Order from us for quality, customized work in due time of your choice.
Introduction
Background of Study
Globalization is the phenomenon through which countries across the globe are connecting through financial trade, political issues, transportation and operations. It is mostly termed as economic globalization since the economy of a particular country carries out trading activities in order to become a part of the global economy (Pope 2002; Cremins 2006). This can be through adopting latest market trends including marketing and selling overseas or simply through adopting technological innovations. Through globalization many developing nations have been seen to improve their fiscal conditions and reduce poverty.
Growth is a versatile experience that is usually linked with firm endurance, attainment of business goals and achievement, or taking up activities to a higher level (Storey 1994; Kinsella et al.1994; Delmar and Wiklund 2003; Wickham 2004; Dobbs and Hamilton 2007). Growth and development of business may indulge in various forms such as employment, profits, capturing market share and development of products and services, although not essentially all at the similar time (Pope 2002; Cremins 2006).
Entrepreneurship reflects in one way or the other the organizations ability to rapidly involve in ground-breaking, hands-on, risk-seeking, independent, and competitively belligerent behaviors to attain its calculated purposes (Dess, Lumpkin, and Covin 1997; Miller and Friesen 1984). Globalizing operations of SMEs (companies with five hundred or fewer employees), have been gathering a lot of heed lately. In Asia, Europe and Northern America, SMEs are making use of opportunities of growth available in global markets simply because of the rapid changes in the technological applications being utilized for communications and transportation, and other administrative factors (Organization for Economic Co-operation and Development 1997; Oviatt and McDougall 1994).
SMEs play a major role in the economic development of any nation; their empowerment has been the primary reason for over forty years of opulence and development. Many large export-import businesses started out as SMEs, and enterprises could be considered as foremost in the globalization of developing economies.
This study is an attempt to explore the relation between globalization, growth and development, entrepreneurship and SMEs in developing nations. The study analyzes the globalization of Nigerian SMEs in order to learn the strategies viable for globalization of SMEs in developing nations and how this impacts the overall growth of the economic strength of the nation.
Objective of the Study
The objective of this study is to show how globalization can benefit a particular nation and improve its economy. This objective is implemented by considering a developing economy that is Nigeria and focusing on how globalization is prevailing in the economy and how SMEs are responding to it. Furthermore, the objective of the study is to see how globalization takes place in SMEs with entrepreneurial orientation.
Research questions
In order to meet the objectives of this study, this study aims to identify, taking the Federal Republic of Nigeria as a case study from the developing economies, these issues here by addressing the following research questions:
-
What is the role of entrepreneurship in the functionality of small and medium enterprises undergoing globalization?
-
Typically, in a globalizing environment, are entrepreneurial SMEs more probable than non-entrepreneurial SMEs, to formulate a viable and useful marketing strategy for globalization?
-
Moreover, when dealing with globalization or globalization, are SMEs that utilize marketing strategy, more reluctant to initiate policies and techniques focused towards uplifting their performance?
-
Finally, what are the pros and cons faced by SMEs when undergoing globalization?
Literature Review
Introduction
This chapter aims to outline the strategic factors related to the marketing of SMEs in the global arena. This chapter bridges the gap between the prior research which implies that the quest of various operational strategies amidst entrepreneurial orientation may be supported successfully in order for any business to globalize successfully (Dess, Lumpkin, and Covin 1997), and the objectives of the current study which aims to highlight the importance and impact of globalization on SMEs, taking Nigeria as the case study.
Why Globalize?
Ever since 1986 there have been major alterations in the macroeconomic environment around the world. The appreciation of the major currencies has caused destruction in the price advantage that developing economies exports had formerly benefited from, wages went up, and the labor movements along with the protection of the environment turned out to be of more importance. With rise in the cost of production, competition among products was no longer a topic of importance as that of competition prevailing in the Southeast Asian nations, China and other developing countries. SMEs in large numbers started to shift their operations to other cheaper locations.
This practice was not applicable to firms that were involved in manufacturing only, rather it started implementation in trading companies as well since they started to outsource their facilities involved in purchasing and distribution. This was termed as the transnational model. According to Parasuraman and Zinkhan (2002, p. 287), Internet technology has the potential to alter almost every aspect of business operations . Along with many other factors, Internet played a great role in enhancing the globalization of SMEs which was supported by numerous scholars, such as Poon and Jevons; Rialp; Knight and Liesch, Etemad and Wright, etc. They all disputed that the commercialization of the Internet was paving path for random chances for SMEs. Such developments tempt business researchers to refurbish their concepts and policies and accommodate the operations of their SMEs accordingly.
The Internet will transform the dynamics of worldwide business and lead to faster globalization of SMEs. SMEs can now get access to the identical capabilities as large businesses, and are adept to enlisting worldwide markets that before might have been unaffordable due to the substantial assets required. And it would furthermore be intriguing to investigate the span to which the Internet has assisted SMEs from evolving nations to globalize (Dess, Lumpkin, and Covin 1997).
Other scholars have furthermore contended that the Internet is only a device rather than of scheme for SMEs. SMEs habitually have their own handicaps in evaluation with large businesses, which have larger assets and mesh of operations. Although the cost of setting up a straightforward location is reduced and inexpensive for most SMEs, the cost of setting up complete, high profile sites is high-priced for SMEs. Major browsing engines for example Yahoo and Google assign high charges for administering their Internet traffic to businesses by leasing key phrases that contemplate their enterprise, which is apparently a handicap for SMEs (Parasuraman and Zinkhan 2002).
SMEs presently provide a considerable share employment and prospects for growth in future all over the world (Organization for Economic Co-operation and Development 1997; United Nations 1993). Moreover, they are believed to account for some 35% of exports from Asia and approximately 26% of exports from developed countries in the rest of the world, including the United States (Organization for Economic Co-operation and Development 1997).
Globalization of SMEs
Globalization and the significance of actively operating SMEs (small and medium-sized enterprises) are the major trends being witnessed in todays corporate world. This study is an attempt to investigate the correlation among the entrepreneurial directives of SMEs, strategies utilized for marketing along with techniques and performance of the business being affected by globalization. The study will offer viable and consolidated findings and conclusions drawn from qualitative evidence regarding important entrepreneurial roles being applied to the globalization of SMEs (Dess, Lumpkin, and Covin 1997).
In various other countries, for example, Italy, South Korea, and China, small and medium enterprises contribute a share of 60 per cent of the entire exports of the respective country. SMEs are functioning in an environment which is subjected to globalization changes on daily basis. Globalization is the rising phenomenon in all economies over the world.
This encompasses manufacturers, customers and governments of various countries. Boundaries among local and global markets are decreasing in relevance as companies head towards the global market. Harmoniously in European, North American and Japanese countries, global competitiveness has greatly strengthened (Dunning 1993). In this environment, to the extreme that SMEs can prove to be catalysts of growth for innovative product markets and the wider development of economies in various nations, the increase of the globalized SMEs is an important factor. However, in view of their small size, most SMEs lack the expertise, market strength and other resources of the traditional MNCs (multinational companies). Compared with these organizations which are larger in size, rich in resources; the complex nature of operations become more difficult for SMEs experiencing globalization.
The success of SMEs undergoing globalization depends largely on the formation and exercising of their strategy development (e.g. Miles and Snow 1978; Porter 1980). Strategy is a reflection of the organizations short- and long-term plans for overcoming the challenges and opportunities confronted by the businesses at a rapid pace. Companies exercise various strategies to attract and retain customers and effectively deal with an array of concerns prevailing in the environment including the competitiveness, scarcity of resources and suppliers.
