Risk factors in the internationalization process of SMEs

Abstract

At the present time characterized by globalizing market, increasing competition, accelerating change and the occurrence of many risks it is necessary for businesses, which want to remain competitive, to be able to respond flexibly to the changes in a timely manner and to identify and manage risks. Companies try to diversify business risks, such as the loss of market share in the domestic market, by entering the foreign markets and participating in international trade. Involvement in the internationalization process cannot be understood only as an opportunity to achieve greater profits and a competitive advantage, it is necessary to consider potential risks accompanying this process, because engaging in the internationalization process may bring the companies many different specific risks. It would be useful for companies to identify the factors of failure resulting from internationalization. Identifying the barriers to internationalization, the main risk factors associated with it and designing their possible prevention or elimination could provide SMEs an impetus to enter foreign markets. Although the risk is a frequently discussed issue in the international discussion, only few studies were strictly focused on risk management in the internationalization process. Risk management is a broad discipline that requires a specific knowledge in practice. However, particularly small and medium-sized enterprises are often unable to identify the potential risks of the internationalization process and therefore are not able to manage the risks. This is due to the fact that SMEs usually do not have managers with a deep knowledge of risk management and, moreover, these managers also often lack experience with foreign markets. Unfortunately, the surveys of SMEs conclude that the poorly predicted risks of entering foreign markets are one of the most common causes of failure of SMEs internationalization process.The main objective of this paper is to identify the risks of the internationalization process of Czech small and medium-sized enterprises. To achieve the main aim, it was necessary to make a survey of current situation in Czech small and medium-sized enterprises with focus on the participation in international trade, compared to the situation of these enterprises in recent years. It was also important to define the risk factors faced by Czech small and medium-sized enterprises in connection with the entry and activities on foreign markets and to identify key risk factors SMEs in the internationalization process are exposed to. It was also necessary to find out the obstacles to the internationalization process affecting the decision of Czech SMEs to penetrate foreign markets. And the last but not least task was to suggest some elementary methods that could be used by Czech small and medium-sized enterprises to eliminate risks in their internationalization process.

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