MBA Assignment: SME Internationalization in Emerging Markets - Russia

This MBA assignment investigates the internationalization of Small and Medium Enterprises (SMEs) within the emerging market of Russia. The project begins with an introduction outlining the research objectives and questions, followed by a literature review exploring the concepts of internationalization and international entrepreneurship, including models like the Stage Model and Innovation Model. The methodology section details the use of secondary data for analysis. The findings and analysis section delves into the trends of internationalization in Russia, the economic impact, challenges faced by SMEs, and effective internationalization strategies. The study identifies key challenges such as economic instability, regulatory issues, and cultural differences. The conclusion provides recommendations, including enhanced government synergy, detailed documentation, and a strong social network presence. The research aims to provide insights into the processes and issues associated with establishing production units in Russia, offering valuable information for businesses looking to expand into the Russian market. The assignment also highlights the importance of understanding the unique demands of the Russian market and adapting internationalization strategies accordingly.

Running head: MBA ASSIGNMENT
MBA Assignment:
The Internationalization of SMEs in Emerging Markets: Case Russia
Name of Student:
Student ID:
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Author’s Note:

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Executive Summary
Internationalization is the process of expanding in international market for enhancing the
business scope. This research study has research on the topic of the internationalization of SMEs
in emerging markets. In order to narrow down the research study, it has chosen Russia as the
emerging market. The research study has been conducted in systematic manner. In the
introduction section, the research paper has framed effective research objectives and questions
for collecting effective information regarding the topic of the research. In the literature review
section, the research paper has gathered effective information regarding the internationalization
of SMEs in emerging market. Furthermore, the methodology section has selected secondary data
collection method for collecting authentic information about the research topic. In the finding
and analysis section, the research paper has gathered specific information regarding the issues of
internationalization in Russian market. At last, in conclusion and recommendation section, the
research paper has provided effective recommendations towards mitigating the issues of the
research.

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Table of Contents
Chapter 1: Introduction....................................................................................................................5
1.0 Project Statement.......................................................................................................................5
1.1 Background............................................................................................................................5
1.2 Project Topic..........................................................................................................................5
1.3 Purpose of the Research.........................................................................................................6
1.4 Problem of the Study.............................................................................................................6
1.5 Research Aim.........................................................................................................................6
1.6 Research Objective................................................................................................................6
1.7 Research Questions................................................................................................................7
Chapter 2: Literature Review...........................................................................................................8
2.0 Introduction............................................................................................................................8
2.1 Concept of Internationalization.............................................................................................8
2.2 Concept of International Entrepreneurship............................................................................8
2.3 Models for Internationalization.............................................................................................9
2.3.1 Stage Model....................................................................................................................9
2.4 Linking International Entrepreneurship with International Business Case Studies............11
2.5 Challenges of Internationalization of SMEs........................................................................11
2.6 Effective Ways of Internationalization for SMEs...............................................................12
2.7 Summary..............................................................................................................................13

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Chapter 3: Research Method.........................................................................................................14
3.0 Introduction..........................................................................................................................14
3.1 Research Approach..............................................................................................................14
3.2 Research Purpose.................................................................................................................15
3.3 Research Strategy................................................................................................................15
3.4 Data Collection....................................................................................................................16
3.5 Data Analysis.......................................................................................................................16
3.6 Ethical Consideration...........................................................................................................17
Chapter 4: Finding and Analysis...................................................................................................18
4.0 Thematic Analysis...................................................................................................................18
4.1 Introduction..........................................................................................................................18
4.2 Theme 1: Trends of Internationalization of SMEs in Russia..............................................18
4.3 Theme 2: Russia and its Economic Impact on Internationalization of SMEs.....................19
4.4 Theme 3: Main Challenges of Internationalization to Russia.............................................21
4.5 Theme 4: Proper Ways of Internationalization to Russia....................................................21
4.6 Summary..............................................................................................................................22
Chapter 5: Conclusion and Recommendation...............................................................................24
5.0 Conclusion...........................................................................................................................24
5.1 Linking with Objectives......................................................................................................24
5.2 Recommendation.................................................................................................................25

