatures revealed a variety of denitions and characteristics that identify differences between SMEs and larger rms. SMEs are differentiated from larger companies not only in terms of physical size (employees, sales turnover and stores), but also in terms of managerial, nancial and operating characteristics. The barriers inhibiting international development of SMEs have been well documented (Leondiou, 1995; Morgan and Katsikeas, 1997) including limited nancial, operational, logistical and learning resources. However, SMEs with international operations have overcome such barriers to expansion stimulated by competitive strategies of differentiation, and driven by entrepreneurial vision and networks. This study also inquired to what extent government export assistance programs facilitate the international development of retail SMEs based in the UK. Increasingly, it is being suggested that research and policy should be directed towards enabling established rms to overcome obstacles to development rather than focusing only on new rms (North and Smallbone, 1996; Devins, 1999; DTI, 2001). Therefore, this paper seeks also to highlight the ndings from retail SMEs in the UK relative to government assistance with recommendations and implications for both practitioners and policy-makers.

Since the intention of this study was not to describe, but rather to build theory from an unexplored area of research, an in-depth case approach was deemed most appropriate (Eisenhardt, 1989; Strauss and Corbin, 1994; Yin, 1994; Collis and Hussey, 2003). Case research, in the eld of SME internationalisation, is likewise context reective, and sensitive to the characteristics of the small- and medium-sized rms (Coviello et al., 1998). This paper focuses on the in-depth case evidence gathered from nine established international retail SMEs in the UK. Building upon international retail and SME empirical research, this exploratory study endeavours to provide an understanding of the international development exhibited by established small- and medium-sized retail rms. While it is recognised that the entrepreneur is a key variable in SME internationalisation, the focus of this study is placed upon a holistic perspective of the rm, as opposed to a wholly entrepreneurial study. Therefore, intrinsically linked to the overall question of this research are three key dimensions of the rm: resource capabilities stimulating and driving international expansion; patterns of foreign development; and international market entry strategy. The paper begins with the theoretical insights and key literature themes surrounding the key sub-questions of this study, which are incorporated into a theoretical framework of retail SME international expansion. Following this, the research methodology is detailed and explained. Industry and company proles and the ndings from the case study research are presented in the following section. The paper will then conclude with a discussion of the ndings in relation to the research questions with recommendations for policy-makers and researchers. Theoretical insights SME denitions The difference between large rms and SMEs can be identied in terms of physical size and presence. Classication of SME size can include number of employees, number of retail outlets, annual turnover, and a combination of employee and turnover measures (Kaynak et al., 1987; Smith and Sparks, 1997; Masurel, 2001). However, empirical studies across industries found sales turnover as the optimal indicator of distinguishing between smaller and larger international rms (Cavusgil, 1976, 1984; Reid, 1982; Ali and Swiercz, 1991; Beamish et al., 1993). This study has followed the guidelines of the European Commission (2000) and dened retail SME according to maximum sales turnover of 24 million pounds sterling. Resource characteristics Small- and medium-sized rms differ from large rms also in terms of managerial, nancial and operating resources. There are two main theoretical perspectives on rm resources: resource-based view (RBV) and dynamic capabilities. At the heart of the RBV are those physical, human and organisational assets that can be used to implement value-creating strategies (Barney, 1986; Wernerfelt, 1995). Dynamic capabilities, on the other hand, are the antecedent organisational and strategic routines by which managers alter their resource base to achieve congruence with the changing business environment (Teece et al., 1997). It has been found that resource capabilities (static or dynamic, positive or negative) inuence the propensity, method and mode of foreign market entry (Morgan and Katsikeas, 1997).

SME retailers

27

IMR 23,1

28

Internationalisation involves a high degree of risk and SMEs have more limited resources to cope with the downside of foreign expansion (Buckley, 1989). Therefore, the obstacles impeding international development for SMEs can be summarised as strategic, operational, informational and process-based restrictions (Morgan and Katsikeas, 1997). As a result of weak nancing and the subsequent need for quick return on investment, SMEs generally have a limited range of entry modes to choose from and a narrower operational base from which international activities can be undertaken (Papadopoulos, 1987). Intensied by limited market knowledge and lack of interaction with key parties, often owners of small rms have no inclination, expertise or awareness to grow (OFarrell and Hitchens, 1988) and consequently to pursue potential opportunities for expansion overseas. However, the existence of export stimuli can allow SMEs to overcome such barriers to international expansion (Leondiou, 1995). International stimuli are those motivating factors which over-ride these obstacles and, in the literature, several key themes have emerged as important stimuli, drivers and facilitators of foreign expansion: international strategy, entrepreneurial vision/experience, rm networks and external assistance. International strategy More often, SMEs are concentrated in sectors or markets that allow them to capitalise upon their strengths in international markets (Papadopoulos, 1987; Merrilees and Tiessen, 1999). According to Barney (2002) rms with resources that are valuable, inimitable, rare and non-substitutable have a competitive advantage over their competitors both domestically and internationally. Therefore, it is maintained that although smaller retailers cannot compete directly with multiple retailers on price, retail SMEs may be better focused and equipped to serve specic international markets (Doyle and Broadbridge, 1999; Lipow, 2002; Chetty and Campbell-Hunt, 2003). By operating as a market nicher with differentiated and unique products, SMEs can successfully serve a narrowly dened segment and service a small proportion of demand in the international markets (Bloodgood et al., 1997; Kohn, 1997; Merrilees and Tiessen, 1999). In the light of the need for competitive strategy through product differentiation (Barney, 2002), it can be argued that retail SMEs must be less marketing-orientated and more market-orientated when considering internationalisation activity. In other words, not necessarily inuencing the market explicitly, but rather reacting to market opportunities by following strategies of product differentiation and adaptation (Lanzara, 1987; Michmann and Mazze, 2001). According to Porter (1980) product differentiation can occur on seven levels: product features, linkages between functions, timing, location, product mix, links with other rms and reputation. In a like manner, Simpson and Thorpe (1996) found that the product, lifestyle, image and niche of the rms brand were key competitive advantages unique to specialty retailers (smaller in size) with successful operations in international markets. Small- and medium-sized retailers may also differentiate from larger retailers through the image and lifestyle of their product offering and brand, positioning their merchandise exclusively to the luxury market (Spannagel, 1993). Importance of entrepreneur/manager The international experience and orientation of the owner-manager or entrepreneur of a rm can also be viewed as an antecedent to, and driver of, SME internationalisation

(Miesenbock, 1988; Reuber and Fischer, 1997; Burpitt and Rondinelli, 2000). While the focus of this study is placed upon the rm, as opposed to the entrepreneur, it recognises that factors relating to managerial competence, international orientation and corporate vision can be recognised as key drivers of internationalisation (Hollander, 1970; Treadgold, 1989; Williams, 1991; Reuber and Fischer, 1997; Doherty, 2000; Fillis, 2001). From the literature it has been found that the company founder has an important inuence upon the strategic orientation, resource orientation, management structure, reward philosophy, growth orientation and entrepreneurial culture of a rm (Stevenson, 1983). Hence, it can be argued that the vision, direction and ultimate competitive advantage of the rm in international markets is directly related to the characteristics of the decision-maker (Morgan, 1997). Likewise, the international orientation of the senior manager/s or entrepreneur has a signicant impact upon the companys network relationships in foreign markets, which in turn has a bearing on the direction of international expansion and the subsequent market entry strategy. Fundamentally then, it may be argued that SME international development is not only driven by the accessibility of resources, but by the competence and vision of management (Chandler and Hanks, 1994). Firm networks In the case of international SME studies, competitive advantage may be dened not only by internal resources, but also by interaction and relationships with other rms (Johanson and Mattsson, 1988; McKieran, 1992; Coviello et al., 1998; OFarrell and Wood, 1998). It has been argued that social and business networks have the potential to act as catalysts for international business expansion (Merrilees et al., 1998; Coviello and McAuley, 1999). Not only can networking overcome internal resource deciencies (Westhead et al., 2001), but yield access to knowledge and experience absent within the rm (Vida et al., 2000; Rutashobya and Jaensson, 2004). These may be both informal and formal contacts in key and target markets, ranging from friendship and family links offshore to contacts with business and government organisations (Coviello et al., 1998). Relatively recent research by Holmund and Kock (1998) and Apfelthaler (2000) highlight the importance of down stream activities, in the form of personal and social contacts via family or friendship links, as compelling forces behind SME internationalisation. Moreover, from a formal perspective, international networking can involve upstream participation in international trade fairs, exhibitions, sharing the same suppliers and buyers (Koch, 2001), right through to strategic alliances, joint ventures and change in ownership/management (Bell et al., 2001; Lindsay et al., 2003). External assistance The owners of small rms often encounter information obstacles, lacking the business skills or personnel to assemble, and interpret information on international expansion (Westhead et al., 2001). Owing to the inability of SMEs to accumulate all necessary resources, some rms may acquire strategically relevant information for internationalisation using external information sources (Morgan and Katsikeas, 1997). External assistance may include hiring new managerial talent experienced in international business (Holmund and Kock, 1998) or communicating with experts outside the company (Terziovski, 2003). It has been suggested that the acquisition of export marketing information to aid decision-making is a key factor in explaining

