| At a time when internationalization and the influence of Small and Medium-Sized Enterprises(SMEs)for the world economy become increasingly important,there is rather little literature specifically on the internationalization of SMEs.Some economies,such as the German one,are driven by SMEs,and their importance for the national economy is vast.99% of all organizations in Germany are SMEs.Interesting are the special characteristics that let German SMEs stand out.Germany's SMEs are envied by the whole world and are the backbone of Germany's strong economy.Most of which operate in very special niches,making Germany the country with the most global market leaders in the world.Similarly important for the German economy are the economic ties with China.In 2017,about 35% of Germany's net FDI outflows went to China.With a volume of nearly 102 billion EUR,China is Germanys number-one partner in imports and with over 86 billion EUR number-three partner in exports.For companies of many different sectors,the engagement with the Chinese market became inevitable.As for both economies,the bilateral relationship is of great importance;it is in the interest of all parties to encourage mutual investment.Therefore,it is remarkable that even though there are more and more organizations specializing on helping companies entering and operating in the Chinese market,there is still a remarkable number of German SMEs failing during their market entrance to China.Concerning this problem,this dissertation aims to find the critical success factors of German SMEs during their market entry to China.With the help of the results of this research,I want to give practical implications to German companies planning to enter the Chinese market,to improve their chance of success.As mentioned in the beginning there has been no research specifically on the market entrance of German SMEs in China.To build a theoretical framework,I,therefore,conducted a literature review on the different characteristics of this study.I first reviewed internationalization theories such as the Uppsala model and the Electic Paradigm of Dunning to identify the key considerations of a firms' internationalization process,that might have also influenced the success of our research objects.Afterwards,I will take a closer look at the specific considerations,such as location choice and entry mode choice,to review those in the process of entry into a particular market.To narrow down the literature review closer to our specific topic,I then discuss the differences between large firms and SMEs,particularly analyzing German SMEs,to examine potential unique challenges for our research object.When conducting research on German SMEs,many characteristics can be found which are very unique for German SMEs and that have a potential influence on their success or failure during their market entry in China.Finally,I will look into the host country environment,to provide ground information about potential challenges,such as legal and cultural challenges,in the host country.The literature review is rather extensive but tries to cover all the factors that characterize this particular research.After reviewing the existing literature,I have found several factors,which appear to be relevant for our research.I can summarize these factors to 1)Lack of Experience;2)Lack of Knowledge;3)Lack of Resources;4)Lack of Firm-specific advantages;5)Lack of Country-specific advantages;7)Lack of Networks;7)Special characteristics of German SMEs negatively influencing the success of the market entry and 8)Administrative and cultural challenges in China negatively influencing the success.As the research question is exploratory,I have considered a qualitative research method as the most suitable approach.When further considering the right research method to answer the research question I figured,that a qualitative method in the form of case studies and in-depth interviews could provide us the best insights of the process,that companies have gone through during their market entry.A comparison of successful and failed cases seemed to be the best approach to find the key differences in their market entry processes.To make the research representative and significant for many SMEs in Germany,I have chosen to collect the samples from the machine construction sectors.SMEs in the machine construction sector have a strong focus on unique technologies and often serve certain market niches,which is consistent with the overall characteristics of German SMEs.Furthermore,the machine construction and plant engineering sector actively invest abroad what makes them further representative for German SMEs.To minimize the influence of other factors,the companies were chosen to be comparable in terms of characteristics such as company size and international experience.With the help of the German Chamber of Commerce in Shanghai,I could find four comparable case companies,of which two were successful and two failed during their market entry.To gain detailed information about their market entry process,I conducted in-depth interviews with employees that have been responsible for the market entry or were part of a team which was responsible for the market entry to China.After conducting the interviews and displaying the findings of the individual interviews,I started comparing them with the help of a process model,developed through prior experience during my internship.By comparing the different steps of the internationalization separated by the steps of the process model,I could draw clearer conclusions of where the differences between the successful and the failed cases appeared.After analyzing the findings,I could draw several results and implications concerning the critical success factors of German SMEs during their market entry to China.While country-specific and firm-specific advantages,which I considered during the literature review,had no influence on the failure of our case companies,especially the experience and knowledge were distinguishable when comparing successful with failed cases.While the successful cases have learned through difficulties in prior experiences and gained general market knowledge and market-specific knowledge,these were missing in the cases of the failed companies.Furthermore,while all of the companies have faced difficulties and a decelerated market entry process,the successful cases,other than the failed cases,have allocated enough resources in form of money to the investment project to overcome these delays and difficulties.Also,in form of the personnel,the successful cases have allocated much higher resources in form of senior managers to the project,while the failed cases only allocated lower level employees to the market entry process.These results can be associated with the results of our literature review.Additionally,I have found an overconfidence of the failed cases.While the successful cases trusted on an existing client base in China,the failed cases trusted on a network-building after the market entry,which has critically influenced their market entrance.This overconfidence originated in a general overconfidence of German SMEs,through their success in the world,as well as in the little difficulties these companies had during their prior market entries.The lack of network,that was just mentioned,is also characteristic for the failed cases.The successful companies have both built a network in the Chinese market in the form of clients,supplier and partner relationships prior to the market entry,while the failed cases were not or barely engaged in the market before starting the market entry process.These results are also supported by the results of the literature review.While the administrative challenges have influenced all of the case companies,I could not find a significant influence of cultural aspects during their market entries in any of the processes.These two factors,therefore,seem not to be critical for the market entrance of German SMEs during their market entry.When reviewing all these factors critically influencing the success of German SMEs during their market entry,I found that most of them root in the preparation of the market entry.The consideration of all the above-mentioned factors,especially in the form of a detailed and cautious preparation of the market entry seem therefore to be critical for the success.To make the research more significant and test the result on a bigger amount of companies,a quantitative research would be necessary.Furthermore,similar research should be carried out to find out if the factors analyzed by this study are from the same importance for the market entry into other markets.Similarities and differences could lead to new insights in international business management and strategies for different markets.As I have studied only German companies and some factors seem to be influenced by this premise,it would also be interesting to investigate to which extend the results of this study apply to companies from other countries. |
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