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5.2.1 Enhanced Synergy with Government...........................................................................25
5.2.2 Detailed Documentation during Entering in Russia.....................................................25
5.2.3 Strong Presence in Social Network..............................................................................26
5.3 Further Scope of Study........................................................................................................26
References List..............................................................................................................................27

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Chapter 1: Introduction
1.0 Project Statement
1.1 Background
One of the significant aspects of the growth of the SME’s in the economies of emerging
nature is the process of internationalization. The emerging economies liberalization offered a
prospect for the contribution of the local SMEs within the global economy. SMEs occupied in
international operations often knowledge high growth due to their direction towards niches and
new markets along with their capability in cooperating with foreign partner (He and Karami
2016). Previous studies have reported certain barriers to the Russian SME’s internationalization
associated to the lack of the financial resources, restricted accessibility to significant
infrastructure, and limited knowledge of managerial experience along with issues in finding
probable overseas customers.
1.2 Project Topic
The research of internationalization has been stated to be informed by a diversified range
of theoretical perceptions, inclusive of the foreign trade, foreign direct investment along with the
internationalization theories of the firm. Recent studies within the framework of international
entrepreneurship strongly highlight the significance of the researches on the institutional
diversifications across the economies of emerging nature and the impact it ahs on the variables
that are firm-specific like capabilities, resources along with realized performances. Small and
firms of medium size often require resources within the emerging economies facing bigger

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challenges in particular related to the persuasion of underdeveloped regulations, policies related
to taxation and at times adverse societal approaches towards the entrepreneurship phenomenon.
Given the dimension and potency of the developing economy of Russia along with the
high degree of trade between the European countries and Russia, it is certainly reasonable in
arguing that this study can materialize information on new insights and assisting the other
organizations in their endeavor for expansion into Russia (Sandberg 2014).
1.3 Purpose of the Research
The main purpose of this study is in creating a clear understanding of the processes and
issues associated with the establishment of the production units within Russia. This study would
also take in the processes of internationalization of SMEs and the key challenges facing the
SMEs while establishing their operations within Russia.
1.4 Problem of the Study
Internationalization provides huge scope to the small scale retail organization of towards
enhancing their market in international market. However, retail industry is facing extremely
challenging situation towards its internationalization. Most of the time, the retail industry faces
tough challenges in entering to Russia for its internationalization. Declining economy and
corrupted business environment of Russia can be challenging for the retail industry in their
internationalization in this country (Ricard, Le Pennec and Reynaud 2016). The weak economic
condition of Russia also imposes tough challenges for the industry towards operating in Russia.
1.5 Research Aim
The aim of this research is to explore the issues of internationalization of small and
medium scale retail enterprises towards operating in Russia.

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1.6 Research Objective
 To identify the impact of internationalization on small and medium scale enterprises
 To assess the issues faced by small and medium scale retail enterprises towards operating
in Russia
 To recognize the best way for SME retails towards operating in Russia
1.7 Research Questions
 What is the impact of internationalization on small and medium scale enterprises?
 What are the issues faced by small and medium scale retail enterprises towards operating
in Russia?
 How SME retails can internationally operate efficiently in Russia?

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Chapter 2: Literature Review
2.0 Introduction
The literature review of this study would be dealing with the institutional theory and also
taking into consideration the two branches of international entrepreneurship; one being cross-
national border performance of the consumerist actors and the other being cross-national border
comparison of the entrepreneurs and their behaviors (Ricard, Le Pennec and Reynaud 2016).
2.1 Concept of Internationalization
Internationalization is the process of increasing involvement of the organizations in
international markets. According to Felzensztein (2016), internationalization process is involved
in the penetrating the international market and provide products and services to global customers
for meeting the global needs. This process provides scope for wide market expansion for the
organization, which ultimately enhances the profit potentiality of the small and medium scale
organization. On the other hand, Musteen, Datta and Butts (2014) opined that international
diversification of business also enhances the customer base for the organizations. In this way,
internationalization can enhance the sales and revenue of the organizations, which in turn leads
to long term organizational sustainability.
2.2 Concept of International Entrepreneurship
International entrepreneurship incorporates the innovative activities, which have the goal
of value creation and growth of businesses across the national boundaries. According to
Sandberg (2014), international entrepreneurship fosters innovation, supports venturing and takes
interest in risk taking for gaining high level of business success in international markets.
Internationalization in emerging market is extremely significant for selling the products and

