Notes

The topic of this dissertation is not yet decided, but around: how to overcome the internationalization challenges faced by UK SMEs when entering the Chinese market?

 

Introduction, Scope and Objectives (500 – 750 words)

The introduction should ‘set the scene’ and context for your research. It should clearly identify the research topic and include a statement of the aims and objectives of the dissertation.

The Literature Review (2000 – 2500 words)

Throughout the programme you will have been encouraged to take a critical approach when reading literature. This approach should also be followed in your literature review. You should aim to do more than simply report the findings contained in journal articles, book chapters and so forth, although this is often a necessary and important task. In addition, however, you might seek to highlight the limitations or contentious aspects of particular studies (in respect of, for example, their theoretical or conceptual underpinnings, research design and interpretation of findings) or identify gaps in the literature (i.e. issues or phenomena that have not been investigated or that have received only limited attention). The latter may provide a rationale for your own study. However you organise the literature review, it should identify and discuss the key themes and contributions with which you are engaging.

Some issues have received a great deal of attention from researchers. Others have received far less attention, perhaps because their origins are relatively recent or because

they have simply been neglected. It therefore stands to reason that the number and quality of research studies that will be available to you will depend on your research topic.

Where an issue has received a lot of attention, the number of studies available to you may seem overwhelming. However, it is rarely necessary or desirable to review every single contribution to the literature. You should focus on those contributions which have been most influential or revealing and those that are most relevant to your own research.

When reading the literature, it is a very good idea to take detailed notes. This will save you time when it comes to writing the literature review. It will also enable you to more easily identify themes and issues. When making notes, you should record information about the objectives of the study, its key findings, the research methods that were used in generating those findings and the conceptual and theoretical orientation of the study (where this is apparent). As mentioned above, you should seek to develop a critical analytical perspective on these issues. You should therefore record your own views on the study (for example, what you consider its strengths, limitations and contribution to be).

Research Methods/ Methodology (1000 words)

You should provide a description of, and justification for, the research methods used in your study. Please bear in mind that you will not be expected to have developed a ‘perfect’ research design. The most important thing is that you reveal the steps you have taken in arriving at your findings. This section would include elements such as:

•  A justification of the research design (i.e. why it should be considered appropriate, and perhaps more appropriate than alternative approaches)
•  A description of the methods and how they have been used e.g. case study; on- line survey, secondary data analysis, in-depth literature review
•  An analysis of the strengths and limitations of the design
•  A discussion of the ethical implications of your research design

Literature review (LR)

The word limit for LR is around 2000- 2500 words, My original plan for the literature review format was:

1. Describe what is internationalization,
2. Describe the difficulties/ challenges of internationalization and entry barriers for UK SMEs.
3. Describe the connections between internationalization and UK SMEs.
4. UK SMEs entry barriers to internationalization and entering a new market, e.g. the Chinese market. (some barriers include: cultural, communication/language difference, different ways of trading, laws and regulations, political issues, costs etc.

Below is some literature review that I have written, please do consider to use it if any useful… (But below was not totally agreed by the supervisor, and above is the feedback on the structure of the LR from the supervisor.)

In the uncertainty of Brexit, the unstable economy has hampered investing decisions of firms in doing business in Britain. According to Bloom et al (2019), over 11% of business investments have gradually exited the UK market since the EU referendum in June 2016. For large, stabled and well- established corporate, they have solid action-plans in place to avoid risks and ensure steady growth for the future. However, for small and medium-sized enterprises (SMEs), they need to have appropriate Brexit approaches to overcome the post-Brexit problems that may impact on their firm success. According to the latest survey from Dun& Bradstreet (2019), business confidence in SMEs since post- Brexit trade deal has dropped by 19% in the last 12 months. Agreements and arrangements in public policy plays an important role in encouraging increased internationalization from SMEs (Wilson, 2019), this is especially important in today’s environment, when SMEs is becoming increasingly important to the growth of the globalised economy (Roy, Sekhar and Vyas, 2016; Kauppinen and Juho 2012). Many SMEs are starting to look for growth opportunities, although the UK government has agreed new trade arrangements for SMEs with the EU, SMEs are looking at more internationalized or globalized strategies for growth so that they can quickly take advantage of cross-border activities (Percy, S 2019).

