The Born Global Strategy

The Born Global StrategyA Guiding Policy Framework for the Internationalizing Small Firm

Ricardo Siller Cardenas

MSc in Economics and Business Administration

The Beginning

• A relatively few years ago:

• Today:

• This global phenomena leads to examine this idea:

• But how can small businesses internationalize?

The Born Global Strategy

• The present Master Thesis focuses on studying the elements of strategy that predispose a small and medium-sized company to become international either early on or in later stages. A strategic guiding policy framework is proposed, and for that matter, the born global profile is the model by which this research is based on.

SPECIFIC RESEARCH PROBLEM

What, Why and Therefore

THE ARISING QUESTION

What are the key attributes and factors of strategy and drivers of performance from born global firms, which under a guiding policy framework contribute to early internationalization and survival?

Outcome: proposal of what the researcher calls a “Guiding Policy Framework”

Purpose of the Study

• The purpose of this study was to identify attributes, factors and strategies that supports internationalization and survival from born global companies, and group those strategies under a common framework that would serve as a basis for launching new ventures.

Umbrella of Terms (Not in Thesis)

International Small Business

Born Globals

Internationalize After 3 years

Micro-Multinational

Become international byemergence

International Small Ventures

Start-up related

OtherDefinition

Theoretical Background

• Based on the Kernel of Good Strategy by Richard P. Rumelt

• Strategy = design

• As such, is all about fitting various pieces together so they work logically towards a common purpose. These pieces (Resources, actions, and the rationale of the situation that has direct influence on the organization) must be configured in a way that the dynamics and interrelations within them yields and advantage in a situation that poses a challenge.


Set of Coherent Actions

Puts the guiding policy to execution. “Hands on” element of the overall strategy. Direct response to challenge.

Falls into the specific nature of the company; its business plan or business model.

Guiding Policy

Framework that deals with the identified challenge.Set of principles or policies to follow when facing the

challenge; does not indicate either specific goals or actions.

Diagnosis

Describes the overall factors that surrounds the economicenvironment of the organization.

Market conditions, industry cycle, technoogicaldevelopments.


Diagnosis

GuidingPolicy

Set of CoherentActions

• We are interested in researchingthese:

• And not in this: why? Because in order to respond our researchquestion, we need a broaderdescriptive approach (Kirpalani, 1985). The Set of coherentactions falls into the specificnature of the business and itsbusiness models and businessplan.

Literature review: Approx. 45 sources

Intro

• Definitions

• Characteristics

• Micro-Multinationals

Strategy

• Role of ICT

• Networks

Performance

• Drivers of performance in BG firns

Methods

• What was needed: “a research method for making replicable and valid inferences from data to their context, with the purpose of providing knowledge, new insights, a representation of facts and a practical guide to action” (Krippendorff, 1980). This insight leads to conclude that qualitative content analysis is the research method that provides better fit for the purposes of this study.

Methods (Continued)

• The nature of this research question and the overall study calls for a method for analyzing written, verbal and/or visual communication messages (Cole 1988), and one that allows the application of this simple process:

• a).- to extract raw information from the born global profile

• b).- to analyze and categorize the extracted information and place it either on the diagnosis element or the guiding policy element of the Kernel of Good Strategy, and

• c).- to develop and test the end product, the Guiding Policy Framework for the Internationalizing Small Firm.

Methods (Continued)

• From this research method, inductive and deductive content analysis are derived as practical approaches. Since the purpose of this thesis is to generate and test new theory, both approaches were applied. The next figure explains visually the outline and rationale of the methodology:

Inductive Approach: To Construct the

KernelGather Data

•Specific Level of Focus

Look for Patterns

•Analyze data to construct theory

Develop Theory

•General Level of Focus

Theorize / Hypothize

• General Level of Focus

Analyze Data

• Analyze data to support hypothesis

Hypotheses supportedor not

• Specific Level of Focus

Deductive Approach: To Test the Kernel

Develop Grounded Theory: Observations from

documents

Gather Data fromLiterature Review / Documents

• Measurement instrument: Matrix of Codes

Analyze data to construct theory

Develop Theory

• Preliminary Kernel of BornGlobal Strategy

Theorize / Hypothize

• Measurementinstrument: interviews

Analyze Data to support theory

Hypothesessupported or not

• Guiding PolicyFramework for the ISB

Test Grounded Theory: Conduct Interview for case study

Deductive Approach Sources: Interviews (App D/E) and two BG case studies

Results: Industry

• Industry: Traditionals and low rates of innovation. Disruption powered by technological change.