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service to international customers, when those products and services have reached their maturity
stage of product life cycle in domestic market. On the other hand, Volchek et al. (2014) opined
that international entrepreneurship is extremely important for improving entrepreneurial
competitiveness and enhance organizational reputation.
2.3 Models for Internationalization
2.3.1 Stage Model
Stage model of internationalization is used for analyzing the small, medium scale and
large sized companies towards explaining their development of internationalization and
international business activities. The international organizations use this model stage by stage for
overcoming the obstacles (Galkina and Chetty 2015). Moreover, the major learning related focus
and knowledge of this model is used for assessing the information about the international market
occupied by a specific market. An effective stage model includes direct
exporting/importing/sourcing, indirect exporting/importing/sourcing, joint venture, licensing and
wholly subsidiary stages (Etemad 2015). Uppsala model and the Innovation model are the two
most widely used stage models in assessing the internationalization of business.
Uppsala Model
Uppsala Model has demonstrated internationalization as series of stages of steps
undertaken by the organizations towards increasing their international involvement. Moreover,
such increased international involvement is occurred through step by step learning process.
According to Volchek, Jantunen and Saarenketo (2013), each increase in the international
involvement is directed towards more progressive stage for complete and deeper understanding
of emerging global markets and their competition. As per this model, the expert market

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knowledge and resource commitment of the organizations impact on the commitment decision
and current business activities. This process is known as change aspect, which in turn contributes
to the next level of international involvement. Such change aspect then leads to increased market
knowledge and stimulates further resource commitment for international markets (Turunen and
Nummela 2017). After that, this model suggests the organizations towards starting their
international operation having complete knowledge of foreign markets regarding their GDP
growth, human resource index, social development and others.
Figure 1: Uppsala Model
(Source: Caiazza 2016)
Innovation Model
Innovation model of international is associated with development of innovative activities
for penetrating in emerging international markets. Continuous learning process in this model
indentifies the unique needs and demands of the foreign customers. Such learning enhances the
confidence of the organizations towards entering into foreign markets. Innovation models of

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internationalization share three core stages including pre-export stage, initial stage and advanced
export stage (Volchek, Henttonen and Edelmann 2013).
2.4 Linking International Entrepreneurship with International Business Case Studies
According to the Oligopolistic Reaction Theory, the organizations in oligopolistic
industry always react to the business practices of the competitors. Thurner, Gershman and Roud
(2015) pointed out that oligopolistic companies are more likely to imitate their competitor’s
business practices for creating a sense of marketplace harmony. However, Lamotte and Colovic
(2015) argued that oligopolistic theory cannot be applied to internationalization of the
organizations. International entrepreneurship requires high level of innovation and uniqueness in
their business practices, which can differentiate them from their competitors in the emerging
international markets. On the other hand, García-Cabrera, García-Soto and Durán-Herrera (2016)
opined that Monopolistic advantage theory suggests the small scale and medium scale firms
towards investing more on the special assets, which are long lasting, proprietary and defendable.
Such special assets assures long term competitive advantage and of the organizations both in
domestic as well as emerging international markets. However, Chetty, Ojala and Leppäaho
(2015) opined that entrepreneur-based organizations are more ephemeral and narrowly defined
towards grabbing the global opportunities and getting success in emerging international markets.
2.5 Challenges of Internationalization of SMEs
International laws and regulation can be a big challenge for the internationalization of
SMEs in the emerging markets. Wales et al. (2016) pointed out that higher tax rate imposed on
the international business organizations ultimately increases their international business costs.
Furthermore, potential tariff rate and the associated legal cost cause high level of challenges for
the organizations in internationally expanding in emerging markets. On the other hand, Roth and