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INCO REPORT ON SURVEY ANALYSES

INTRODUCTION

This report contains two main parts and an appendix. In the first part, a full analysis of the survey of Small and Medium Enterprises (SMEs) is presented and substantialized from the viewpoint of the internationalization efforts undertaken by these companies. The second part presents the same for Consulting Companies, as well as individual consultants, either interested or already involved in the process of internationalization consulting. Both parts combine the two aforementioned analyses and offer certain conclusions with respect to the objectives of the entire INCO project, namely, to the development of the comprehensive training curriculum.

The final part is an appendix (found at the end of this book), which is comprised of the actual survey data analysis output along with the most relevant interpretation of the results. Besides the reasons mentioned above, the survey was designed to help the consortium in identifying areas of knowledge, which both SMEs and consultants presume to be important in internationalization process, and come up with some concrete recommendations for the development of a training curriculum.

PART I: SMALL AND MEDIUM ENTERPRISES (SMEs).

Small and Medium Enterprises from Austria, France, Hungary, Italy, and Poland have taken part in this survey. It is important to mention that almost a half of all respondent companies were represented by their management.

The overall number of replies was 424, out of which 67 were not usable, which left us with the sample size of 357 small and medium enterprises from 5 countries. Only 13.4% of all respondent companies have more than 100 employees, while the rest have less than that amount. About 1/3 of all respondent companies have annual revenues in the range from 1 million to 5 million Euro; about 42% have revenues less than 1 million, and around 24% of companies have revenues exceeding 5 million Euro per year. The majority of respondents represent either the manufacturing (35.5%) or the service (23%) sectors of the economy. Most manufacturing companies that responded to our survey reside in Austria, while majority service enterprises represent Hungary (more than 72%).

Currently, 21.2% of all respondent companies operate regionally on the domestic market, 21.7% operate only in the domestic market, 21.5% operate in both the domestic market and in the neighboring countries, 17.2% operate only within the EU, 5.4% work on the market that includes both the EU and one other continent, and 14.4% operate globally. Significant majority of all respondent companies have been in business for more than 10 years. The same majority of respondent SMEs are independent companies, i.e., not subsidiaries of other firms.

Overall, only 41.3% of the companies responded have used the external consulting services before in order to solve a problem within the company, which was not necessarily for the internationalization purposes. The main reasons for engaging the help of the consulting services were to provide an objective analysis of a problem or opportunity and lack of internal know-how (however the weights of the above mentioned reasons differ form country to country, see Appendix). Most of the SMEs seem to have positive impression of collaboration with the consulting services.

Majority of companies (87% of all responded) have never engaged a consulting company to assist in the internationalization process. Only Austria with 21.1% and Italy with 33.3% have more or less significant results in terms of consultancy engagements. That result could have a dual meaning – on the one hand, there may not be enough consulting companies helping SMEs to internationalize, or on the other hand, SMEs may not feel a need in engaging consultancies in the internationalization process.

Most companies agree that all the following knowledge, skills, and abilities (KSAs) are either important or very important for the employees when the company is engaging in the internationalization process: knowledge of individual characteristics of SMEs, language skills, knowledge of different market entry strategies, international project management skills, market access and market knowledge of employees, knowledge of international contract laws, and international negotiations. The only neutral result is for Intercultural Management – this, however, is due to the lack of explanations of what this subject really means and comprises.

Moving down the questionnaire and trying to identify the most important outcomes, we now need to determine the need for and kind of consulting services, in order to bridge a gap between employers’ needs and expectations and their employees’ abilities.

Most respondents evaluated the competence of their employees, in terms of the aforementioned major KSAs needed for successful handling of the internationalization process as average. The only points rated as good were competence in presentation skills in the international environment, market access and market knowledge, and international negotiations skills.

In the following section, we will evaluate a possibility for the improvement/ training of the SMEs’ employees by comparing the companies’ representative views on Importance of employees KSAs for international success of the company and Evaluation of competence of the employees, who deal with international business activities in the several different areas.

Using Paired-Samples T-test we will determine whether there is a statistically significant difference between the Importance and Evaluation. The two-sample paired t test is used to test the null hypothesis that the difference between two samples’ means is 0 (otherwise means are proven to be different, the direction (sign) of the difference is important for us). If the difference of the sample means is larger or equal to zero, then Evaluation is ether higher or equal to the Importance, so there will be no justification for the additional employees’ training/ consulting; however, if the difference is negative and statistically significant, then there is a need and a rationalization for the training in required area. Note that the sample size will always be equal (included are only cases with the data available for the two variables).

As it has turned out, in every test the correlation between the two means were statistically significant, as well as every pair of the means was proven to be different. Also, it appears that in every area the employees KSAs are not up to the standards with the company’s expectations for the successful transformation during internationalization process, which provides opportunities for the training and consulting. However, some variations are larger than the others; the most significant ones are in the areas of international contract laws, market entry strategies, and international negotiations. This means that there is a strong need in training especially in the above-mentioned areas. It is also important to add that there is no evidence of variations in training needs among the countries-participants of the survey, which supports the call for a uniform curriculum.

The majority of respondents agreed that international business expansion often fails because of the lack of employees' education, which may justify employees’ training for the companies seeking the success at the international arena. In addition to that, the distribution of the answers is similar for all the companies whether or not they have engaged any king of consulting services to help internationalize their activities before or acting internationally at present. Also, almost all respondents (235 out of 259, or 91%) either partly or strongly agree that the management plays a crucial role in success/failure of the international business expansion. In addition, more than a half of companies agree that their organizations under-invest in to their internationalization efforts. All of these facts serve as a strong support and justification for the necessity of educating companies and their management in how to conduct a successful internationalization process.