Brexit to the UK means that they are able to establish their own trade policies in which opens the door for both the UK and China in making new free trade agreements (A. Garcia-Herrero, J. Xu, 2016). The UK is one of Europe’s leading investors in China (Wilson and Brennan, 2003) and the UK currently stands as the world’s 7th largest investor in China (MOFCOM, 2003). Recently, China has opened up the vast swathes of the Chinese economy to welcome and support UK firms to do businesses in China (Lynn, 2019) and with over 6% growth rate per year, China is on track to overtake the US as the world’s biggest economy (Lynn, 2019). The open-door policy has encouraged many foreign investments and attracted tremendous interests from businesses to China. However, China is a difficult, and certainly an attractive and different market (Ilheu, 2007) with huge potential economic growth for foreign firms to operate in. For large firms, they have their own resources to go alone into the Chinese market, whereas for SMEs, unless there are the right supports and resources available in China, otherwise it can be difficult for them to develop the right business model and become successful in China.

SMEs Internationalization

Internationalization for SMEs is becoming increasingly important for the globalized economy (Kauppinen and Juho 2012). Zeng et al. (2008) argued that the outward growth movement and international operations of a SME firm, which encompasses strong challenges that the firms have to face (Calabrò and Mussolino 2013). Similarly, internationalization of SMEs have been considered as the outcome of dynamic interaction between organizations, governments and countries (Yamakawa et al. 2008). Likewise, Huang X, Renyong C (2014) claimed that internationalization as a process of developing resources, accumulating capitals for international activities. Therefore, in the course of internationalization in the last few decades, it has led to increased attention placed on internationalization of SMEs and results in extraordinarily competitive environment for developed and developing countries.

 

Barriers to Western SMEs internationalization

According to the European Network for SME Research (ENSR) survey conducted by the European Commission’s in 2003, the most frequently cited market entry barrier by SMEs is the high cost of the whole internationalization process (European Commission, 2004). Costs include those associated with translation of documents, doing market analysis abroad, financial risks associated, travel expenses, international competition from foreign firms, purchasing legal consulting services, cultural differences, political risks, corruption and rule of law issues and among others. Business cultural in China is different to the cultural in the UK, one of the most important factors for operation success and failures of business is guanxi relationship (Wilson, J. and Brennan, R. 2003). From previous research by Janet X. J. Ai, (1988), the volume of foreign investments and interests in China have been magnificent with over 10,000 foreign companies doing business in the city of Beijing alone. Therefore, the high number of competitions in China could be an entry barrier for western SMEs, especially when they have limited resources and finance available (Wilson, J. and Brennan, R. 2003).

 

Guanxi

Guanxi relationship has been discussed by many researchers in the past (Wilson, J. and Brennan, R. 2003 ,Yeung and Tung, 1996, Vanhonacker, 1997, Neil R et al., (1999) as one of the most important factors for western businesses to achieve success in China. Firms needs to understand the importance of building better guanxi with the stakeholders through private, informal, and mainly non-business orientated relationship. For western firms entering a new market with different cultural, guanxi continues to be an important aspect of Chinese society (Vanhonacker, 1997). As the Chinese government generally do not want foreign companies to overtake the competitiveness of the local firms, questions about cultural and economic sovereignty may evolve. Internationalization means opening up of different sectors, however, in reality firms may find it difficult to develop their own distribution in a new country.

Gaps in the Literature

Previously, little studies have investigated the market entry methods for western SMEs to establish and trade in China, although a recent research from Wilson, J. and Brennan, R. (2003) has focused on China market entry methods for Western large firms across several industries, the findings suggest that Joint Venture (JV) may be a more suitable market entry method for SMEs in China. While there is little convincing evidence about how JV provides the market intelligence and integrated different market entry methods to SMEs.

