Innovative Small Firms Can Better Handle Globalization
Small business innovation today heavily depends on this truth: Small businesses can no longer afford to think local. In today’s business environment, even a single-town business firm will be affected in a manner that is global. Learn then the basic concepts of global strategy for the adaptive and agile small business.
Strategic management is much more important now when a firm is still small. For example, when still operating out of his garage, Bill Gates catapulted Microsoft into the big leagues with a strategic goal of “a computer in every house.”
Without a global perspective or plan, a small company will be unable to capitalize on possibilities or manage dangers associated with global forces that intrude locally. Thus, small business innovation is limited to local needs while global threats or opportunities abound.
Understanding Global Strategy
Kamel Mellahi, Jedrzej George Frynas and Paul Finlay in Global Strategic Management, Oxford University Press, 2005, define global strategy as a single strategy that uniformly applies to all subsidiaries and partners of a multinational corporation with operations in many countries. Standards at headquarters are coordinated to achieve economies of scale.
The same authors also differentiate global strategy from an international strategy. International strategy is defined as a multinational corporation’s policy to let its subsidiaries “analyze, develop, and implement” their own strategy custom-fitted to their local market. Simply, it means adapt to the local business environment.
Another form that the authors have not considered though is the combination of a global strategy with an international strategy such as in the case of HSBC, “The World’s Local Bank.” This is a business innovation that maximizes economies of scale in some areas of its operations while adapting to the local business environment in other areas.
Still another form is the single-country business firm offering offshore outsourcing services or products under a uniform standard to its international clients. Another variant is the same outsourcing services or products which are custom-fitted to adapt to an international customer’s local business environment.
The Small Business and Global Strategy
The small business is no longer a standalone firm. When partners, service providers, suppliers, or even competitors have a global, or international strategy, then entrepreneurs should likewise have a global strategy whether defensive or opportunity-seeking. Of course, the small business should not act like a multinational corporation yet. Instead, small business innovation should consider available global opportunities and global risks that threaten it.
Outsourcing or Procuring from Single-Country Firms with Global Reach
Outsourcing small projects or certain processes can be part of a small business’ global strategy. For instance, small businesses can take advantage of the time zone. Small projects or work packages that can be submitted online can be completed on weekends or through the night in another country with a different time zone. This is management innovation that maximizes the 24-hour work day or 40-hour work week at the least possible cost.
Innovative ideas too can be outsourced for software development as long as the small business owner can trust the outsourcing firm’s adherence to confidentiality or exclusivity agreements.
In this light, entrepreneurs selecting offshore firms should consider the following:
- The outsourcing firm should be able to meet the standards of the local business environment.
- Payment modes and schemes should have global reach and should be relatively safe.
- Before outsourcing a critical aspect of the small business, the entrepreneur should first test for reliability on small projects that are not so critical.
- Anti-money laundering laws and government regulations.
Partners – Global & International Corporations or Single-Country Firms with Global Reach
Small businesses can partner with global and/or international corporations as well as single-country firms in the areas of banking, logistics, wholesaling, franchising, exclusive distributorships, and other opportunities.
For instance, opening an account with a global bank like HSBC can make possible convenient money wire transfers to Asia where outsourcing firms abound. Small groceries too catering to a special set of customers say, Koreans, can procure Korean beer and other Korean products online.
Small businesses that can adapt to these situations and maximize their benefits are innovative firms that are more likely to thrive in a globalized business environment.
Opportunities for an Exit Strategy
Single-town or single-state entrepreneurs should not overlook the opportunity when a big firm or global corporation is expanding into their local business environment. Rather than see the intrusion as a threat, small businesses can consider this intrusion as a profitable exit strategy. Entrepreneurs can sell their business, partially or in whole, at a profit most especially when their small businesses have clear advantages.
Hence, take-over or franchise deals should be considered along these lines.
Small Business Innovation Management and Global Strategy
Innovation management no longer applies to internally-generated innovation but also covers external innovations that threaten a small business or provide opportunities for it. Small businesses should realize that globalization is in fact, disruptive innovation. It can either make small businesses perish or survive.
Small business innovation and global strategy, therefore, should harmoniously work hand-in-hand.