SME retailers

29

IMR 23,1

superior levels of export performance (Culpan, 1989; Hart and Tzokas, 1999). But, in the UK, Crick and Czinkota (1994) found that exporting rms were largely unaware of government programmes available for assisting international activity. Therefore, it may be argued that despite the potential market information and contacts available from government bodies, many SMEs with limited knowledge are unaware of opportunities in foreign markets (Westhead et al., 2001). Process of international development Traditional models of internationalisation contend that rms exhibit an evolutionary progression in their international operational development. The Uppsala model ( Johanson and Vahlne, 1977) suggested that rms gradually internationalise in an incremental manner through a series of evolutionary stages. Firms were presumed to begin exporting by targeting psychically close countries and through condence and experience, rms committed greater resources and targeted countries more psychically distant (Johanson and Wiedersheim-Paul, 1975; Bilkey and Tesar, 1977). This stages view of internationalisation has also found support in the international retailing literature (Robinson and Clarke-Hill, 1990; Treadgold, 1990; Pellegrini, 1994). The international movements of large multinational retailers have provided much support for this perspective in that empirical studies have found multinational retailers to pass through phases in their international development and seek more familiar environments before moving on to distant markets (Treadgold, 1990; Myers and Alexander, 1996). Although the stage theories of internationalisation have gained considerable support, they have also attracted signicant criticism. A key criticism of the stages model is that it suggests the presence of a deterministic and mechanistic path by which rms implementing an international strategy must follow (Buckley et al., 1979; Reid, 1986; Bell, 1995). Recent studies in the eld of SME internationalisation have taken account of the randomness and complexities involved in the internationalisation process which may cause some SMEs to leapfrog stages or enter markets that are distant from the domestic market (Ibeh, 2003; Rundh, 2001). It has been suggested that the process of international expansion for SMEs is actually a process of change (Piercy, 1982) and more casual in approach for business service rms, compared to manufacturers (OFarrell and Wood, 1998). Research studies have shown that the process of international expansion adopted by SMEs is neither predetermined nor systematic (Lanzara, 1987; Bell et al., 2001) and is characterised by a lesser degree of determinism and a more active role given to the rm (Welch and Luostarinen, 1988; Dalli, 1994). These criticisms of the stages model are particularly relevant in the context of international retail SME expansion, whereby retail rms are faced with a selection of entry modes which facilitate rapid expansion and the bypassing of the various stages in the expansion process. It has been found that retailers, in general, do not always follow a progressive path to internationalisation but often scale down their international operations with a view to either progressive deinternationalisation or perhaps further activity in the future (Alexander and Quinn, 2002). Furthermore, the networks and relationships between smaller retail rms and foreign business partners may lead to the spontaneous development of new expansion opportunities, causing a rapid rush of international activity.

30

Direction of foreign expansion International development for smaller retailers may not always be conned to geographically and culturally close markets, but rather the specialist market dimensions of the companys products can permit retail SMEs to access opportunities in new markets regardless of cultural diversity (Hutchinson et al., 2002). Likewise, small- and medium-sized retailers seeking international development, and empowered by a globally relevant brand, format and planning exibility, may have access to opportunities in markets not necessarily culturally or geographically proximate (Alexander and Quinn, 2001). According to Lanzara (1989) luxury products exclusive to the high-income consumers, are often generically international requiring only small changes to meet the special tastes of individual markets. Therefore, smaller retailers with a luxury brand may be more apt to a centrally controlled strategy with a limited but consolidated presence through agship stores in prominent capital cities throughout the world, typically London, Paris, and New York. Entry mode strategies International rms can choose between various market entry modes for foreign markets depending on the amount of resource commitment available, extent of risk, potential for returns and degree of control required (OFarrell et al., 1998; Yip et al., 2000). Retail companies would appear to have a broad selection of market entry modes at their disposal, including exporting, licensing, in-store concessions, franchising, joint ventures, and partly or wholly owned direct investments (McGoldrick and Davies, 1995). SMEs, on the other hand, have a more limited range of international entry modes to choose from, a narrower operational base from which new international activities can be taken (Papadopoulos, 1987; Benito and Welch, 1994) and, therefore, generally avoid entry modes that require greater resource commitments (Erramilli and DSouza, 1993). Lower cost and control entry modes such as licensing and exporting/wholesaling directly to the market are attractive methods of entering a foreign market with less nancial commitment. While licensing offers inexpensive yet fast track international expansion, it may not be appropriate for retailers with distinct ownership assets (Sternquist, 1997). A retailer must have built a successful product brand, if the brand name is to be sold or licensed to the market (Davies, 1992). Whereas, wholesaling has been found by fashion retailers to be an effective preliminary method of foreign market entry in terms of a low-risk means of generating cash ow, customer loyalty and market intelligence (Moore et al., 2000). Networking and partnerships can provide smaller rms with both the competitive advantage and the option of resource-sharing entry methods to facilitate international expansion (Vatne, 1995; Rutashobya and Jaensson, 2004). Franchising has provided retailers such as Body Shop and Benetton with a route to expansion that is less costly and risky than joint ventures or acquisitions (Alexander and Quinn, 2001). Ideally, franchise operations are an innovative way to combine the advantages of larger business, such as economies of scale and product development, with the advantages of small-scale entrepreneurship (Sanghavi and Pavlin, 1996). However, franchising should not be considered a straightforward option for small companies, it has been argued that smaller retailers are less likely to be successful in

SME retailers

31

IMR 23,1

32

attracting potential franchisees compared to more established franchisers that have well-known brands (Alon, 2001). It has also been shown that while franchising facilitates rapid international expansion for small rms, the restrictive effects of small size, in terms of support provision and the limited resources to control and monitor diverse international operations, may become highly signicant over time as the international network expands (Quinn, 1999). Higher degrees of control modes (at a high investment cost), such as wholly owned subsidiaries and agship stores are also appropriate for retailers with highly proprietary products or processes. Retail innovations and specialist products are difcult to defend from imitators, therefore, some smaller rms may nd it necessary to internalise their innovations (Pellegrini, 1991) and open wholly owned subsidiaries in various countries. According to research by Moore et al. (2000) luxury and fashion brands typically open agship stores within premium shopping streets across the world (such as Bond Street in London and Fifth Avenue in New York) as the vital component of their marketing communications strategy. Although costs are very high and turnover is modest, the agship store supports wholesale business and secures reputation of a brand. Theoretical framework The key themes from the theoretical insights aforementioned have been integrated and presented in a theoretical framework. This theoretical framework is organised around core aspects of international development, as dened by previous studies from international retail and SME research. From Figure 1, the key areas presented include the barriers, stimulants, drivers, facilitators, process, and market entry strategy of retail SME internationalisation. From the broader literature retail SMEs stimulated by a specialist market strategy or driven by strong entrepreneurial management and rm networks, may overcome any barriers (strategic, operational, information or process) to internationalisation. Furthermore, external assistance from government or consultancy rms may also address any resource obstacles and facilitate expansion overseas. The process/direction of retail SME internationalisation and entry mode choice may both affect, and be affected by, how the company is stimulated and driven into new international markets. This framework charts the existing body of knowledge on international retail and SME expansion and identies several important gaps and research questions (Perry, 1998). These issues or questions are not expressed as precise, testable, closed yes/no propositions, but as general broad, open research issues (Yin, 1994): RQ1. What types of barriers inhibit international expansion for retail SMEs? RQ2. How are these barriers overcome? RQ3. Can company strategies of differentiation or market appeal stimulate retail SME expansion? RQ4. How important is entrepreneur/decision-maker in directing the company overseas? RQ5. Do rm networks drive retail SME international expansion?

RQ6. What type of assistance is available in UK from external organisations, and does this facilitate retail SME expansion into foreign markets? RQ7. Is there any pattern to the direction and approach to the foreign development of small- and medium-sized retailers from the UK? RQ8. What types of entry mode choices are available and appropriate to international retail SMEs and why?