 

Bibliography

• Alicia Garcia-Herrero and Jianwei Xu, (2016) What consequences would a post-Brexit China-UK trade deal have for the EU?
• Bloom, N., Bunn, P., Chen, S., Mizen, P., Smietanka, P. and Thwaites, G. (2019).The impact of Brexit on UK firms. [online] Bankofengland.co.uk. Available at: https://www.bankofengland.co.uk/working-paper/2019/the-impact-of-brexit-on-uk-firms.
• Calabrò A, Mussolino D (2013) How do boards of directors contribute to family SME export intensity? The role of formal and informal governance mechanisms. J Manag Gov 17(2):363–403
• Dun & Bradstreet, (2019). [online] Available at: https://www.dnb.co.uk/content/dam/english/business-trends/creativeux-997-uk-sme-report-2028-pdf-final.pdf [Accessed 18 Nov. 2019].
• European Commission (2004), Observatory of European SMEs 2003, No. 4: “Internationalisation of SMEs”, EIM, Luxembourg.
• Hedley, M. (2019).China Market Entry Strategy: A Guide To Entering Chinese B2B Markets. [online] B2B International. Available at: https://www.b2binternational.com/publications/china-market-entry/ [Accessed 16 Nov. 2019].
• Huang X, Renyong C (2014) Chinese private firms’ outward foreign direct investment: does firm ownership and size matter? Thunderbird Int Bus Rev 56(5):393–406
• Ilheu, M. (2007). Knowledge a critical factor in the internationalisation of SMEs: the case of Portuguese SMEs in China.International Journal of Chinese Culture and Management, 1(1), p.22.
• Janet X. J. Ai (1988) “Canadian Companies Doing Business in China: Key Success Factors.”
• Kauppinen, A. and Juho, A. (2012). Internationalisation of SMEs from the perspective of social learning theory.Journal of International Entrepreneurship, 10(3), pp.200-231.
• Korsakienė R, Tvaronavičienė M (2012) The internationalization of SMEs: an integrative approach. J Bus Econ Manag 13(2):294–307
• Lynn, M. (2019).China has opened its doors to UK firms. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/2019/03/15/china-has-opened-doors-uk-firms/ [Accessed 23 Nov. 2019].
• Millington, A., Eberhardt, M. and Wilkinson, B. (2005). Gift Giving, Guanxi and Illicit Payments in Buyer–Supplier Relations in China: Analysing the Experience of UK Companies.Journal of Business Ethics, 57(3), pp.255-268.
• MOFCOM (2003) Foreign Trade Statistics 2003. www.mofcom.gov.cn
• Neil R et al., (1999) “Canadian Companies Doing Business in China: Key Success Factors.”MIR: Management International Review, vol. 39, no. 1, 1999, pp. 7–35. JSTOR, jstor.org/stable/40835729.
• Percy, S. (2019).Brexit for small businesses. [online] The Telegraph. Available at: https://www.telegraph.co.uk/business/challenges/brexit-for-small-businesses/ [Accessed 14 Nov. 2019].
• Roy, A., Sekhar, C. and Vyas, V. (2016). Barriers to internationalization: A study of small and medium enterprises in India.Journal of International Entrepreneurship, 14(4), pp.513-538.
• Wilson, J. and Brennan, R. (2003). Market entry methods for western firms in China. Asia Pacific Journal of Marketing and Logistics, 15(4), pp.3-18.
• Wilson, K. (2019). [online] Gvpartners.com. Available at: http://www.gvpartners.com/web/pdf/Chapter_2_Wilson_FINAL.pdf [Accessed 24 Nov. 2019]
• Yamakawa Y, Khavul S, Peng MW, Deeds DL (2013) Venturing from emerging economies. Strateg Entrep J 7(3):181–196
• Yeung, I. and Tung, R. (1996). Achieving business success in Confucian societies: The importance of guanxi (connections).Organizational Dynamics, 25(2), pp.54-65.

 

 

Methodology/ Research Methods (1000 words)

My consideration for this part is to conduct interviews with UK SMEs management levels who have previously did internationalization and entered a new market, e.g. China. The interview will find out what are their thoughts about the challenges and difficulties of entering the Chinese market for example.

This section would include elements such as:

•  A justification of the research design (i.e. why it should be considered appropriate, and perhaps more appropriate than alternative approaches)
•  A description of the methods and how they have been used e.g. case study; on- line survey, secondary data analysis, in-depth literature review (I will conduct around 8-10 interviews with different UK SMEs)
•  An analysis of the strengths and limitations of the design (limitations may be, if there were more companies can be happily to conduct the interviews, then the results/ findings may be more accurate. Because at the moment, the interview is not conducted yet and may have difficulties with finding the right suitable companies to conduct the interviews with me due to limitations on the time/cost/effort the companies may not be willing to spare.)

·  A discussion of the ethical implications of your research design.