THE INTERNATIONALIZATION STRATEGIES OF SMEs:
THE CASE OF THE SLOVENIAN HOTEL INDUSTRY
Mitja Ruzzier1, Maja Konečnik2
Received: 19. 5. 2005. Original scientific paper
Accepted: 20. 2. 2006. UDC: 640.4 (497.4)
The paper presents the theoretical background to internationalization strategies for the case of the hotel industry. However, although the hotel industry’s internationalization has already been analyzed, the paper presents a rare example of its application to small and medium-sized hotel firms. In order to reveal the distinctive internationalization development strategies of SMEs we propose a framework for analyzing and understanding the four main internationalization dimensions: operation, market, product, and time. The characteristics of the proposed dimensions were analyzed by examining four Slovenian small and medium-sized hotel firms. Our findings imply that internationalization is a necessary step for small and medium-sized hotel firms, but each hotel company should find the proper combination of all four dimensions that matches the resources available to it.
1. INTRODUCTION
Recent research studies on the internationalization of the hotel industry mostly cover large hotel firms or hotel chains that operate in the international environment (Go, 1989; Go et al., 1990; Litteljohn & Beattie, 1992; Contractor & Kundu, 1998a & 1998b; Rodriguez, 2002). However, although large hotel enterprises are the main players in the supply for tourists’ overnight stays, smaller suppliers and their important role for the local environment should not be neglected. However, small and medium-sized enterprises (SMEs) have attracted more attention in recognition of their economic role and contribution to growth. Their role in OECD economies continues to be crucial for boosting economic performance, particularly in light of the recent slowdown seen in economic growth. SMEs represent over 95% of enterprises in most OECD countries and generate over one-half of private sector employment. Smaller firms in the 1990s increased their share of exports and inward and outward foreign direct investment in both OECD and many Asian countries. Given global trade and investment patterns, SMEs are becoming increasingly important pillars of the economies of the main trading partners (OECD, 2002; Green Paper, 2003).
Man et al. (2002) assert that a small firm is not a scaled-down version of a larger firm. Smaller firms differ from larger firms in their managerial style, independence, ownership and scale/scope of operations (Coviello & Martin, 1999). They have different organizational structures, responses to the environment and ways in which they compete with other firms (Man et al., 2002). Erramilli and D’Souza (1993) identified two important interrelated characteristics of small firms: resource constraints, and resource commitments in conditions of environmental uncertainty. Limited resources (especially capital resources) were identified as an important factor that distinguishes the strategic behavior of small firms from that of larger firms, while environmental uncertainty forces these firms to approach new investments cautiously and to minimize resource commitment (Erramilli & D’Souza, 1993). In the context of internationalization, the resource scarcity of SMEs may impact on their ability to enter foreign markets and can also limit a smaller firm’s ability to reach more advanced stages of internationalization (Westhead et al., 2001 & 2002). As we can see, insurmountable obstacles for SMEs may occur when starting with international activities. Compared to their larger competitors, SMEs seem to have to overcome greater obstacles but, by utilizing SMEs’ specific advantages and discovering niche markets, they may be able to compensate for their disadvantages (Pleitner et al., 1998; Buckley, 1993).
This paper study investigates the internationalization strategies for SMEs. In particular, it seeks to