SME retailers

33

BARRIERS STRATEGIC: risk, management attitudes, lack skills OPERATION: financial constraints INFORMATION: limited market knowledge PROCESS: lack of interaction with key parties

STIMULUS SPECIALIST STRATEGY

Specialist strategies, focused retail concepts and strong brand enable differentiation from competitors in international market

DRIVERS ENTREPRENEUR/ MANAGER

Vision, experience and know-how of management influence the direction, speed and strategy of internationalisation

MARKET STRATEGY
Less marketing-orientated and more marketorientated with merchandise directed at international premium or middle-market consumers

NETWORKS
Formal and informal relationships of management are central to international expansion strategies

ENTRY MODE CHOICE DEPENDENCY VARIABLES

Product Assets (brand and market appeal) Resource Capability (financial and organisational commitment)

FACILITATORS EXTERNAL ASSISTANCE

Government programs or consultancy service

PROCESS OF DEVELOPMENT DIRECTION

International appeal of brand: allows expansion not only into close markets but distant capital cities across the world

APPROACH
It is a process of change, more opportunistic, informal and haphazard in nature

OPTIONS
Own Store,Concessions, Franchising, Wholesale Licensing and Distribution

Figure 1. International retail SME development: a theoretical framework

IMR 23,1

These questions and issues are addressed throughout the ndings and discussion of the case company evidence. Research methodology A case study design was chosen for several reasons. First, given the paucity of research in this area, a more exploratory and theory building approach was deemed appropriate (Eisenhardt, 1989; Strauss and Corbin, 1994; Collis and Hussey, 2003). Exploratory case studies are appropriate where the existing knowledge base is poor and the available literatures can provide no conceptual framework or hypotheses to note (Yin, 1994; Perry, 1998). The theoretical framework presented in the previous section provided a clear indication of the themes and gaps in both the elds of SME and retail international literature. Therefore, it was anticipated that the inductive process of data generation involved in case study research would provide a greater understanding (Janesick, 1998) and new insight into retail SME internationalisation. This approach, furthermore, has been credited as an effective way of gaining a rich depth of information about the dynamics of organisational activity (such as internationalisation), leading to theory generation (Stake, 1994). Finally, the adoption of a case study approach responds to the recent calls in the elds of international retailing and SME internationalisation for more in-depth studies (Sparks, 1995; Coviello et al., 1998; Doherty, 2000; Goldman, 2001). The rst stage of the research methodology was to identify SME retailers operating in the UK market with international operations. Cases were selected by a theoretical sampling design, and this allowed for the selection of similar rms in order to generate theory. The retail company cases were selected by the following criteria: case companies with sales turnover less that 24 million must originate in the UK, with Head Ofce location in the UK, and operate in at least one international market. From a sample of 17 retailers, letters were sent to the managing director of each rm explaining the purpose of the research and requesting access to key personnel. Nine out of the seventeen agreed to participate in the study. The level of access requested included face-to-face in-depth interviews with relevant persons within senior management (at least two) involved in the international decision-making process of the company, and any other relevant information. Data was collected from a number of sources. Secondary data was analysed to provide further background material and to help triangulate the data. By collecting separate impressions together, a fuller and richer picture of the rms experience was built (Collis and Hussey, 2003). This included case histories, promotional material on each rm, archival information and company reports. Interviews were conducted with the international manager or senior manager/s responsible for the international activities of the rm and were transcribed and analysed using analytic coding. Throughout the duration of the study analysis of the data went hand in hand with data collection, to allow for the emergence of important themes and patterns in the data (Taylor and Bogdan, 1984). The paper now presents the ndings from the case studies. A thematic summary of the ndings is provided rstly, followed by a cross-case analysis of the ndings. Direct quotes from case informants are used to facilitate the analysis, as they are believed to best reect the phenomena under investigation (Coviello et al., 1998).

34

Findings The cross-case analysis revealed a number of key themes that emerged from the data which consist of a number of sub-categories, shown in Table I. The ndings will therefore be presented around these key themes. Company/industry prole The nine retail SMEs in this study operate within four different sectors (clothing and accessories, beauty and cosmetics, sports and leisure and jewellery and gifts) of the retail industry. For reasons of condentiality, these companies cannot be named. However, to facilitate a full understanding of the similarities and differences between cases, companies will be referred to as companies A, B, C, D, E, F, G, H and I in the discussion that follows. Companies E, C and D operate within the beauty and cosmetics sector of the retail industry. Company C is a very English rm who sells gift orientated products while company E, is essentially a perfumer with a small range of accessories aimed at the premium end of the market. Company D is slightly different from companies C and E in that it produces and sells only natural products designed for consumers who desire alternative remedies to combat ailments. In the clothing and accessories sector, both companies B and A operate specically in the designer and premium end of the consumer market, but company I targets one specic consumer segment clothes and accessories for big and tall men. In the sports and leisure sector, company H has two divisions within the rm: sports and travel dedicated to the production and selling of
Theme Industry prole Sub-category Beauty and cosmetics Clothing and accessories Jewellery and gifts Sports and leisure Size: turnover, age and international experience Barriers: nance, time, contacts Financial commitment Complexity of international markets Market information Brand control Management resources Specialist/niche market Unique concept International brand potential British/English lifestyle image Management qualities Company networks Access to external market information Opportunistic development Speed of international expansion Market expansion patterns Entry mode choice Dependency variables Vertical integration (manufacturer to retailer)

SME retailers

35

Firm size Barriers

International stimulus

International drivers Process of international development Entry mode strategies

Table I. Thematic summary of ndings

IMR 23,1

bespoke and collectable guns and specialist outdoor activities and holidays, and the other selling clothes and accessories to complement the luxury adventure lifestyle of its customers. Finally, both companies F and G operate within the jewellery and gifts sector. Firm size To illustrate the domestic and international activities of the nine companies in this study, Table II describes their size in terms of turnover and number of stores in the UK and the extent of their foreign development in the light of their experience overseas and the number of international markets entered. From Table II the size of the companies in terms of domestic turnover indicates a broad spectrum of cases included in this study: three companies are towards the small size of SME (less than 10 million), four are mid-sized (between 10 and 29 million) and two are at the top end of the SME denition (between 20 and 25 million). Likewise, in terms of age and experience there is a mixed comparison, with three companies less than 10 years old, four between 10 and 30 years and two between 30 and 60 years. As regards the international scope of business activities in these companies, there appears to be no relationship between size of sales at home and that abroad. In other words, it can be argued that even a small domestic business constrained by size issues, may establish a successful international presence (for example, see companies D and E). Barriers The main barriers expressed by the majority of the retail SMEs in this study were (in order of importance) nancial commitment, complexity of international markets, market information, brand control, and management resources. In terms of nancing international expansion, company I, insist as a small family run business . . . nancing is an issue . . . there is an element of risk for the shareholders and family. As company F argue, internationalisation is less risky for larger companies . . . since they have a larger pool of money to fall back on. The cultural, legal, economic and consumer differences between markets contributes to the complexity of foreign market development, as company B argues that international expansion is much more complex than domestic growth . . . even within the EU there are still huge differences in local restrictions and legalities. Both companies H and F maintain that smaller retailers expanding into new countries
Number of overseas countries 17 10 2 1 3 10 29 30 14

36

Company D E H F I G A C B

UK T/over (m) 5.7 6.5 8.2 10.8 11.5 12.0 18.0 22.3 25.7

Number of UK stores 15 21 2 3 32 16 20 34 10

Years in overseas 20 12 10 2 32 5 60 25 25

Table II. Domestic and international prole of case companies

need to understand the differences between markets and recognise the needs of the culture. The idiosyncrasies of foreign markets necessitate prior research and analysis of the target market. In order to make a fully informed decision retail SMEs have to account of the risks and assess the market very well and in-depth before making an international move (company A). Likewise, company F believes internationalisation as a high risk therefore you need to really understand the market you are going into and really understand the reasons why you are doing it. For the retail SMEs in this study (companies A, D, E, G and I) that have strong international brands, protection of the brand is vital (company D). According to company E the risks that people are concerned with are the loss of control . . . in terms of control in brand management. Therefore, management resources to support the international expansion of the companys and brand is a very time consuming and often complex procedure, especially dealing with different cultures and markets (company D). Company I state that management resources are the biggest cost, getting the people in place and whenever you start to go international you need to put in place the infrastructure that is going to serve you for the next year or two (company D). The ndings will now describe how retail SMEs overcome these obstacles to internationalisation stimulated by specialist market strategies, driven by strong management and company networks, and enabled by the adoption of key entry mode strategies. International stimulus Specialist/niche market advantages. These companies can be seen to employ various specialist retail strategies, and these may be considered in terms of single-product, single-client and single-theme market strategies (Tordjman, 1994). Table III illustrates the types of differentiated strategies utilised by British retail SMEs both at home and abroad. The ndings from Table III indicate that retail SMEs are less marketing-orientated and more market-orientated in consideration of internationalisation activity. Company B, for example, strongly argued that luxury is the focus . . . targeting the middle to high class customer. These specialist market advantages are further explained by Figure 2 which describes the market appeal of the nine retail SMEs on a continuum from high price and the premium end of the market towards a more moderate price accessible to the middle-market. These rms have been placed on this diagram according to the description given by each company respondent.
Niche market Single-product International retail SMEs E: perfumer C: toiletries and gifts G: luxury gifts and accessories F: top-end jewellers I: destination shop for big and small men D: for those educated in healthy alternatives H: luxury adventure B: English lifestyle aspirations A: pure British style