About 60% of all respondents indicated that they are acting internationally at present. Most companies of this sort are operating in Austria and Italy, while the least are in Hungary. More than 20% of all companies responded get almost all their revenues from the international operations. In Italy this number is the highest (50%), while France has the lowest percentage (8%). In terms of their international activities, most companies are involved in export and networking only (around 45%), while some 17% are dealing in the area of opportunistic foreign trade. About 41% of the respondents have been operating internationally for more than 10 years, while only about 16% less than 3 years.

A clear majority of all respondents have indicated that the higher revenue potential is the most important reason to go international. Overwhelming majority of the SMEs associate the success of the company with the expansion into international business. Majority of the companies train their employees for the process of internationalization.

Around 62% of all respondents among the countries-participants are not presently using the services of management consultants. Some companies are not even operating internationally. They explain this fact by several factors, such as being born domestic, lack of experience in international negotiations, lack of international project management skills, as well as the lack of knowledge of contract law for international companies.

More than 75% of all company-respondents are currently using 15 or less man days per year of consulting services. In terms of individual countries, the most consulting services are used by Italy and France, while Austria is lagging behind in this matter. Compared to the present needs of the companies, in the near future these companies will require more consulting services in the areas of internationalization and market entry, internationalization process improvement, HR services, IT, etc.

About a third of all respondents feel that they do not require any assistance with internationalization, while the rest 67% would like to use some consulting services on this issue. More than two-thirds of the companies replied to the questionnaire either neutral, agree, or strongly agree with the proposition that external consulting leads to the best results in internationalization. Despite that, a significant majority of companies believe that it is better to develop own employees than hire external consultants. However, this could take much more resources than companies would want to spend. More than 70% are spending only up to EUR 5,000 per year on the external consulting services.

PART II: MANAGEMENT CONSULTING COMPANIES.

198 respondents from 5 countries participated in this survey aimed at consulting companies. About a half of all respondents are rather small consulting firms, with 1 to 3 employees, while only about 5% of companies employ more than 150 people. In terms of different countries, France has a clear majority of medium-sized (10 to 50 employees) consultancies, while in Austria around 44% of companies employ 3 or less employees. Most respondent companies in this survey were represented by either their management or board members.

Around 60% of all consultancies responded earn less than 500,000 Euro per year, with only 19.4% making from 1 to 5 million Euro annually. Almost half of all Austrian consultancies are in the lower range of the income, while 45.5% of French consulting firms are in the medium (1 to 5 million Euro per year) earning range.

More than 57% of all respondents operate strictly in their respective domestic markets, with 56% of consultancies being in operation longer than 10 years. An overwhelming majority of all respondent companies are independent firms, i.e. are not subsidiaries of other firms. In terms of consulting networks, the membership varies across the countries. In Austria, Hungary, and Italy, a significant majority of companies belong to some sort of a consulting network, while in France and Poland most consultancies are even more independent.

The answers to the questions “Which estimated percentage of the total revenues is your company making with the companies of the following classification” and “Which estimated percentage of the total revenues is your company making with the client companies of the following size”, most respondents were quite inconsistent with their replies. However, it is still possible to make certain conclusions. For instance, most companies consult to businesses in industrial and commercial sectors of the economy, while the hospitality sector is most neglected by the survey respondents. In another instance, it is possible to conclude that a clear majority of consultancies across the countries work with Small and Medium-sized enterprises (SMEs).

In terms of areas of consulting, most companies agree that in the near future there will be an increase in consulting services aimed at helping companies to internationalize. In majority of subject areas, however, there is noticeable decrease in services offered by the consultants. One can speculate, that since there was no additional instruction to the above question, respondents might mark only one area (let say, PRESENT) instead of focusing on both answers (PRESENT and FUTURE). Additional testing may be necessary to get definitive results.

When asked to evaluate different factors in consulting to SMEs for internationalization process, most companies across countries agree that knowledge of individual characteristics of SMEs, language skills, knowledge of different market entry strategies, international project management skills, market access and market knowledge of employees, knowledge of international contract laws, intercultural management, and international negotiations are all either important or very important in such a process.

When consultancies were asked to evaluate the knowledge, skills, and abilities of their employees, the following results were revealed. A significant majority of respondent consultancies assessed their employees’ KSAs as either medium, good, or very good in all the subject areas, except for knowledge of international contract laws, knowledge of international logistics, as well as knowledge of international finance and accounting. This clearly presents some good opportunities for providing necessary training in the areas above.

Surprisingly, about a half of all respondent companies have never consulted to SMEs on its way to and through internationalization. This answer, however, varies significantly among the countries. Half of all Austrian and Italian consulting firms have had some experience in consulting to SMEs on its way to internationalizing, while more than a half of French, Hungarian, and Polish consultancies have never had such an experience.

When consulting to these SMEs, most consulting companies have mentioned that all of the factors described above were either relevant or very relevant during their consulting engagements. Therefore, if one is to compare current KSAs of consultants (as evaluated by their management) with what is presumed as relevant, it is possible to conclude that there is a clearly established opportunity to provide consultant with training in many areas, including training in international contract laws, international logistics, as well as in finance and accounting. It is also important to add that there is no evidence of variations in training needs among the countries-participants of the survey, which supports the call for a uniform curriculum.

The statement above (italicized) is fully supported by the overwhelming majority of consultancies across the countries who replied that there are still plenty of opportunities for improvement in all the areas of consulting for the internationalization process. In addition, only about 35% of the respondent firms are currently training their employees in such relevant to internationalization skills as international negotiation, languages, etc. Furthermore, around 75% of all consultancies consider assisting companies that go international as a very important business opportunity.

Finally, it is important to note that a clear majority of all respondent firms are willing to spend up to 5,000 Euro on a training course devoted to internationalization of small and medium enterprises.