Kenyan Small and Medium Enterprises
By CPA Benjamin Nyaoro
As a business moves up the growth pyramid, the domestic market becomes saturated and full of competition thus reducing the periodic profits because the revenue from the total market segment is shared among the competing forces. The next aspiration therefore is usually to venture into the next immediate international market. The need for business expansion triggers the need for internationalization.
Venturing into an unknown foreign market as a business expansion activity, is like venturing into unchartered water territories; where you may not know how deep the waters go, or how far beyond the territory goes; thus the need to find people who are familiar with the waters to hold the spotlight and provide directions. As it is with most SMEs all over the world, the challenge of resources is real, and a solution needs to be found with utmost swiftness.
Optimum utilization of resources requires that a firm applies the least possible amount of resources required to perform a certain task to achieve optimum results. To achieve this, firms are encouraged to apply the concept of networking to leverage on the scarce resources at their disposal. In this piece, as I describe the process of networking, I also try to answer two fundamental questions that have been asked by many entrepreneurs I have met in my line of duty, which are:
i. What are the sources of networking? ii. What is the importance of networking?
The Process of Networking The process of networking involves business owners coming together to forge relationships that are mutually beneficial for their businesses. Networking may be done to help expand businesses’ ability to find more customers, more partners and eventually sustainable growth. Networking works on the principle that the more people you meet and discuss your business with, the more the number of people who will remember you and your business.
SMEs are thus encouraged to increase the number of people they meet both in the domestic and international markets. Could be that someone you meet today becomes useful tomorrow as you seek to venture in a particular market. Networking is thus the process of creating relationships that are useful for business expansion in a foreign market.
i. Sources of networking during internationalization
There are no universally defined sources of networking, but from experience I will try to categorize them as broadly as possible into business networks, personal or social relations and use intermediary firms to bring out a very high-level understanding of the concept of networking.
a) Business networks
A business network can comprise of actors, resources and its mobilization and application and/or business activities and their implementation. The aim of creating such a network is to achieve efficiency and efficacy through interlinking of business activities, creating leverage of resource heterogeneity and knowledge sharing. This is purely based on the mutual self-interest of actors. The players in this network could include competitors, suppliers, customers and other stakeholders. In short this is a network of two or more businesses formed at an official capacity for mutual benefit.
b) Personal/Social networks
Social networks or relations is a web of personal relations or connections by individuals to obtain certain favors either as an individual or for the sake of an organization. Social networks result in the creation of social capital that is useful to SMEs and its owners especially in a foreign country in leveraging on financial and other resources. Social networks are mostly formed at an informal setting that can eventually translate into useful business networks if cultivated and developed.
c) Use of intermediaries
Intermediaries are a group of non-business actors that do not directly engage themselves with the purchase or sale of a product or service, but can act as vehicles for communication, information and influence. Intermediaries can be useful to internationalizing SMEs in terms of providing them for instance with market knowledge or risk analysis for a market they are targeting. In most instances they act as gate keepers who can point SMEs the right direction towards clients and success in a foreign market.
ii. Importance of networking during internationalization
Here are some key reasons why SMEs seeking internationalization must endeavor to network before leaving their home country to go abroad for business reasons.
1. Lead Generation
The most useful leads that one can obtain in a business is through networking. Using contacts and people you know can open bigger doors for business opportunities and success for your business. Ensure professional communication while following up on leads because in as much as people want to help you succeed in your business, they also don’t want to feel badgered for business. Use common courtesy and be sensitive to timing when doing follow ups on contacts.
2. Benchmarking and Best Practices
The most effective way to benchmark your business in terms of operations and performance in both the domestic and international markets is through networking. Learning from what people in your networks do is usually the best way to learn since these are people who know you and can accord you ample time to learn one or two things from them. For example, if you own a manufacturing business and you belong to an association of manufacturers, you can find out what the latest software programs or technology are or learn about employee management practices that you can bring back and adopt to your own business.
3. Leveraging on Business Dynamism and new patterns
Staying in a network puts you ahead of your competitors who do not belong in one. Networking can help you stay on the edge of technology and new business patterns which can hand you a clean advantage over your competitors by implementing new things in your business before they learn of them.
4. Increase in Self-confidence
By regularly meeting and talking to new people, you get to a point of increased confidence if you do it as often. As a business owner, your business’s growth is highly dependent on meeting and talking to the right people and making the right connections. Networking is key for forging and maintaining relationships as it pushes people who are less confident to make conversations and lasting relationships and partnerships with people they do not know.
5. Level of Influence
“It’s not WHO or WHAT you know, but WHO knows you”. This is true when it comes to building successful business relations in the international market. To grow your business quickly in the foreign market, you will need to forge a strong source of relevant contacts in your network Networking can open up several doors to talk to highly influential people that you wouldn’t otherwise be able to easily talk to or access. So, ask the right questions to find out if the person you know is the one you want to know or if they know the person or people you would want to know you and your company! In conclusion, all said and done, networking is an art and some people are just naturally more gifted at blending with people they don’t know and making friends on first contact while others are not. If you are not good at it, practice being friendly and learn the art of striking up conversations. Learn the trick of remembering the names of people that you meet and creating a good first impression on them.