SME retailers

37

Single-client Single-theme

Table III. Specialist market advantages for British retail SMEs in international markets

IMR 23,1

HIGH PRICE- PREMIUM END OF MARKET H F we are one of the main choices for top-end jewellery a genuine luxury brand

ultimate luxury

38

luxury is the focus. targeting the middle to high class customer

B A

affordable luxury

luxury retailer.often placed beside C niche, but also cater for the more luxury end of the market

E C not heavily premiumwe are not out of peoples reach is affordable to the majority of customers

I D

Figure 2. Market appeal of British international retail SMEs

MODERATE-HIGH PRICE- MIDDLE MARKET ACCESSIBILITY

This strategy of differentiation and specialism is further portrayed by each company in Figure 2, ranging from high price and the premium end of the market towards a more moderate price accessible to the middle-market. For instance, at the premium end of the market, companies A, B, F and H describe themselves as luxury brands targeting the high-class customer. While companies E, C and G describe their products as luxury, they are somewhere in the middle between the high and middle market. On the moderate price end of the spectrum, more accessible to middle market customers, companies D and I highlight the niche aspects of their products with more affordable prices for the majority of customers. Unique concept. Although all the rms in this study like to believe they are unique, in the case of company B it feels that it has something different within the luxury area. This company argues that the style of its brand is:
. . . about the best traditional fabrics used in a way thats slightly disrespectful . . . the old vintage and raggedly-edged mixed in with the new.

In a very different manner, company F is more tongue-in-cheek about the way it does things with jewellery and is often cited as an unstuffy alternative to traditional jewellery retailers. According to the company:
. . . every product is hand crafted and tailor-made keeping that spontaneity and creativity and originality (about the company) without succumbing to all these pressures of becoming a big brand.

In a similar way company H proudly states, that everything is made for one person. International brand potential. For instance, company Ds brand was:
. . . designed for people who wanted to be healthy naturally and to be more educated about their body and the alternative ways and remedies by which to combat ailments.

SME retailers

The company argues that:

. . . the uniqueness of the concept is something that is appreciated across the world . . . (and the brand) is a well-known look that people can translate into sales in their country.

39

This brand in particular draws on the core values of natural and organic treatments and the belief about why and how a rm does business. In terms of economic conditions, the top-end luxury brands of companies B, E, F and H are steeped in exclusivity, luxury and English aspirations, trading on the wants and desires of high-income consumers. Company H maintains that its customers throughout all markets of the world love the Englishness and Britishness of the brand. British/English lifestyle image. For the companies in this study image, design and creativity are of paramount importance in international markets, and many of the luxury and up-market goods retailers have traded on classic design and frequent English or British associations. This is obvious in the case of six out of the nine companies studied, entailing little adaptation in the international strategies of these organisations. Company B, in particular, points out that the English lifestyle aspiration is very much a key strength in international markets. It was the distinct British country sporting image established in 1976 that inuenced the image of the retailer right up to the present day. In company Hs case it is the Englishness and the Britishness of the brand and the long traditions in gun-making that surround the companys heritage that attracts international customers. For companies A and E, the British roots of the brand are further demonstrated by Royal Warrants that accompany the packaging of their goods. This is a key factor for the international development of companies A and E in that their foreign customers think if it is good enough for the Royal Highness Prince of Wales, then the company is doing something right. International drivers Management qualities. There is no doubt that the owner manager has a pivotal role to play in the international decision-making of retail SMEs. Two-thirds of the respondents pointed out the signicance of the entrepreneurial qualities of the founder of the rm and an informal approach to market development decisions. For company F, the founders creative background in art school and jewellery design has forged . . . very much a hands on approach . . . always on the go and fully aware of all the different markets in the world. The positive attitude towards international expansion is a strong factor within the management of these smaller retail companies and internationalisation is perceived as a challenge rather than an undesirable burden. Company C, 30 years ago, was prepared to take risks and opportunities and company G aspires to take the brand global. In the case of most of the rms in this study, international expansion is evaluated as a calculated risk, but a risk worth taking: if it is done right and the time is right and you go into it with the full knowledge of what you are trying to get out of it, it can be fantastically successful (company F).

IMR 23,1

40

From Figure 3, it is evident that three retailers out of the nine were more established in terms of business age and expanded into foreign markets much later in their development. Regardless of experience, the respondents in the older companies also stressed the continued availability of more and greater opportunities for them both in the domestic and international markets. Company networks. Of the nine case studies examined in this study it is interesting to note that ve of these companies have experienced a change in company structure within the past seven years, involving a take-over by a parent company. In terms of the actual impact upon the organisational structure and international decision-making of the company, the international management structure within these SMEs has remained autonomous. All ve companies were operating in international markets previous to the take-over and it is evident that adoption by a parent company for these retailers caused an increase in foreign expansion activities. Company A, parented by an Asian company, stated that our business has certainly improved in Asia, during the time that they have taken over. In terms of nance injection, company C argues if the parent company has a very strong relationship with the bank, then there is no doubt you will benet from it. The nancial support that these bigger companies can offer to smaller retailers is also invaluable from an experiential learning perspective, as company H explained that you need the support, you can branch out and try new things when youve got big daddy as a resource. Likewise, regards the inherited networks, company C found that there is no doubt that the benets of being part of a larger network and the umbrella that comes with that has had a very positive effect on us. Informal networking and knowledge acquired by international travel are also important for the companies in this study. Company T maintains that contacts in different countries are very important . . . you get a lot of information from what you learn. The creation of strong social bonds, often as a result of the founder or senior manager travelling and living in different foreign countries, has allowed several of these rms to access necessary business information. For instance, in companies L and C both founders were drawn to certain markets over others due to the experience of living and building solid social relationships in those countries. The owners of company L knew Hong Kong very well . . . the person who was in charge of letting our
160 140 120 100 80 60 40
Years International Age

Figure 3. Company age v.experience in international markets

20 0 L N T C M I H P A

rst store we knew. In the case of company C, in Scandinavia our distributor there was a good friend that (the owner) met and liked and became very good friends with. Access to external market information (government and private organisations). Four companies (A, B, C and D) used government assistance and consultancy advice primarily in the initial decision stage of expansion to acquire information on the consumer market and business environment of the target country. According to company B nancial support and assistance from consultancy rms can act:
. . . as a knowledge bank for advice on markets in the Far East, where local information on the economy, culture and buying behaviours of the people are very different to the West and require special attention.

SME retailers

41

The government agencies contacted by the companies included the Department of Trade and Industry (DTI), Trade Partners UK (TPUK) and Business Link. The main level of assistance was the ability of the government to provide business contacts in the international markets of interest, either from an agency or franchise partner perspective. For example, company A when choosing agents will go to the DTI and the DTI will give us a list of people and company C argue that the government route of assistance is not only less expensive, but important because of the contacts they can establish. In the case of company D, when expanding into the larger markets we would consider Business Link and TPUK to do that both in terms of market research, accessing business contacts and potential franchisees. However, the general nature of government services was the rst point raised in criticism by retail SMEs. It was found that:
. . . each company has an individual way of doing things and they (Business Link) would approach it more broadly and say this is the way to do it (company D).

Secondly, the success rate of making contacts with the appropriate people in the new international market was very low. For example, one retailer (company D) argued that:
. . . sometimes these organisations can push you in that proactive direction where you are speaking to people that are really not right . . . it stopped ultimately because it generated leads that were not right for us and there is a reluctance to do that again, to go back to that stage were we were turning people down.