• Born globals DO NOT operate in industries characterized by rapid growth; rather, these companies are servicing traditional or off-line industries with the support of technologies

• At the same time, these technologies facilitate the development of international entrepreneurial orientations in the firms.

• Beyond operating in “tech” industry per se, BG’s are applying technological capabilities in order to transform social aspects of the internet and redesign existing business processes, which at the same time, has the consequence of evolving into new business models.

Results: Industry (Continued)

• It was not clear if internationalized industries provided the main motivators for these companies to go global. Rather, it seemed that technological capabilities and the size of the local market were the main drivers of internationalization of the born globals, independently of the levels of maturity of an industry.

• Actually, it seemed that the older an industry, the more opportunities for disruption, as in the case of Drivr.

• The level of competition in target markets did not prove to be a main motivator for going international. Rather, the size of local markets that is not sufficient for firm’s products or services proved to be a better incentive for internationalization.

Results: Industry (Continued)

• These born globals operate in either:

• a).- traditional off-line industries comprised by several activities that are ripe for technological disruption, or

• b).- traditional off-line industries with low rates of innovation and industry change.

Results: Markets

• The assumption that for some companies, the local market for their offerings is non-existent was not proved in this study, since for the two cases studied, there were some levels of activity in the local market.

• For Conferize, it is the possibility to command a ratio of 50% of their total sales; for Drivr, it was the possibility to forge partnerships with local taxis.

• Contrary to what research indicates, product orientation and its relation with business development was more important than market orientation.

Results: Markets (Continued)

• It was not easy to determine whether the changing nature of international markets would have direct influence on born global strategy; rather, it was technological capabilities and the prospects of disrupting old industries the factors that provided competitive advantage.

• The intense focus on product development and supply side catering made difficult to determine the levels of knowledge of these born globals on their respective markets, making it not conclusive to determine whether global niche markets might has brought opportunities or the levels of market growth.

Results: Markets (Continued)

• It was possible to detect the initial intention to be born global by design.

• But not because the stagnation of the local market; rather, because according to these companies, there was not any sense on operating exclusively local if their technological capabilities and disruption potential in traditional industries would provide better chances to internationalization and cater a bigger market share.

• Additionally, the patterns of internationalization proved to be more regional than truly global.

Results: Managerial

• Preliminary inductive study indicated the characteristics of the typical born global founder or key individual:

• A self-starter with a background in technology or research

• Who hire young and educated people with little business experience to manage the company.

• He is also an individual with substantial international experience and language abilities.

• The conclusive arguments regarding these characteristics prove that all these insights are equally valid.

• Yet, in other research, international experience seemed to be not significant.

Results: Managerial

• Characteristics of the founders were clear; people with technological or research background, with a precedent in entrepreneurship.

• And not surprisingly, internationalization from the beginning was always in the back of the mind of the entrepreneurs.

Results: Networking

• Networking had a substantial weight on born global development; even as important as depending on the whole business model on it, as proved by Drivr, since the resources from foreign partners would provide a competitive advantage.

• Conferize also proved this assumption to be of critical importance when the findings indicated that the purpose of their partnerships were for incremental and scalability objectives.

Results: Product ModelStrategy• Surprisingly, a new pattern emerged. Product Model Strategy

was not a code that was considered in the axial design.

• This was inductively constructed and equally considered under the principle of chain of evidence, and it seemed to have a substantial weight in the internationalization process.

• Basically, the Product Model Strategy describes the policies that these born globals employ in their international pursuits; namely, basing their uniqueness (and hence, competitive advantage) in business model innovation, developing proprietary technology, and surprisingly, instead of orientating toward market learning, these born globals are entirely focused on the supply side and product development.

• The rationale is that there is no use in focusing in a market where you are still in early stages of product development.

Born Global Diagnosis:

State of the Industry, New Market Conditions, Technological Disruption

International Management

Policy

International Entrepreneurial

OrientationsPolicy

Knowledge and Learning

OrientationsPolicy

TechnologicalCapabilities

Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy




Policy


OrientationsPolicy


OrientationsPolicy


Policy

NetworkingPolicy

Product ModelPolicy

Limitations of the study:

• “If I had to do this study again, in what way would it differ? Would another approach affect outcomes, and if so, how?”

What I did wrong

1. Rushed results analysis and discussion

2. Unproper use of deductive methods

3. Performance not well addressed

4. Limitations that did not let a quantitative component

5. Confirmation Bias

Thanks!