Global Concerns of Strategic Management
In today's globalized economy, no business can operate without considering the broader external environment. Because of fewer resources, small businesses are much more vulnerable to adverse environmental conditions than large corporations. It is imperative for small-business managers to strategize to fend off global threats and build on the opportunities provided by an interconnected world economy.
Globalization is the trend toward economic, political and technological interdependence between countries. National boundaries in business are becoming blurred. Businesses are becoming more decentralized and sourcing is increasingly international. This phenomenon involves both threats and opportunities for small businesses. On the one hand, cheap products and services by multinational firms threaten the local markets of small companies. On the other, small firms with proprietary products can partner with multinationals and grow rapidly.
Technology has emerged as a facilitator in global commercial change. E-commerce has made global supply chains a reality. Small businesses can reach out to a global customer base by the internet, but technological advances can pose important technical and regulatory challenges. Also, the legitimacy of online audio, video and print material can turn into a contentious issue. Part of global strategy includes optimizing online messages for an international audience.
The business climate of a location includes the factors such as taxes, regulations, and local costs of doing business that affect the health of businesses. Many nations and states regularly publish business climate surveys. In the global economy, nations and states compete to attract footloose businesses looking for the most favorable location for business. Entrepreneurs and managers should consult business climate reports before deciding on the location of a new business.
With globalization forces on the doorsteps of small businesses, the question is how to respond to them. There are at least two theories. The “stages” view suggests a step-by-step approach, whereby the company starts from its domestic market and proceeds to enter international markets. The “born-global firm” is a company that engages in international business from or near its inception. Companies facing small domestic markets can benefit from the born-global approach, but this requires personal experience of founders with the target market and a proprietary product. The ability to provide the initial costs is another issue that requires strategic planning and budgeting.
Global forces contain exceptional threats. The 2001 terrorist attacks on the World Trade Center and the Pentagon left many business analysts floundering with an unprecedented international threat. Small businesses tied to local markets can be especially vulnerable to the consequences of terrorism in their home markets. Cyber-attacks are another example. Many small businesses erroneously think they will not be targeted by cyber-attackers, but such attacks, even in the net of a generally distributed computer virus, can have a devastating impact on small businesses.