The third criticism related to the lack of marketing and convenient access to information on government exporting assistance. Several retailers had no knowledge of the exporting assistance available and relevant to SMEs. Process of international development Opportunistic development. The case companies in this study experienced different processes of international development and events leading up to the decision to expand into new markets. Company B remarked that: In the early stages, the desire to grow internationally occurred on a day-to-day basis, depending on who walked in the door. This natural progression to foreign expansion was also characteristic of company I who maintains that it was not part of any strategic vision, but at the time there was a ferry from Hull to Rotterdam. On the one hand, several of the case companies experienced an unplanned, reactive and opportunistic initial decision (B, C, D and I), while for others international expansion was part of a planned initiation made in a proactive and systematic manner

IMR 23,1

42

(F and H). There is evidence among these companies that socialisation through family links, friendships and living abroad have had the greatest effect when decisions regarding choice of markets for expansion are being made. In the case of companies C and G, the founders of these companies were drawn to certain markets over others due to the experience of being and living in those countries. For company G the founders knew Hong Kong well . . . so the person in charge of letting our rst store we knew. In the same way, company C stated:
In Scandinavia our distributor there was a good friend that (the owner) met and liked and became very good friends with.

Speed of international development. The relationships which these retail SMEs have built with various actors in the international network may be regarded as highly important for the timing of international market development. Firm C exemplies this notion of informal networking in the process of expansion:
. . . he (the founder) judged the market from the people and whether he liked and trusted them . . . larger retailers fail because they are too detailed in their execution planning and dont have enough intuition.

The change in ownership status also marked a clear impetus for an increase in international involvement among the retailers in this study. This is related to their desire to exploit the international potential of their brands and their need to raise sufcient capital to fund foreign expansion. Company C, although present in Asia before the takeover by its Malaysian parent company, was nowhere near as successful as it was following the change in ownership: the parent companys geographical experience allowed us to develop the Far Eastern markets a lot stronger. However, there were a signicant number of companies (A, G, H and I) that experienced a somewhat slower pace of expansion. For company H, there was the need to take every step slowly and efciently. Company A believed not in precipitating foreign market decisions, but in recognising the complexities involves in expansion you need to account of all the risks and assess the market very well and in-depth before making an international move. Market expansion patterns. The market development of these companies has involved in many cases the opening of agship stores within capital cities, located typically within premium shopping streets in London, Paris and New York (companies B, E, F, G and H). For instance, company E stated that the original idea was to pick key cities where we wanted shops . . . prestigious capitals throughout the world. Company H emphasised the need to have complete control over its business, therefore, in its three international stores the capital investment has been high: the image and service has to reect the level of quality of the brand . . . we put an awful lot into our agship stores. Yet, for companies A, C, D and I, less emphasis was placed on control and more on access to target markets; franchising, distribution and licensing agreements have enabled a greater spread of business to an extensive consumer market. Two-thirds of the cases expanded initially into geographically and culturally distant markets, such as the US and the Far East. It is evident that retail SMEs, in the context of the UK market at least, tend to possess a strong image and a globally relevant brand, thus allowing the company to access opportunities in markets that are not necessarily culturally or geographically proximate. For company H

our brand is an international lifestyle brand . . . so it is a very natural thing to move into these countries. Entry mode strategies Entry mode choice. From the ndings based on these companies, there appears to be a variety of different international entry modes used by retail SMEs. These include own stores, licensing, wholesaling, concessions and franchising. All companies in this study (except company F who is at the very early stage of internationalisation) have used at least two or more different methods of entry mode strategies in their international development. Dependency variables. It may be argued from the case evidence that given the barrier of nance commitment, there is a willingness among these retail SMEs to consider and accept the trade off between absolute control of own stores and the higher risk equivalent of franchise and wholesale agreements. The usage of low-cost and low-control entry mode strategies reects not only the nancial limitations and constraints placed upon these smaller retailers, but according to these companies the nature of business in the target market can dictate which way the market should be entered. Particularly in the markets of the Middle East, company G believes that you have to have a franchise partner in the Middle East, you cant do it on your own. Some of these companies have had to adapt the entry mode to local requirements, as they often had to act quickly when an opportunity arose in the market. Company A, for example, stresses the ability to be exible internationally and the way you are expected to do business in some markets is quite unconventional. All the companies in this study emphasised the issue of control and risk associated with expansion as important variables in the decision-making process regarding entry modes. Company C points out that:
. . . you need to decide whether you want complete control or whether you are willing to share the risks and this depends on how quickly you want to achieve expansion . . . in smaller more interesting markets we will distribute our products, and in the principal markets we will have our own retail store.

SME retailers

43

Company D maintains that franchising eases the nancial and organisational risks for us as a company, being a small company, this is really the only way we can feasibly expand internationally. For company G, franchising was the initial entry strategy for overseas markets:
. . . a risk to our reputation rather than to our wallets . . . a franchise partner in the Middle East is the only way to establish a presence successfully.

The appeal of franchising as a viable entry mode strategy for companies D, G and I not only relates to the low cost aspect, but arguably lies in the niche aspects and strong brand appeal of their product. Not only can franchising overcome any lack of knowledge in the target country for the company, but the strong niche appeal of the company is an attractive business venture to potential franchisees seeking to ll a gap or niche in their local consumer market. However, for company G, it has been the case that they:
. . . have got braver and braver, we would now choose to operate in countries where we can operate directly . . . we have found that the results are better if we do and as weve got nancially stronger.

IMR 23,1

Company H states the need to have complete control over their brand therefore franchising is not an option and we wont license either. Company A does not take any nancial risks in foreign expansion, using mainly wholesale and licensing as a means of entry. Although no scal risk is incurred in international expansion, the company acknowledged that:
. . . there is risk as to exposure of the product . . . and in terms of licensing we are just very careful in every aspect of the agreement.

44

Vertically integrated strategy: manufacturer to retailer. All but one of the companies studied in this research have experienced integration from manufacturing or production into retailing or selling of their goods. The majority of these vertically integrated retailers also point out that the production and design of their own goods remains an important operational aspect of their business and the image of their international brand in all markets. For instance, company D maintained that its herb garden in Dorset now provides enough herbs to enable them to manufacture most of the fresh herb tinctures sold in the shops and used in their products. There are two key areas important to smaller retailers in this study that have experienced vertical integration from producer/manufacturer to retailer. Firstly, they are fully committed to the in-house manufacture of their products (companies D, E, F, G, H). Secondly, the production of their goods remains important in sustaining the uniqueness of the products characteristics, especially in foreign markets (companies D and H). Company H trades internationally on the craftsmanship and bespoke elements of its products and remarked that you are paying for it made by hand by a craftsman who has spent up to 7 years in training. In terms of the implications for entry mode choice, the majority of these companies that have experienced vertical integration from production to retailing have used wholesale and distribution through agents as a means of entering certain overseas markets. Discussion Several themes emerge from these case ndings, some extend upon the themes presented in the theoretical framework and others add new insights for retail SME internationalisation. There is no question from the ndings of this study that smaller retailers have both the potential and capability to enter international markets. However, what is important in terms of contribution to theory development is how they manage to overcome the obstacles in the international development process and successfully establish a presence in overseas markets. The ve main barriers to internationalisation noted by the companies were nancial commitment, complexity of international markets, market information, brand control, and management resources. Therefore, in comparison to the literature, retail SMEs do not appear to consider strategic and process barriers as important obstacles when internationalising. In terms of overcoming the obstacles aforementioned, while the possession of a distinct specialist strategy driven by strong management serves to stimulate and drive plans for retail SME internationalisation, it may be argued that networking resources make it a reality. In terms of international stimulus, the retail SMEs in this study sought to achieve competitive differentiation by using specialist strategies directed at the luxury/premium and middle market consumers. At the top-end of the market there are

