Entering Emerging Markets: A Dynamic Framework

Abstract

Entering emerging markets (EMs) is a huge opportunity and a risk for small and medium-sized enterprises (SMEs). This paper concentrates on the problems emerging from building a supply network in a target economic area. Cultural, legislative, and market factors make it a challenge, but SMEs also face diverse obstacles from side effects emerging from firm’s internal decisions. Some of these obstacles are self-generated, and they arise from aggressive growth strategies in parallel with misunderstanding the dynamics of one’s own firm—the unintended consequences of decisions. In this paper we will analyze the internal restrictions on Finnish SMEs or actions impeding or accelerating their growth in EMs. A conceptual system dynamics model is constructed so as to describe the challenges of entering EMs. The model is based on a literature review, VTT logistics experts, and interviews conducted with Finnish SMEs.