Internationalization in Small and Medium-Sized Enterprises

Many small and medium-sized companies are already operating successfully in other European countries, thus strengthening the German economy’s reputation as the world champion of export.

Many small and medium-sized companies are already operating successfully in other European countries, thus strengthening the German economy’s reputation as the world champion of export. But there are new, high-growth markets waiting even beyond the boundaries of Europe. Small and medium-sized companies in particular risk quite a bit, but they also stand to gain even more if they step outside of familiar national or European borders and successfully position themselves in competition with large, high-resource companies in new markets. The move abroad is thus always a major decision and should be preceded by clearly formulated considerations. This was the point of departure for the first SME Forum [“Forum Mittelstand”] of the year 2017, with an afternoon event for entrepreneurs around the topic of “Developing new growth markets: Potentials and pitfalls for small and medium-sized entrepreneurs.”

When planning a foreign expansion, awareness of the legal environment involved is an indispensable prerequisite. With this logic in mind, after welcoming remarks by event organizers Professor Dr. Christina Günther, Chairholder of the IHK-Chair of Small and Medium-Sized Enterprises at WHU, and Ralf Lawaczek, Managing Director of IHK Koblenz, the SME Forum turned the podium over to attorney Dr. Timo Karsten for the first lecture of the day. During his overview of the legal steps involved in successful internationalization and business activity abroad, it became clear that the significance of individual legal aspects is also largely a function of individual, strategic decisions. Karsten pointed to different legal forms, including for instance branches or subsidiaries, the legal status of which involved a variety of benefits and drawbacks. The decision whether to second a company’s own experts and executives or recruit employees locally also helps sets the stage for future developments. To maintain one’s perspective on legal questions of taxation and labor law in the jungle of local legislation, he advised participants to conduct a market study. Investment in legal advisors with local expertise and use of a tax or payroll team, together with well-connected recruiters, also paid off in the long run.

These are observations that Holger Hoffmann, Management Consultant and Interim Manager at iLux Electricals Pvt. Ltd, shares as he looks back on four years as a board member of an Indian production company. Now active in the startup sector, Hoffmann took the participants along on a journey into a strange world. His very personal lecture on human-resources management and communication abroad, based on the example of his own experiences as the only European in a formerly family-run Indian company, shed light on aspects of everyday relevance, such as religion, language, culture and politics. A great paradox is the Indian penchant for bureaucracy, coupled with non-compliance with countless laws that are often impossible to enforce. The resulting, ubiquitous avoidance structures and networks, he pointed out, are useful and dependable once one learns to accept and understand them. Hoffmann identified genuine interest, open dialog and acceptance of traditions of all kinds as success factors. Summing up his experience in India, he said: “There’s one thing of which you can be sure: nothing works as planned, but everything is negotiable and possible.”

Robert Lippmann, Managing Director for Location Policy and International Affairs at the Koblenz Chamber of Industry and Commerce, led the second part of the event with a presentation on the International Chambers of Commerce at the Chamber of Industry and Commerce. Following the remarks by Mr. Lippmann, under the traditional agenda item, “Entrepreneurs in dialog,” Thomas Kleppel, Winkler und Dünnebier Süßwarenmaschinen GmbH, Dr. Antje Eckel, Dr. Eckel Animal Nutrition GmbH & Co. KG and WHU Alumnus Henning Kocks, Kocks Consult GmbH, joined in a discussion with participants about their own successful expansions abroad, specifically in Russia, Thailand und Kazakhstan. To cap off the afternoon event for entrepreneurs, Alexander Feltes, an analyst at DEG – Deutsche Investitions- und Entwicklungsgesellschaft mbH, presented a variety of offers and measures in support of German SMEs in emerging markets. Taking his own consulting work as an example, he highlighted the motivations, concerns and surprises of investing in developing and emerging economies.

The goal of the SME Forum is to provide practical and specialist information on the latest academic insights to small and medium-sized enterprises in the region on a regular basis, and in this way to make a real contribution towards increasing the economic and innovative clout of local businesses.