those luxury retail SMEs portraying strong afliations with traditional style values and quality (e.g. company A and H) and sources of utility typically include high quality products, exclusive brand recognition, excellent service and elevated prices. At the middle-market spectrum there are those concept retailers which focus on a particular market segment and customer (e.g. company D and I) with recognisable and more affordable middle market brands and products. For British retail SMEs with operations abroad the high quality of their international retail brand may also be bedded in British imagery and highlighted by awards of Royal Warrants. As regards the important role of the entrepreneur/manager in international decision-making, the driving inuence of the owners international orientation and business outlook was a strong theme to emerge, thus conrming the ndings of many studies within the international SME literature (Reid, 1981; Apfelthaler, 2000). However, given the constraints of size and the noted barriers, the ndings suggest that most retail SMEs in this study have used both formal and informal networking to overcome such obstacles to expansion. One interesting aspect for ve of these companies has been a change in company structure, involving a take-over by a parent company. The adoption by a nancially stronger parent bridged any gaps in nance, increased manpower resources and brought new expertise, which caused an increase in company international activity. Not only can such networking overcome any obstacles to foreign expansion, but these ndings conrm that informal relationships built with friends and family are highly important for the timing of retail SME international development. The use of government and consultancy services may also bridge market information obstacles to internationalisation for retail SMEs (e.g. companies A, B, C and D). However, the presented ndings suggest that the majority of rms felt that the activities of government agencies failed to facilitate the internationalisation process, which supports to some extent the research conclusions of Westhead et al. (2001). The path to internationalisation for these companies is marked more by a process of change rather than a predetermined strategic plan of expansion. The ndings would suggest that international development could best be described as a reaction and response to opportunities both at home and abroad. For these companies, internationalisation tends to be ad hoc, in that it involves opportunistic reaction to sporadic events and propositions from the international market. The level of sophistication and exibility required for operating in culturally distant markets are qualities inherent within the majority of the retail SMEs examined here who have expanded into such distant territories very successfully. The specialist characteristics and format of these smaller retailers signicantly impacts upon the direction of international expansion. It can be argued that these retailers with a strong image and globally relevant brand have secured access to opportunities in markets that are not necessarily culturally or geographically proximate. For example, the luxury retailers (companies A, B and H) in this study have located in capital cities, thus exploiting their premium appeal. There are a variety of entry methods employed by these smaller retailers across different markets. Although a large percentage of the rms have opened at least one store outlet internationally, it appears that wholesaling, or selling products directly to foreign markets, is an attractive method readily used by the majority of these rms in order to overcome any nancial obstacles to foreign expansion. In terms of the factors

SME retailers

45

IMR 23,1

46

inuencing entry mode choice, it may be argued that the key issue for these companies is the level of available resources. In terms of the barriers to internationalisation, for most of the companies, the major inuence upon the entry method chosen was the level of cost involved and the amount of risk incurred to the company/brand in the decision to enter a new foreign market. In the case of some companies (e.g. companies F and H) a large degree of importance was placed upon protecting the brand and name of the company in new and foreign markets. In order to protect the exclusivity of the brand, an international presence for retail SMEs with premium products was achieved either through organic growth (agship stores in prominent capital cities) or in-store concessions. For those companies where product assets and the exclusivity of the brand are not critical factors (e.g. companies D and I), it was found that non-controlling market entry modes such as exporting, licensing, wholesale and distribution agreements proved attractive foreign-market entry modes, due to the lower level of resource commitment. Implications for private and public support organisations This study offers insights into the SME sector of the retail industry in the UK in terms of their experience and adoption of government exporting programmes. Firstly, it may be suggested that policy-makers need to recognise the idiosyncrasies of retailing in comparison to manufacturing internationally, therefore, adapting the general nature of exporting programs to suit the needs of retailers. Given the specialist nature and format of these SME retailers and their operation internationally in niche and luxury markets, it may be more appropriate to create a specic program or forum aimed at the issues of branding, product quality/image, and entry mode strategies in different international markets. Secondly, in terms of access to information and the marketing of exporting services and programmes, these government agencies may need to assess the level and targets of their marketing campaigns, to ensure that all types of companies with international potential can be reached. Moreover, policy initiatives should aim to develop the international orientation of the owner-manager as a precursor to the formulation and implementation of internationalisation strategy as suggested by Lloyd-Reason and Mughan (2002). Ultimately, the challenge facing government bodies requests the further development of channel relationships, networking contacts and international-related information programs accessible to retail SMEs. There is no doubt that government assistance has a purpose and a role in the international development of small- and medium-sized retailers in the UK, however, this barrier of wrong perception that must be rst addressed by government, and then more closely targeted policy initiatives can be developed. Implications for managers The main implications for managers of small international rms concern attitudes, perceptions and knowledge of international business strategy. Chetty and Campbell-Hunt (2003) found that managers need to be aware of the mental models they have that could be their main barriers to internationalisation. Based on the evidence from this study, managers of retail SMEs need to invest enthusiasm and sustenance into their relationships with customers, suppliers and distributors: it is

through these networks that they can overcome any lack of knowledge of foreign markets. Without sufcient know-how and formal training in international retailing, successful foreign expansion is unlikely (Vida et al., 2000). Sometimes a false sense of certainty can lead rms into believing that help is not needed, but SMEs should be encouraged to actively participate in relevant training sessions and trade talks sponsored by government organisations. Specically for those SMEs at an early stage of internationalisation, hiring new managerial talent experienced in international business or obtaining assistance from government exporting bodies by existing management will dramatically improve the internal planning procedures and capabilities of the rm. Conclusion The aim of this paper has been to encourage additional and further research rather than providing an exhaustive review of the international development of retail SMEs. From the theoretical framework presented, key research issues have been identied. The ndings from this study not only conrm that smaller British retailers have both the potential and capability to enter international markets successfully, but provides initial insights into how they overcome the constraints of size and establish an international market strategy. As there is now strong empirical evidence that neither size, age nor experience matters to British international retailers, this analysis of actual company activity in the UK retail industry provides important insights into a neglected area of international retail study and this should help to develop the body of knowledge on SME internationalisation in general. Knowledge on SME retailer internationalisation, as it stands, is at a very early stage of development. Several of the themes emerging from these ndings may be explored in more depth in future research. For example, the issue of branding in the internationalisation of retail SMEs, the role of the entrepreneur and owner/manager in the international decision-making process of retail SMEs, the factors that inuence the market selection decisions and entry mode strategies. Exploration of these issues would undoubtedly provide important insights into a neglected area of international retail study, and would serve to further develop the body of knowledge on SMEs in general.
References Alexander, N. (1990), Retailing post 1992, Service Industries Journal, Vol. 10 No. 1, pp. 172-87. Alexander, N. and Quinn, B. (2001), SMEs and the internationalisation of retailing, Marketing and Retailing Working Paper Series 01/3, Faculty of Business and Management, University of Ulster, Belfast. Alexander, N. and Quinn, B. (2002), International retail divestment, International Journal of Retail & Distribution Management, Vol. 30 No. 2, pp. 112-25. Ali, A. and Swiercz, P.M. (1991), Firm size and export behaviour: lessons from the Mid West, Journal of Small Business Research, Vol. 29, pp. 70-1. Alon, I. (2001), The use of franchising by US based retailers, Journal of Small Business Management, Vol. 39 No. 2, pp. 111-22. Apfelthaler, G. (2000), Why small enterprises invest abroad: the case of four Austrian rms with US operations, Journal of Small Business Management, Vol. 38 No. 3, pp. 92-8.

SME retailers

47

IMR 23,1

48

Arnold, S. and Fernie, J. (2000), Wal-Mart in Europe: prospects for the UK, International Marketing Review, Vol. 7 Nos 4/5, pp. 416-32. Barney, J.B. (1986), Organisational culture: can it be a source of sustained competitive advantage?, Academy of Management Review, Vol. 11 No. 3, pp. 656-65. Barney, J.B. (2002), Gaining and Sustaining Competitive Advantage, Prentice-Hall, Englewood Cliffs, NJ. Beamish, P.W., Craig, R. and McLellan, K. (1993), The performance characteristics of Canadian versus UK exporters in small and medium sized rms, Management International Review, Vol. 33, pp. 121-37. Bell, J. (1995), The internationalisation of small computer software rms: a further challenge to stage theories, European Journal of Marketing, Vol. 29 No. 8, pp. 60-76. Bell, J., McNaughton, R., Young, S. and Crick, D. (2001), Towards an eclectic model of small rm internationalization, in Jones, M. and Dimitratos, P. (Eds), Researching New Frontiers, paper presented at Fourth McGill Conference: International Entrepreneurship. Benito, G.R.G. and Welch, L.S. (1994), Foreign market servicing: beyond choice of entry mode, Journal of International Marketing, Vol. 2 No. 2, pp. 7-27. Bilkey, W.J. and Tesar, G. (1977), The export behaviour of smaller-sized Wisconsin manufacturing rms, Journal of International Business Studies, Vol. 8 No. 1, pp. 93-8. Bloodgood, J.M., Sapienza, H.J. and Almedia, J.G. (1997), The internationalisation of new high-potential US ventures: antecedents and outcomes, Entrepreneurship Theory & Practice, Vol. 20 No. 4, pp. 61-76. Bonaccorsi, A. (1992), On the relationship between rm size and export intensity, Journal of International Business Studies, Vol. 23 No. 4, pp. 605-35. Buckley, P.J. (1989), Foreign direct investment by small and medium sized enterprises: the theoretical background, Small Business Economics, Vol. 1, pp. 89-100. Buckley, P., Newbould, D. and Thurwell, J. (1979), Going international the foreign direct investment decisions of smaller UK rms, EIBA Proceedings Uppsala, pp. 72-87. Burpitt, W.J. and Rondinelli, D.A. (2000), Small rms motivations for exporting: to earn and learn?, Journal of Small Business Management, Vol. 38 No. 4, pp. 1-14. Burt, S. (1986), The Carrefour group the rst 25 years, International Journal of Retailing, Vol. 1 No. 3, pp. 54-78. Cavusgil, S.T. (1976), Organisational determinants of rms export behaviour: an empirical analysis, PhD dissertation, University of Wisconsin-Madison, Madison, WI. Cavusgil, S.T. (1984), Differences among exporting rms based on degree of internationalisation, Journal of Business Research, Vol. 12 No. 2, pp. 195-208. Chandler, G. and Hanks, S.H. (1994), Founder competence, the environment, and venture performance, Entrepreneurship Theory & Practice, Vol. 18 No. 3, pp. 77-89. Chetty, S. and Campbell-Hunt, C. (2003), Paths to internationalisation among small and medium-sized rm: a global versus regional approach, European Journal of Marketing, Vol. 37 Nos 5/6, pp. 796-820. Collis, J. and Hussey, R. (2003), Business Research: A Practical Guide for Undergraduate and Postgraduate Students, Palgrave Macmillan, Basingstoke. Coviello, N. and McAuley, A. (1999), Internationalisation and the smaller rm: a review of contemporary empirical research, Management International Review, Vol. 39 No. 3, pp. 49-61.

