Internationalization Strategies for SMEs: Experience of the IBERPYME Programme Paramaribo, Suriname – 19 November 2009

1. Internationalization Strategies for SMEs: Experience of the IBERPYME ProgrammeParamaribo, Suriname – 19 November 2009

2. Importance of internationalization • Trend to international trade and financial openness. • Trade agreements underway make up an outline • of the trade map in the next years. • The world system, boosted by technologies, • is becoming more dynamic every day. • At present, any type of information and knowledge • is virtually within reach of any organization. • The number of competitors has increased, • and they have become more competitive.

3. Frequently mentionedcritical topics Limitations of business competitiveness: • Low productivity and diversification • Limited access to financing • Difficulties to access international markets • Insufficient trained staff and limited managerial capacity • Lack of quality controls and standardization of products • Limited capacity for technological innovation and adaptation: Low investment on R&D • High transport and logistics costs • Low social capital: reduced associativity

4. Difficulties identified for SMEs • Internal Variables: • Personnel management • Election of appropriate tecnologies • Capacity to use information • External Causes: • Market structure • Availability of information sources • Legal and institutional factors • Factors derived from official policies

5. Marketing • Enterprise logistics • Marketing channels • Financial systems • Public policies Competitive Strategies in a Globalized World • Associativity • Development of Information and Communication Technologies (ICTs)

6. Information and Communication Technologies • ICTs facilitate the exchange of information and knowledge in a globalized world. • Promote a better communication among SMEs, enterprise networks and any associative system. • Allow for better access to intangible innovations and capacities of enterprises.

7. Associativity • Clusters • Industrial districts • Enterprises networks • Subcontractors and suppliers • Export consortiums

8. HORIZONTAL NETWORKS (Among enterprises of the same link) VERTICAL NETWORKS (Among enterprises of consecutive links) Enterprise networks • A cooperation mechanism among enterprises • Each participant holds legal independence and managerial autonomy • Through volunteer affiliation • To reap individual benefits through joint action Source: Carlos LópezCerdan and Antonio Maeso, 1999

9. HORIZONTAL NETWORKS (Among enterprises of the same link) VERTICAL NETWORKS (Among enterprises of consecutive links) • Alliance among enterprise groups offering the same product or service that cooperate with each other in some activities, but compete against each other in the same market. • Alliance among large and small enterprises to develop suppliers Source: Carlos LópezCerdan; COCAI - Mexico

10. Client Distributor Carrier Shoe manufacturer Shoe manufacturer Shoe manufacturer Shoe manufacturer Skin seller Tannery Livestock farmer Vertical-Horizontal Relations SMEs do not have resources or capacity to adopt individual strategies Independent enterprise networks are more flexible to market variations Integration and coordination of networks and production chains are not only a means of adding value, but also a competitiveness and equity strategy. Source: Carlos LópezCerdan; COCAI - Mexico

11. Individual producer Networking producer Produces according to his/her conditions. Produces according to his/her client-consumer needs. Produces generics (commodities). Produces specialised raw materials. Sells as one business to another (B to B). Sell to whomever he/she can. Has fewer possibilities for growth and sustainability. Can organize his/her production according to plans of rotation and biodiversity. Fuente: Carlos LópezCerdan; COCAI - México

12. Cluster model • Sectoral and territorial concentration of enterprises of the same link in a production chain or complementary links plus network of support institutions PRODUCERS AND MARKETEERS MAJOR ENTERPRISES • There is cooperation • There is exchange of information • There is structure of relations • Joint action of enterprises • There are patterns of collective efficiency NETWORK OF SUPPLIERS ENTERPRISES PROVIDING RAW MATERIALS, PARTS, COMPONENTS AND SERVICES Integration Collaboration SOCIAL CAPITAL HUMAN TECHNOLOGY FINANCIAL BUSINESS RESOURCES RESOURCES CLIMATE PHYSICAL INFRASTRUCTURE Links

13. Productive Coordination Centre • Promotion of trust-based relationships among SME enterprises and other actors • eliminate obstacles to the creation of networks • To encourage and guide enterprises integration • eliminate transaction costs of enterprises • To speed up learning processes of enterprises • Functions • Intelligence: To identify joint business opportunities • Development: To support implementation and management of joint businesses. To determine benefits expectedby enterprises. To evaluate impacts • Links: To promote alliances with support institutions • Innovation: To manage incorporation of technology packages into networks in order to make the necessary improvements to achieve the project’s goals • Features • Autonomy • Stability • Full-time commitment • Self sustainable • Integrity (reliable) • Transparency

14. Why to work with Clusters? • Openness and liberalization of markets mean that enterprises operate in a global market. • Opportunities to enter new markets and threat of entry of new competititors. • High and sustainable growth modelbased on exports. • New economic development and growth model based on competitiveness. • Productivity • Capacity to continously innovate • Change in enterprise organization mechanisms. • Change in the design of public policies: There is no question about the participation in a global market. Favouring economic development. Favouring competitiveness. KEY ACTORS 1) Enterprises: Dynamic enterprise blend 2) Professional partnerships, corporations 3) Universities, technology institutions, technology centres 4) Public sector: Governmental institutions, public-private tables, etc.. Source: Production Development Corporation – CORFO; Chile, 2008

15. A Cluster has to… • Develop a sector or sectors related to potential economic growth in the territory. • Develop horizontal networks (enterprises that produce the same type of good) and vertical networks (enterprises that are in different positions of the production chain). • Speed up development in the selected territory, creating interaction among enterprises and improving competitiveness. • CRITICAL SUCCESS FACTORS • Availability of an enterprise base ready for change and associativy to achieve goals. • Getting involved with relevant actors: businessmen and strategic institutions. • Leadership in the region to conduct and operate the programme Source: Production Development Corporation – CORFO; Chile, 2008

16. Why a cluster? • Because a relevant part of enterprise competitiveness (particularly SMEs) depends on the characteristics of the environment. Because the cluster could be a favorable environment for development competitiveness of enterprises • Competitive advantages of a cluster • Spontaneous advantages: • Potential increase in number of enterprises in a cluster. • A variety of suppliers, human resources and information. • Local image. • Dissemination of knowledge. • Induced advantages: • Trust-based relationships. • Local development economies. • Specialization and productive complementation. • More flexibility. • Improvement in managing enterprises.

17. Current situation It is necessary to train professionals with methods and practices aimed at intervenir en campo with all the actors of the cluster. It is necessary to think about non-institutional technical support and coordination structures in their ebryonic stage which are very flexible for the development of the first clusters. It is necessary to think about refundable financial instruments to cofinance projects of the cluster’s enterprises and institutions. It is necessary to improve the follow-up and assessment tools to make an on-site evaluation of the cluster’s enterprises. It is necessary to foster benchmarking and the exchange of experiences among the various institutions and practitioners working on the development of clusters in Latin America with a view to beginning to integrate a knowledge network.

18. Essential topics and activities scheduled for 2010 • Integration and productive coordination • 2) Innovation and entrepreneurship • 3) Information and Communication Technologies • 4) Internationalization • 5) Productivity, Quality and Competitiveness • 6) Financing • 7) Public Policies • 8) Enterprise Social Responsibility

19. Thank you for your attention Latin American and Caribbean Economic System (SELA) IBERPYME Programme http://www.sela.org E-mail: iberpyme@sela.org