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I Introduction
In the age of globalization, expanding business into global becomes increasingly important even for local start-up/SMB. The changes of external environment are rapidly changing the established pattern of the international expansion of small domestic organizations; increasing number of companies is entering overseas markets from the earliest stage of their operations (e.g., “Born Global”). I was a member of the management of three start-ups, and felt the impact of global competition. As a management consultant, I observed number of small companies to leverage outsourcing services, providing well-designed electronics in global market. I came to understand globalization brings significant threats and opportunities even for small organizations.
Theoretically speaking, a small organization can potentially enjoy competitive advantages against a larger organization in today's business environment. The emergence of new methods to obtain funding, outsourcing services, and low-cost marketing opportunities has destroyed the traditional limit of small organization. The flexibility enables these organizations to select the best-qualified partners and gives them the ability to deal with large fluctuations in demand. Furthermore, the shorter decision-making process allows these businesses to develop more innovative products and services in short amount of time. Given an existence of abundant external resources in the market, small organization can be an attractive and strategic choice to maintain a competitive advantage. Although it is not an instantaneous shift, there are many indications that within decades a small organization of 20-30 members will be able to operate a global value chain, potentially a billion dollar international business.
However, in reality there are only a few examples of such small organization that operates large global value chain. The two most significant factors may be the economics of scale and the additional transaction costs associated with the adoption of external resources. While the benefit of being small will be maximized in knowledge intensive business with fluctuating demand and diversified needs, it may not be advantageous in labour-intensive or capital-intensive business that requires the economics of scale. Furthermore, at this point higher transaction costs associated with inter-firm exchanges in the value chain consisting of several independent organizations outweigh the benefits in most cases. Therefore, general argument is that small organization is under significant pressure of globalization. Global competition is threat, not opportunity for small domestic organizations.
Number of articles aim at providing insight on the impact of globalization, outsourcing, offshoring and other major trends on the larger organizations. However, application of established theories on small businesses is still at examination stage, especially due to the diversity and complexity in SME sector. The question is if the change of external environment is an opportunity for small domestic organization or not. Potentially, globalization might destroy all the local businesses. On the other hand, it may provide significant opportunity for small organization. We have to figure out how small organization can maximize its unseen potential in the next century. This short work presents several preliminary thoughts on the potential of such small organizations in the next century.
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posted by Cotton at 19:48
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