Coviello, N.E., Ghauri, P.N. and Martin, K.A-M. (1998), International competitiveness: empirical ndings form SME service rms, Journal of International Marketing, Vol. 6 No. 2, pp. 8-27. Crick, D. and Czinkota, M.R. (1994), Export assistance: another look at whether we are supporting the best programs, International Market Review, Vol. 12, pp. 61-72. Culpan, R. (1989), Export behaviour: the relevance of rm size, Journal of Business Research, Vol. 18, pp. 207-18. Dalli, D. (1994), The exporting process: the evolution of small and medium sized rms toward internationalisation, Advances in International Marketing, Vol. 6, pp. 85-110. Davies, G. (1992), Two ways in which retailers can be brands, International Journal of Retail & Distribution Management, Vol. 20 No. 2, pp. 24-34. Devins, D. (1999), Supporting established micro businesses: policy issues emerging from an evaluation, International Small Business Review, Vol. 18, pp. 86-96. Doherty, A.M. (2000), Factors inuencing international retailers market entry mode strategy: qualitative evidence from the UK fashion sector, Journal of Marketing Management, Special Millennium Edition, Vol. 161 Nos 1/3, pp. 223-45. Doyle, S.A. and Broadbridge, A. (1999), Differentiation by design: the importance of design in retailer repositioning and differentiation, International Journal of Retail & Distribution Management, Vol. 27 No. 2, pp. 72-82. DTI (2001), Opportunity for all in a world of change, White Paper on Enterprise, Skills and Innovation, Department of Trade and Industry, London. Eisenhardt, K.M. (1989), Building theory from case study research, Academy of Management Review, Vol. 14 No. 4, pp. 532-50. Erramilli, M.K. and DSouza, D.E. (1993), Venturing into foreign markets: the case of the small service rm, Entrepreneurship Theory & Practice, Vol. 17, pp. 29-41. European Commission (2000), The European observatory for SMEs, Report 6, Ofce for Ofcial Publications of the European Communities, Luxembourg. Fillis, I. (2001), Small rm internationalisation: an investigative survey and future research directions, Management Decision, Vol. 39 No. 9, pp. 767-83. Goldman, A. (2001), The transfer of retail formats into developing economies: the example of China, Journal of Retailing, Vol. 77, pp. 221-42. Hart, S. and Tzokas, N. (1999), The impact of marketing research activity on SME export performance: evidence from the UK, Journal of Small Business Management, Vol. 37, pp. 63-75. Hollander, S.C. (1970), Multinational Retailing, Michigan State University, East Lansing, MI. Holmund, M. and Kock, S. (1998), Relationships and the internationalisation of Finnish small and medium-sized companies, International Small Business Journal, Vol. 16 No. 4, pp. 46-64. Hutchinson, K., Quinn, B. and Alexander, N. (2002), SME retailer internationalisation: a qualitative study, Marketing and Retailing Working Paper Series 03/1, University of Ulster, Belfast. Ibeh, K.I.N. (2003), On the internal drivers of export performance among Nigerian rms: empirical ndings and implications, Management Decision, Vol. 41 No. 3, pp. 217-25. Janesick, V.J. (1998), The dance of qualitative research design: metaphor, methodolatry, and meaning, in Denzin, N.K. and Lincoln, Y.S. (Eds), Strategies of Qualitative Inquiry, Sage, London, pp. 56-85.

SME retailers

49

IMR 23,1

50

Johanson, J. and Mattsson, L-G. (1988), Internationalization in industrial systems a network approach, in Buckley, P.J. and Ghauri, P.N. (Eds), The Internationalization of the Firm: A Reader, Academic Press, London, pp. 303-21. Johanson, J. and Vahlne, J.E. (1977), The international process of the rm: a model of knowledge development and increasing foreign commitment, Journal of International Business Studies, Vol. 8 No. 1, pp. 23-32. Johanson, J. and Wiedersheim-Paul, F. (1975), The internationalisation of the rm: four Swedish case studies, Journal of Management Studies, Vol. 12 No. 3, pp. 305-22. Kaynak, E., Ghauri, P.N. and Olofsson-Bredenlow, T. (1987), Export behaviour of small Swedish rms, Journal of Small Business Management, Vol. 25, pp. 26-32. Koch, A.J. (2001), Factors inuencing market and entry mode selection: developing the MERMS model, Marketing Intelligence and Planning, Vol. 19 No. 5, pp. 351-6. Kohn, T.O. (1997), Small rms as international players, Small Business Economics, Vol. 9, pp. 45-51. Lanzara, R. (1987), Strategic differentiation and adaptation among small and medium-sized Italian exporting manufacturers, in Rosson, P.J. and Reid, S.D. (Eds), Managing Export Entry and Expansion, Praeger, New York, NY. Leondiou, L.C. (1995), Export stimulation research: review, evaluation and integration, International Business Review, Vol. 4, pp. 133-56. Lindsay, V., Chadee, D., Mattsson, J., Johnston, R. and Millet, B. (2003), Relationships, the role of individuals and knowledge ows in the internationalisation of service rms, International Journal of Service Industry Management, Vol. 14 No. 1, pp. 7-35. Lipow, V. (2002), All the worlds a store: international retail trends, available at: http://retail. monster.com/articles/international Lloyd-Reason, L. and Mughan, T. (2002), Strategies for internationalisation within SMEs: the key role of the owner-manager, Journal of Small Business, Vol. 9 No. 2, pp. 120-9. McGoldrick, P.J. and Davies, G. (1995), International Retailing: Trends and Strategies, Pitman, London. McKieran, P. (1992), Strategies of Growth, Maturity, Recovery and Internationalisation, Routledge, London. Masurel, E. (2001), A dynamic view of SME co-operation and market concentration in Dutch retailing, available at: http://sbaer.uca.edu/research/1996/icsb Merrilees, B. and Tiessen, J.H. (1999), Building generalisable SME international marketing models using case studies, International Marketing Review, Vol. 16 Nos 4/5, pp. 326-44. Merrilees, B., Miller, D. and Tiessen, J. (1998), Serendipity, leverage and the process of entrepreneurial internationalisation, Small Enterprise Research, Vol. 6 No. 2, pp. 3-11. Michmann, R.D. and Mazze, M. (2001), Specialty Retailers Marketing Triumphs and Blunders, Quorum Books, Westport, CT. Miesenbock, K.J. (1988), Small business and exporting: a literature review, International Small Business Journal, Vol. 6 No. 2, pp. 42-61. Moore, C.M., Fernie, J. and Burt, S. (2000), Brands without boundaries: the internationalisation of the designer retailers brand, European Journal of Marketing, Vol. 34 No. 8, pp. 919-37. Morgan, R. (1997), Decision-making for export strategy, Small Business and Enterprise Development, Vol. 4, p. 2. Morgan, R.E. and Katsikeas, C.S. (1997), Export stimuli: export intention compared with export activity, International Business Review, Vol. 6, pp. 477-99.

