Case of service-based business internationalization

Not only products can be exported, but also services (Lee, 2019). Providing management and consulting services internationally is also a common way of doing international business. This is how an organization in one country provides management, design and supply services to an organization located in another country. Often a firm sales services in the field of construction design and management. The similarity between these consulting, management and technical support services is that to have economy of scale and specialization a domestic market usually is too small (Rose, 2007). Even market of a medium-sized European country of five to ten million population does not order enough services domestically, to specialize for providers in a very narrow field of expertise. The ability of such companies to specialize and have scale is often possible only if the services are provided at least on a regional level.  In case of professional intellectual services, a company’s engineers and specialists travel a lot to various countries in region or even in continent to provide professional services such as design or construction supervision. The same goes for management consulting. For example, a consulting focusing on seaport or airport operations is forced to work globally, as there usually is not enough domestic seaports or airport. Of course, the USA and China being large and populous countries create demand within their local markets for this kind of services. However, many European countries are much smaller in population, and therefore their local market for specialized services is insufficient.

In the field of intellectual services, engineering, management and consulting services can either be exported (Díaz-Mora et al., 2018). So, a firm serving client in another countries issues an export invoice. If a scope and specific of the service and contract have a long-term nature, then sometimes a company establishes a subsidiary in foreign country to provide services there. Some services are even provided through a franchising models or through non-equity alliance partners. For example, in audit business, several global organizations franchise local firms in different countries, so these local firms provide services to their clients under the name and brand of the international auditor. Same is happening in the international law firms, because it is important to know local language and legislation. An intelligent business of professional services does not require capital investments, and the main resource is people there. If an organization develops its international activities in this area through franchising, so-called expert databases are often created, and as needed, experts of specific specialization travel from one country to country to supplement the team of local experts.

The main advantages of exporting professional services such as management, design, consulting, training and research (Nordås, 2018):

• Allows expanding the market and specializing when it is not possible to do so in a local country due to market insufficiency.
• In the case of the knowledge industry, there is an opportunity to access and involve specific experts in projects by creating international data banks of experts.
• Ability to transfer accumulated experience to different countries, especially in the case of professional services.

The main disadvantages of the professional service export:

• Suitable only for very specific areas where the service provider or service object is highly mobile.
• It is common for employees to travel frequently and spend most of their time with clients in foreign countries, however not everyone accepts this kind of lifestyle.

Another way of sell services abroad is serving foreign clients domestically. This model of service export is usual in some areas of maintenance and repair. Some industries are very capital intensive, require state of the art in know-how, and a very highly skilled workforce. For example, in the aviation industry, it is common for aircraft maintenance to be carried out by organizations with a manufacturing and maintenance base in a given country, often with capital ties to an airline company. These organizations specialize in repairs and routine maintenance and performing overhauls on a particular aircraft model. To perform maintenance of the aircraft, the airline organization flies the planes to those airports where the maintenance and service operators are located. Services such as maintenance and repair of an airplane or a ship are international in nature. To specialize in such repair and maintenance, the domestic market is usually too small. It is possible to operate on an international scale (Lodefalk, 2013). Even in a medium-sized European country, there are not enough orders that would allow an organization providing such specific services to specialize in a narrow field. In the example of aircraft maintenance business, an aircraft arrives in the country where the service physically is provided, in contrast to professional intellectual service cases where the company’s engineers and specialists travel to clients abroad to provide professional services.

The main advantages of selling maintenance and repair services to foreigners in a home country:

• Allows expanding the market and specializing, when it is not possible to do so in own country due to market insufficiency.
• The entire production base, investments and workforce are accumulated in home country, and the income comes from abroad, which is very useful for both the organization providing such international services and the state, because all taxes are paid in home country.

The main disadvantage of selling maintenance and repair services to foreigners:

• In a foreign country if there a labor is cheaper, a competitor may appear who offer services at a lower price. Customers are required themselves to transport ship or plane or any other device, part or component for repair or maintenance, so there is not difficult to change regular service supplier if needed.

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