The Internal and External Barriers to Exporting Faced by SMEs

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The Internal and External Barriers to Exporting Faced by SMEs After many countries enter into World Trade Organization in the world, the multitudinous small and medium-sized enterprise will obtain the import and export operating right. This means they will have the bigger development space. But the small and medium-sized enterprises face some risks when they are doing their business. They reason could cause this problem is that small and medium-sized enterprises have some insufficiencies by themselves, especially on exporting aspect. (Pierre-Andre J, Andre j, and Laurent D, 1994). Generally speaking, exporting barriers could be differentiated as internal barriers and external barriers. Internal barriers related to organization management, information etc. External barriers deal with the host and home environment and government policy within which the company operates (Leonidou,1995a). Therefore, this essay will focus on SMEs exporting and expounds the internal and external barriers to exporting faced by SMEs.

For Internal barriers, the informational barriers are the most important factor. 'Informational barriers refer to problems in identifying, selecting, and contacting international markets due to information inefficiencies.' (Morgan and Katsikeas 1997). The unenlightened information is one of the informational barriers. The international trade relate to different countries' laws and conventions. Obviously, exporting is a complex process that needs to pass through many links, such as commodity inspection, customs, insurance, transportation and so on. Therefore, international trade is much more complicated than the domestic trade; the risk is also higher. Usually, the partial small and medium-sized enterprises are insufficiently experienced and lack the talented person when export their product. They often consider some factors, but actually neglect other factors. For example, they think much of signing contract, but lack the ability to fix the problems after contract and fulfill the contract. The only reason is that they don not have fully understanding of international trade system and also have limit information to analyze overseas market. Therefore, after SMEs obtain the exportation operating right to be engaged in the export business, the fist task they have to do is preparatory work, including how to manage the organizational resource, analyze the product if it is not a compatible to the foreign market and so on. The information and data collection could avoid rashly entering the international market without fully preparation. (Alexandra J. Campbell, 1996)The informational barriers especially present to customers investigation work. Suppose SMEs have chosen the customer who has low credit which cannot fulfill the agreement that will bring the loss to the exporting company. In some case, some exporting SMEs have economic loss because the company had not realized that the customer intentionally cheats at the beginning of signing a contract. Then, the goods were deceived by the customer. To compare with large company, the size of SMEs is much smaller, if a large payment for goods cannot be received according to the contract, it will inevitably affect company turnover of capital, also will cause the operating difficulty.

Price is other internal barrier to SMEs besides informational barriers. At present, many small and medium-sized enterprise stop on the price competition, they gained customers by low price. Even in order to capture the customer, many companies export the same kind of raw material product by low price that may causes this kind of raw material output reduce rapidly. (Leonidou, Leonidas C, 2004) Only dependent on price competition could obtain the benefit in the short-term, but these profits are not enough to support the technical innovation and develop new product. It inevitably affects company growth in potential. (Gregory Hilton 2005). In fact, price already was not the primary factor that affects...
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