Myers, H. and Alexander, N. (1996), European food retailers evaluation of global markets, International Journal of Retail & Distribution Management, Vol. 24 No. 6, pp. 34-44. Namiki, N. (1988), Export strategy for small business, Journal of Small Business Management, Vol. 26, pp. 32-7. North, D. and Smallbone, D. (1996), Small business development in remote rural areas: the example of mature manufacturing rms in Northern England, Journal of Rural Studies, Vol. 12, pp. 151-67. OFarrell, P.N. and Hitchens, D.M.W.N. (1988), Alternative theories of small-rm growth: a critical review, Environment and Planning, Vol. 20, pp. 1365-82. OFarrell, P.N. and Wood, P.A. (1998), Internationalisation by business service rms: towards a new regionally based conceptual framework, Environment and Planning, Vol. 30, pp. 109-28. OFarrell, P.N., Wood, P.A. and Zheng, J. (1998), Internationalisation by business service SMEs: an inter-industry analysis, International Small Business Journal, Vol. 16 No. 2, pp. 13-34. Papadopoulos, N. (1987), Approaches to international market selection for small and medium-sized enterprises, in Rosson, P.J. and Reid, S.D. (Eds), Managing Export Entry and Expansion, Praeger, New York, NY, pp. 128-58. Pellegrini, L. (1991), The internationalisation of retailing and 1992 Europe, Journal of Marketing Channels, Vol. 1 No. 2, pp. 3-27. Pellegrini, L. (1994), Alternatives for growth and internationalisation in retailing, The International Review of Retail, Distribution and Consumer Research, Vol. 4 No. 2, pp. 121-48. Perry, C. (1998), Processes of a case study methodology for postgraduate research in marketing, European Journal of Marketing, Vol. 32 Nos 9/10, pp. 785-802. Piercy, N. (1982), Export Strategy: Markets and Competition, Allen and Unwin, London. Porter, M.E. (1980), Competitive Strategy, Free Press, New York, NY. Quinn (1999), Control and support in an international franchise network, International Marketing Review, Vol. 16 Nos 4/5, pp. 345-62. Reid, S.D. (1981), The decision-maker and the export entry and expansion decision, Journal of International Business Studies, Vol. 12, pp. 101-22. Reid, S. (1982), The impact of size on export behaviour in small rms, in Czinkota, M.R. and Tesar, G. (Eds), Export Management: An International Context, Praeger, New York, NY. Reid, S. (1986), Export channel choice and export performance: a contingency approach, in Tan, C., Lazer, W. and Kirpalani, V. (Eds), Emerging International Strategic Frontiers, American Marketing Association, Singapore, pp. 260-4. Reuber, A.R. and Fischer, E. (1997), The inuence of the management teams international experience on the internationalisation behaviours of SMEs, Journal of International Business Studies, Vol. 28 No. 4, pp. 807-25. Robinson, T. and Clarke-Hill, C. (1990), Directional growth by European retailers, International Journal of Retail & Distribution Management, Vol. 25 No. 8, pp. 262-8. Rundh, B. (2001), International market development: new patterns in SMEs international market behaviour?, Market Intelligence and Planning, Vol. 19 No. 5, pp. 319-29. Rutashobya, L. and Jaensson, J-E. (2004), Small rms internationalisation for development in Tanzania: exploring the network phenomenon, International Journal of Social Economics, Vol. 31 Nos 1/2, pp. 159-72.

SME retailers

51

IMR 23,1

52

Sanghavi, N. and Pavlin, I. (1996), Franchising as a SME development issue: the case of transitional economies, paper presented at ICSB 41st World Conference, Stockholm, 17-19 June, available at: www.sbaer.uca.edu/research/1996/ICSB Simpson, E.M. and Thorpe, D. (1996), A conceptual model of strategic considerations for international retail expansion, in Akehurst, G. and Alexander, N. (Eds), The Internationalisation of Retailing, Frank Cass, London. Smith, A. and Sparks, L. (1997), Retailing and small shops, Institute for Retail Studies, University of Stirling, Stirling. Spannagel, R. (1993), Small and medium enterprises in retailing in Germany strong in the west and weak in the east, paper presented at Seventh International Conference on Research in the Distributive Trades, University of Stirling, Stirling, pp. 584-90. Sparks, L. (1995), Reciprocal retail internationalisation: the Southland Corporation, Ito Yokado and 7-Eleven convenience stores, The Service Industries Journal, Vol. 15 No. 4, pp. 57-96. Stake, R.E. (1994), Case studies, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, Sage, Newbury Park, CA, pp. 236-47. Sternquist, B. (1997), International expansion of US retailers, International Journal of Retail & Distribution Management, Vol. 25 No. 8, pp. 262-8. Stevenson, H.H. (1983), A perspective on entrepreneurship, Working Paper, 9-384-131, Harvard Business School. Strauss, A.S. and Corbin, J. (1994), Grounded theory methodology, in Denzin, N.K. and Lincoln, Y.S. (Eds), Handbook of Qualitative Research, Sage, Newbury Park, CA, pp. 273-85. Taylor, S.J. and Bogdan, R. (1984), Introduction to Qualitative Research Methods: The Search for Meanings, Wiley, New York, NY. Teece, D.J., Pisano, G. and Shuen, A. (1997), Dynamic capabilities and strategic management, Strategic Management Journal, Vol. 18 No. 7, pp. 509-33. Terziovski, M. (2003), The relationship between networking practices and business excellence: a study of small to medium enterprises (SMEs), Measuring Business Excellence, Vol. 7 No. 2, pp. 78-92. Tordjman, A. (1994), European retailing: convergence, differences and perspectives, International Journal of Retail & Distribution Management, Vol. 22 No. 5, pp. 3-19. Treadgold, D. (1989), Retail internationalisation: 1992 in context, in Bendall, A. (Ed.), Retailing to 1992: Key Factors for Retailers, Longman Group, Harlow, pp. 8-17. Treadgold, A.D. (1990), The developing internationalisation of retailing, International Journal of Retail & Distribution Management, Vol. 18 No. 2, pp. 4-11. Vatne, E. (1995), Local resource mobilisation and internationalisation strategies in small and medium-sized enterprises, Environment and Planning, Vol. 27, pp. 63-80. Vida, I. (2000), An empirical inquiry into international expansion of US retailers, International Marketing Review, Vol. 17 Nos 4/5, pp. 454-75. Vida, I., Reardon, J. and Fairhurst, A. (2000), Determinants of international retail involvement: the case of large US retail chains, Journal of International Marketing, Vol. 8 No. 4, pp. 37-60. Welch, L.S. and Luostarinen, R. (1988), Internationalisation: evolution of a concept, Journal of General Management, Vol. 2, pp. 34-55. Wernerfelt, B. (1995), The resource-based view of the rm: ten years after, Strategic Management Journal, Vol. 16 No. 3, pp. 171-4.

Westhead, P., Wright, M. and Ucbasaran, D. (2001), The internationalisation of new and small rms: a resource-based view, Journal of Business Venturing, Vol. 16, pp. 333-58. Williams, D. (1991), Differential rm advantages and retailer internationalisation, International Journal of Retail & Distribution Management, Vol. 19 No. 4, pp. 3-12. Williams, D. (1992a), Motives for retailer internationalisation: their impact, structure and implications, Journal of Marketing Management, Vol. 8, pp. 269-85. Williams, D. (1992b), Retailer internationalisation: an empirical enquiry, European Journal of Marketing, Vol. 26 Nos 8/9, pp. 8-24. Wolff, J.A. and Pett, T.L. (2000), Internationalisation of small rms: an examination of export competitive patterns, rm size and export performance, Journal of Small Business Management, Vol. 38 No. 2, pp. 34-47. Yin, R.K. (1994), Case Study Research: Design and Methods, 2nd ed., Sage, Newbury Park, CA. Yip, G.S., Biscarri, J.G. and Monti, J.A. (2000), The role of the internationalisation process in the performance of newly internationalising rms, Journal of International Marketing, Vol. 8 No. 3, pp. 10-35. Further reading Burghausen, M. and Fan, Y. (2002), Corporate branding in the retail sector: a pilot study, Corporate Communications: An International Journal, Vol. 7 No. 2, pp. 92-9. Jeffreys, J.B. (1968), Large retail rms in Europe: their characteristics, relative importance, and future development, European Journal of Marketing, Vol. 2, pp. 268-72. Moen, O. (1999), The relationship between rm size, competitive advantages and export performance revisited, International Small Business Journal, Vol. 18 No. 1, pp. 53-72. Moore, C. (1997), La Sans Frontieres: the internationalisation of fashion retailing, Journal of Fashion Marketing and Logistics, Vol. 10 No. 2, pp. 66-84. Waldman, C. (1978), Strategies of International Mass Retailers, Praeger, New York, NY.

SME retailers

53

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints