PME et entreprenariat

Glossary for Barriers to SME Access to International Markets

 

Internal Barriers

 

External Barriers

 

 

INTERNAL BARRIERS: Barriers internal to the enterprise associated with organisational resources/capabilities and company approach to export business.

Informational Barriers: problems in identifying, selecting, and contacting international markets due to information inefficiencies.

Limited information to locate/analyse markets: difficulty in knowing what national and international sources of information is available or required to reduce the level of uncertainty of foreign markets.

Unreliable data about the international market: problems associated with the source, quality, and comparability of available information used to attempt to increase understanding of foreign markets (including access to data, ability to retrieve data quickly, and the cost of obtaining data).

Identifying foreign business opportunities: difficulty in strategically and/or proactively identifying and selecting opportunities in foreign markets (including customers, contacts, business partners and joint ventures).

Inability to contact overseas customers: difficulty in contacting customers in overseas markets due to geographical distance and time-zones, poor research by the firm in identifying customers, and limited exposure to sources listing potential customers such as databases.

Human Resource Barriers: inefficiencies of human resource management with regard to internationalisation.

Lack of managerial time to deal with internationalisation: inability for managers to devote sufficient time, resources and energy towards selecting, entering and expanding into foreign markets, designing marketing strategies, and conducting business with overseas customers.

Insufficient quantity of and/or untrained personnel for internationalisation: problems associated with insufficient numbers of personnel to handle the excess work demanded by international operations, in addition to a lack of specialised knowledge and expertise within the company to deal with international business tasks such as documentation handling, logistical arrangements, and communicating with foreign customers (including knowledge of foreign languages, cultures and hands-on export experience).

Difficulty in managing foreign employees: inexistence of proper managers to employ and manage foreign employees to deal with international business task such as operating activity in foreign markets.

Financial Barriers: lack or insufficiency of finance with regard to internationalisation.

Shortage of funds to finance working capital for internationalisation: difficulty in allocating and/or justifying adequate expenditure towards researching overseas markets, visiting foreign customers, adapting international marketing strategies.

Shortage of funds to finance investment for internationalisation: difficulty in allocating and/or justifying adequate expenditure towards investment to start or expand international activity.

Shortage of insurance for internationalisation: difficulty in insuring products for foreign markets and/or assets in foreign markets.

Product and Price Barriers: pressures imposed by external forces on adapting the elements of the company’s product and pricing strategy.

Difficulty in developing new products for foreign markets: inability, difficulty or unwillingness to develop entirely new products for specific foreign market needs and wants.

Difficulty in adapting product design/style: inability, difficulty or unwillingness to adapt the company’s product design or style to the idiosyncrasies of each foreign market (e.g. different conditions of use, variations in purchasing power, dissimilar consumer tastes, diverse socio-cultural settings).

Difficulty in meeting product quality/standards/specifications of foreign markets: inability, difficulty, or unwillingness to adapt products necessitated by both legal and non-legal differences in quality standards and preferences among overseas markets.

Difficulty in offering satisfactory prices to customers: inability to offer foreign customers satisfactory prices because of: higher unit costs due to small production runs; additional costs incurred in modifying product, packaging and/or service; higher administrative, operational and transportation expenses; extra taxes, tariffs, and fees imposed; and higher costs of marketing and distribution. 

Difficulty in matching competitors’ prices: lack of price competitiveness due to factors that are controllable (e.g. strict adoption of a cost-plus pricing method) and/or uncontrollable (e.g. existence of unfavourable foreign exchange rates; differences among countries’ cost structure of production, distribution, and logistics; adoption of dumping practices by competitors; and government policy to subsidise local industry). 

Difficulty in granting credit facilities to foreign customers: problems due to a lack of funds to sustain providing credit facilities to customers and/or a fear that debts may not be recovered from customers that might be far away, have no past experience with the company, and come from countries with unstable politico-economic environments.

Lack of excess production capacity for foreign markets: inexistence of or inability to generate excess production over and above what the domestic market requires in order to initiate or expand export business operations.

 

Distribution, Logistics and Promotion Barriers: barriers associated with the distribution, logistics and promotion aspects of in foreign markets.

Difficulty in establishing/using distribution channels in foreign markets: problems associated with adjusting distribution methods according to the variations and idiosyncrasies within foreign markets (e.g. range and quality of services offered, and number of layers of a distribution channel), and/or problems associated with gaining access to distribution channels in overseas markets (including channels that are occupied by the competition; the costs of managing the length of the channel; or various levels of the system being controlled by a certain distributor).

Difficulty in obtaining reliable foreign representation: difficulties in obtaining reliable representation overseas who meet the: structural (territorial coverage, financial strength, physical facilities), operational (product assortment, logistical arrangements, warehouse facilities), and behavioural (market reputation, relationships with government, cooperative attitude) requirements of the exporter and is not already engaged by a competitor.

  Difficulty in supplying inventory abroad: problems associated with re-supplying the foreign market adequately including transportation delays, demand fluctuations, and unexpected events that create shortages of the company’s products overseas.

Excessive transportation/insurance costs: the exacerbation of transportation costs because of large distances to and within foreign markets, poor infrastructural facilities, limited availability of transportation, and delays in product delivery; and/or insurance costs because of the higher risks associated with selling goods overseas.

Difficulty in offering technical/after-sales service: problems associated with the provision of technical and/or after-sales service including delays and increased costs associated with: geographical distances between the company and its foreign market; setting up servicing operations in strategic locations; maintaining large quantities of spare parts; adjusting the approach to after-sales service for country variations in conditions of use, competitive practices, and physical landscape.

Difficulty in adjusting promotional activities to foreign market: problems associated with adjusting promotional activities due to country variations in buying motives, consumption patterns, and government regulations including: variations in the composition of the target audience, inappropriate content of the advertising message, unavailability or different use of advertising media, restrictions in the frequency/duration of advertising, and insufficient means to assess advertising effectiveness across countries.

EXTERNAL BARRIERS: Barriers stemming from the home and host environment within which the firm operates.

Procedural Barriers: barriers associated with the operating aspects of transactions with foreign customers.

Unfamiliar exporting procedures/paperwork: difficulty in understanding and/or managing customs documentation, shipping arrangements, and other export procedures.

Difficulty in communicating with foreign customers: insufficient and/or infrequent communication with customers due to the large geographical and psychological distances between buyers and sellers, and poor communications infrastructure.

Slow collection of payments from abroad: difficulty in achieving timely collection of payments from overseas due to the lack of immediate contact with overseas markets, foreign buyers requesting more credit facilities, the use of intermediaries to enter a foreign market, and/or strict currency restrictions imposed by the central bank of the foreign market.

Difficulty in enforcing contracts and resolving disputes: problems associated with: enforcing contracts due to poor quality (e.g. non-verifiable information, ambiguity, lack of consideration or mutual acceptance, and/or unreasonable breadth of the contract); enforcing contracts because of unclear expectations, misinterpretation, ‘bad faith’ and/or unwillingness of contract partner(s) to uphold the contract; resolving disputes because of nonexistent or unsophisticated dispute resolution mechanisms, time and/or cost of accessing foreign legal systems, lack of knowledge of foreign laws, and conflicts of laws; and/or unwillingness of contract partner(s) to participate in dispute resolution mechanisms.  

Governmental Barriers: Barriers associated with the actions or inaction by the home and foreign government in relation to its indigenous companies and exporters.

Lack of home government assistance/incentives: support and/or encouragement by government agencies to SMEs for export and internationalising activities is non-existent, scarce or unsophisticated.

Unfavourable home rules and regulations: local exporters are restricted by controls imposed by the home government including restrictions on exports of either components or final-products to certain hostile countries and/or restrictions on products with national security or foreign policy significance.

Restrictions to have foreign ownership: foreign companies are restricted on the equity share they can hold by the foreign government.

 

Restrictions on the movement of people/business persons (such as problems obtaining visas, quotas, limited duration of stay, etc.): there are restrictions of the movement of people including numerical limitation to movement of natural persons which provide a specific service such as computer related service and legal service.

 

Unfair treatment compared to domestic firms in tax or eligibility to affiliate: foreign companies are treated less favorable regarding taxes including higher direct or indirect taxes charged to foreign companies.

 

Unfair treatment compared to domestic firms in public procurement: foreign companies are treated less favorable regarding participation in public procurement including discrimination in the application of financial or technical criteria for project and/or imposition of using local contents.

 

Unfair treatment compared to domestic firms in competition regulation: foreign companies are treated less favorable regarding competition with domestic companies including the case that publicly-controlled firms are subject to an exclusion or exemption, either complete or partial, from the application of the general competition law, .

 

Laws and regulations are not transparent in the foreign country: regulatory inefficiency including difficulty in finding the necessary information in laws and regulations and/or information cost and time of obtaining necessary licenses or permits.

Customer and Foreign Competitor Barriers: Barriers associated with the firm’s customers and competitors in foreign markets, which can have an immediate effect on its export operations.

Different foreign customer habits/attitudes: difficulty in adjusting the company’s strategy to accommodate variations in consumer habits and attitudes caused by different topographic and climatic conditions, household size and structure, level of technical understanding, income level and distribution, manners and customers, and education standards.

Keen competition in foreign markets: difficulty in maintaining competitive advantage in overseas markets due to more complicated and intensive competitive situations (e.g. competition arising from many sources, different cost competitive strategies and protections, different brand positioning and variable marketing strategies).

Business Environment Barriers: Barriers associated with the economic, political-legal and socio-cultural environment of the foreign market(s) within which the company operates or is planning to operate.

Poor/deteriorating economic conditions abroad: unpredictable consumer behaviour caused by economic effects such as large foreign debts, high inflation rates, and high unemployment levels in foreign markets, which erode their citizens’ purchasing power and impacts on their spending habits (e.g. seeking more economical products, purchasing goods less often, and carefully selecting what they buy).

Foreign currency exchange risks: risks to international business transactions arising from unstable exchange rates leading to fluctuating export prices overseas; revaluation of exporter’s currency resulting in less favourable prices to end-users; and unconvertible foreign currencies that impede the repatriation of sales/profits from overseas.

Unfamiliar foreign business practices: variations in business practices from country to country which may confuse or send distorted signals to companies that are unfamiliar with the formal and informal procedures performed in foreign markets.

Different socio-cultural traits: challenges associated with understanding and accommodating the affects that variations in religion, values, attitudes, manners, customs, education, and social organisation have on consumer behaviour, targeting approaches, and marketing programmes.

Verbal/non-verbal language differences: challenges associated with understanding the oral and written aspects of the foreign language and its nonverbal characteristics, such as body language and time perception, in order to communicate both verbally and non-verbally through marketing, advertising, branding and packaging.

Inadequacy of infrastructure for e-commerce: non-existent or unsophisticated structures (e.g. hardware, software, security, and broadband) are in place to support the distribution, sale, purchase, marketing, and servicing of products or services over electronic systems such as the Internet and other computer networks.

Political instability in foreign markets: difficulty in initiating or maintaining operations overseas due to economic (low household incomes, inflationary trends, large foreign debt), societal (religious fundamentalism, ethnic tension, high degree of corruption), and/or political (authoritarian regime, conflict with neighbours, military control) factors.

Tariff and Non-tariff Barriers: Barriers associated with restrictions on exporting and internationalising imposed by government policies and regulations in foreign markets.

High tariff barriers: the burden associated with excessive tax applied to imported goods to artificially inflate prices of imports and protect domestic industries from foreign competition.

Inadequate property rights protection (e.g. intellectual property): difficulties associated with an inadequate legal framework to protect the ownership, use, control, benefit, transferral or sale of both physical and intangible property especially intellectual property (e.g. copyrights, patents, trademarks and trade secrets).

Restrictive health, safety and technical standards (e.g. sanitary requirements): difficulties associated with meeting high, non-transparent, inconsistent and/or discriminatory country-specific standards for imported goods including: sanitary and phytosanitary requirements; industrial and environmental protection standards; conformity assessment procedures (testing and re-testing, verification, inspection and certification to confirm products fulfil standards); and technical standards (e.g. preparation, adoption and application of different standards for specific characteristics of a product such as production, design, functions and performance).

Arbitrary tariff classification and reclassification: problems and costs associated with the practices by Customs administrations of classifying goods in a way which is not in accordance with internationally accepted rules and principles of tariff classification (e.g. increasing the level of duty payable for imported goods either for trade policy, trade protection and/or revenue raising reasons; imposing tariffs less favourable than those implied previously through reclassification of imported goods; inability to obtain firm rulings from overseas Customs authorities on duties for some products; and/or lack of technical knowledge by Customs’ administrations to enable them to provide correct tariff classifications to importers).

Unfavourable quotas and/or embargoes: unreasonable prohibition of commerce and trade with a certain country or unreasonable restrictions on the quantity of specific goods being imported to certain countries.

High costs of Customs administration: costs associated with: divergent interpretations of customs valuation rules by different Customs administrations (including the use of arbitrary or fictitious customs values); delay in customs clearance procedures (e.g. excessive and/or irrelevant paperwork, congestion at points of entry, delay and cost of cargo clearance); lack of procedures for prompt review; and lack of transparency and/or irregular/illegal practices (e.g. unofficial customs procedures, unwritten rules and unpublished changes, unofficial fees to accelerate processing, and the absence of information on customs regulations and procedures in English).

Competitors with preferential tariff by regional trade agreement: disadvantageous competition with competitors who can benefit low or zero tariff from regional trade agreement between host country and home country of competitors.

 

 

 

 

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