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Internationalization and Glocalization of Smes Julia Truntschnig Going Glocal Internationalization and Glocalization of Austrian SMEs in the Russian Federation MASTER’S THESIS Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Science Studies of International Management Alpen-Adria-Universität Klagenfurt Faculty of Management and Economics Supervisor: Univ.-Prof. Dipl.-Ing. Dr. Erich Schwarz Presupervisor: Mag. Dr. rer.soc.oec. Ana Kuntaric Department of Innovation and Entrepreneurship April 2015 GOING GLOCAL: INTERNATIONALIZATION AND GLOCALIZATION OF SMES AFFIDAVIT I hereby declare in lieu of an oath that - the submitted academic paper is entirely my own work and that no auxiliary materials have been used other than those indicated; - I have fully disclosed all assistance received from third parties during the process of writing the paper, including any significant advice from supervisors; - any contents taken from the works of third parties or my own works that have been included either literally or in spirit have been appropriately marked and the respective source of the information has been clearly identified with precise bibliographical references (e.g. in footnotes); - to date, I have not submitted this paper to an examining authority either in Austria or abroad and that - the digital version of the paper submitted for the purpose of plagiarism assessment is fully consistent with the printed version. I am aware that a declaration contrary to the facts will have legal consequences. Villach, 4th of April, 2015 ii | PAGE GOING GLOCAL: INTERNATIONALIZATION AND GLOCALIZATION OF SMES ABSTRACT Increased globalization leads companies of all sizes to consider going international in order to broaden their customer base, increase their sales and ensure the future success of their business. Internationalization, however, also brings along several challenges, such as the adaptation of products and marketing strategy to target customers with different cultural backgrounds and origins. As a result, in order to combine global standardization and local adaptation and eventually enable companies to achieve maximum success in a foreign market, the concept of glocalization evolved and is becoming more and more popular. This thesis investigates both the concepts of internationalization and glocalization, in the framework of Austrian SMEs internationalizing to the Russian Federation, with special focus on the food and drinks industry. An in-depth survey with fourteen representatives of Austrian SMEs of this industry active in Russia, explores whether and to which extent Austrian SMEs glocalize their products, marketing communication and distribution, and whether the combination of internationalization and glocalization is beneficial for them. Hence, this thesis contributes to academic literature about glocalization of SMEs, a field of scientific research which has received rather littler academic attention so far, especially in the context of Austria and Russia. The results of the conducted study revealed that product adaptations are carried out by very few SMEs and are largely focused on recipe and ingredients. Marketing communication was found to be adapted more frequently, most often with regard to language of product labels and promotion material, but also concerning content and design of promotion material and promotion channels. In conclusion, the study identified an interrelation between internationalization and glocalization by clearly demonstrating that glocalization positively influences SMEs’ success in the foreign market. In summary, this research illustrates the substantial importance of both internationalization and glocalization for Austrian SMEs in the food and drinks industry and highlights the high potential of the Russian market in this sphere. It closes research gaps regarding foreign market entry of Austrian SMEs into the Russian Federation and sheds light on the phenomenon of glocalization within Austrian SMEs, contributing to academic research in these fields by providing reference for future operations of SMEs in the market. iii | PAGE GOING GLOCAL: INTERNATIONALIZATION AND GLOCALIZATION OF SMES ACKNOWLEDGEMENTS I would like to cease this opportunity to express my gratitude to several people for their support with this thesis and my academic career in general. First and foremost, I would like to thank all company representatives who participated in my study for this thesis. Without their contribution, this master’s thesis would not have been possible and their support and cooperativeness is highly appreciated. I would also like to express my sincere gratitude to my supervisor Univ.-Prof. Dipl.-Ing. Dr. Erich Schwarz, and especially to my presupervisor Mag. Dr. rer.soc.oec. Ana Kuntaric, for their patient guidance, encouragement and advice throughout the writing process of this thesis. Last but not least, I would also like to thank my beloved parents and sister, for their constant support, guidance and inspiration not only in my academic career, but throughout my entire life. Words alone cannot express my gratitude for all that you have given me. Thank you for always believing in me. iv | PAGE GOING GLOCAL: INTERNATIONALIZATION AND GLOCALIZATION OF SMES TABLE OF CONTENTS TABLE OF FIGURES AND TABLES ................................................................................. VII ABBREVIATIONS .......................................................................................................... VIII 1. INTRODUCTION ................................................................................................... 1 1.1. STRUCTURE OF THE THESIS .................................................................................. 3 2. THEORETICAL FRAMEWORK .......................................................................... 4 2.1. TERMINOLOGY .................................................................................................... 4 2.2. SMALL AND MEDIUM-SIZED ENTERPRISES (SMES) .............................................. 7 2.2.1. GENERAL CHARACTERISTICS OF SMES ........................................................................... 7 2.2.2. SMES IN AUSTRIA ............................................................................................................ 9 2.2.3. SMES IN THE RUSSIAN FEDERATION ............................................................................. 11 2.3. INTERNATIONALIZATION .................................................................................... 14 2.3.1. INTERNATIONALIZATION OF SMES ....................................................................................... 14 2.3.1.1. MOTIVES FOR INTERNATIONALIZATION OF SMES .................................................................. 14 2.3.1.2. BARRIERS FOR INTERNATIONALIZATION OF SMES ................................................................ 15 2.3.2. FOREIGN ENTRY MODES OF SMES ...................................................................................... 16 2.3.2.1. EXPORT FOREIGN MARKET ENTRY MODES ...................................................................... 18 2.3.2.2. INTERMEDIATE FOREIGN ENTRY MODES .......................................................................... 19 2.3.2.3. HIERARCHICAL FOREIGN ENTRY MODES ......................................................................... 21 2.3.2.4. FOREIGN MARKET ENTRY MODES: AUSTRIA AND RUSSIA ................................................ 21 2.4. AUSTRIA AND THE RUSSIAN MARKET ................................................................. 22 2.4.1. THE BUSINESS RELATIONSHIP BETWEEN AUSTRIA AND RUSSIA ................................ 22 2.4.2. OPPORTUNITIES FOR AUSTRIAN SMES IN RUSSIA .................................................... 23 2.4.3. CHALLENGES FOR AUSTRIAN SMES IN RUSSIA ........................................................ 25 2.5. INNOVATION ..................................................................................................... 27 2.5.1. INNOVATION IN THE FRAMEWORK OF SMES ............................................................ 28 2.5.2. INNOVATION IN INTERNATIONALIZED SMES ............................................................ 30 2.6. FROM GLOBALIZATION TO GLOCALIZATION ...................................................... 31 2.6.1. GLOCALIZATION IN PRODUCT MANAGEMENT .......................................................... 34 2.6.2. GLOCALIZATION IN MARKETING COMMUNICATION ................................................. 36 2.6.3. GLOCALIZATION IN DISTRIBUTION ......................................................................... 38 3. EMPIRICAL FRAMEWORK .............................................................................. 40 3.1. RESEARCH APPROACH AND TECHNIQUE ............................................................. 40 3.2. RESEARCH DESIGN ............................................................................................ 42 3.3. DATA COLLECTION METHOD ............................................................................. 44 3.4. SAMPLE DESCRIPTION ....................................................................................... 45 3.4.1. COMPANY DESCRIPTIONS ...................................................................................... 46 3.4.2. GENERAL CHARACTERISTICS OF THE SAMPLE ......................................................... 49 3.5. RESEARCH FINDINGS AND ANALYSIS ................................................................. 52 3.5.1. INTERNATIONALIZATION ........................................................................................................
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