Majority of businesses around the world are included in the category of micro, small or medium-sized enterprises (SMEs). More than 95 percent of enterprises in the world can be categorized as SMEs. Of the total employment in the world who works in SMEs have been more than 50 percent and most of SMEs have employees less than 100 people. The important role of SMEs in contributing a large portion of GDP and economic activity has been well recognized in many countries.
SMEs have also been considered as the backbone of the economy in the European countries. In the European countries, SMEs represent up to 99% of all businesses, and they generated approximately 85% of new jobs. The important role of SMEs in these countries has been supported by Baptiste-Cornelis and Long (2009). Thurik and Wennekers (2004) also confirmed the crucial role of SMEs in promoting economic growth. Thus, it is no doubt that SMEs play a very important role to the economy in particular and development in general and the following are the 7 barriers limiting smes to operate internationally;
1. Informational barriers: Informational barriers may prevent SMEs from internationalising their operations. Informational barriers can be defined as ‘the problems in identifying, selecting, and contacting international markets due to information inefficiencies. For those SMEs that have not yet started the process of internationalising their operations, these barriers may even dissuade them from engaging in international activity.
2. Human resource barriers: Another important barrier to internationalisation for SMEs concerns the difficulties associated with the management of human resources (Mendy and Rahman, 2019). Managers of SMEs that have not yet internationalised their operations may face time and resource constraints for the identification of foreign markets and for the designing of an appropriate entry strategy.
3. Financial barriers: Financial barriers also represent an important obstacle for SMEs, especially those that are not yet internationalised. A recent survey found that more than a half of non-exporting SMEs report that the financial investment required to become an exporter is too large and it thus discourages them to internationalise.
4. Marketing barriers: Finally, marketing barriers can prevent SMEs from internationalising their operations, including the company’s product, pricing, distribution, logistics, and promotion activities abroad. SMEs may have to develop new products or adapt existing ones to the needs of specific foreign markets.
5. Competitor barriers: While constrained by limited resources, SMEs are likely to be exposed to intense competition in foreign markets, both from incumbent domestic players and large multinational corporations.
6. Procedural barriers: Another barrier that can prevent SMEs from internationalising their operations concerns unfamiliarity with the necessary procedures and required paperwork. SMEs may have difficulties in understanding and managing the complexity of customs documentation or the bureaucracy associated with export operations due to their more limited resources
Governmental barriers: SMEs wishing to internationalise their operations are also often confronted with governmental barriers, which can be defined as ‘the barriers associated with the action or inaction by the home and foreign government in relation to its indigenous companies and exporters.