SMEs are considered to be the catalyst of economic growth, providing jobs and reducing poverty in developing economies. SMEs have also been witnessed as being the sole means through which rapid economic growth and industrialization have been successfully attained (Harris and Gibson, 2006; Sauser, 2005; van Eeden, Viviers and Venter, 2004; Arinaitwe, 2002; Kiggundu, 2002; Yusuf and Schindehutte, 2000; Monk, 2000; Goedhuys and Sleuwaegen, 2000; Birch, 1981, 1987). While these contributions made by SMEs are highly acknowledged, entrepreneurs come across many hurdles that obstruct their development in the long run.
Research on development of SMEs has proved that percentage of failure to globalize is higher than in the developing nations as compared to the developed ones (Arinaitwe 2002). Scholars have already pointed out that commencing a business itself is a risky ordeal altogether and to warn entrepreneurs about the chances of failure in setting up an SME are very narrow; even though SMEs have been the in existence for almost forty years now. In order to overcome these considerably big failures all that can be done is to have a handful of long and short term strategies developed beforehand (Sauser 2005; Monk 2000).
Aggressive positivity has been viewed among development of SMEs and economies at the same time (Harris and Gibson 2006; Monk 2000; Sauser 2005; Birch 1987; Birch 1981). However, no substantial research has been carried out or documented with respect to this positive relationship occurring in the developing countries. Studies in development of SMEs are necessarily required for their prevalence in developing countries like Nigeria because there is an evident dissimilarity in the development process between developed and developing economies (Arinaitwe 2002). Moreover, it is also important to realize the difficulties being faced by SMEs during development in African countries because they are evidently dissimilar from those occurring in developed countries. These hurdles include a scarcity of financial wherewithal, scarcity of management expertise, non feasible locations, policies and procedures, economic situation, as well as risky elements such as deprived network, dishonesty, very low willingness to purchase the products and services and the rate of poverty. According to Arinaitwe (2002), interior and exterior differ among developed and developing nations.
Entrepreneurs might be faced with similar challenges in accomplishing their growth opportunities, but provided the heterogeneity of SMEs differences in development are seen in how these are managed by the entrepreneur (Kinsella et al. 1994; Barkham et al. 1996; Gibb 2000; Wickham 2004; Donohoe and Wyer 2005). Wickham (2004) projected that the entrepreneurs conceptualization of how it would affect their individual role in the business resolute the strategies assumed to practice firm growth, where one such policy is globalization.
Theoretical Framework
Globalization is a reflection of various trends that firms utilize for marketing and selling their products in various different countries around the world. It is coupled with governments reducing operations and venturing obstacles, carrying out production operations in various countries at a time, local firms acquiring raw materials or spare parts from cheaper suppliers overseas, and international firms continuously carrying out their competitive functions in local markets (Dunning 1993). Globalization has been a steady procedure, stemming from a broad array of self-supporting trends.
One of the most substantial factors has been the development of liberalism on the economic and political front since the postwar period, which has caused the decrease in protecting trade. Other shifts range from the growth of technology and communication arena to the development of the Eurobond market (Dunning 1993).
Looking at the macro and commerce scenario, globalization is glimpsed to be a major origin of turbulence in the markets, high competitiveness indicted by the MNCs, missing connections amidst the markets due to liberalization of trade undertakings and the increase of international trading possibilities, all of which in one way or the other influence the presentation and capabilities of the SMEs.
In similar scenarios, entrepreneurship is advised to be the only beneficial device for survival. Entrepreneurship is primarily connected with a quest for prospects, undergoing dangers and ready to face the dangers catalyzed by a market leader which is powerful and follows a certain set of standards (Dess, Lumpkin, and Covin 1997; Miles and Snow 1978). Firms which have an entrepreneurial orientation are inclined to indulge in innovating undertakings, undergo hefty dangers and virtually start the method of innovating their services and goods (Miller and Friesen 1984; Morris and Paul 1987). Lumpkin and Dess (1996) idealize that most crucial value of an entrepreneurial setup is going into new markets especially going into these new markets with newer goods and services as well as supplying possibilities for new projects and commencing new goods in alignment to seize the market. They finally concluded in their discussion that along with innovation, taking risks and being proactive, entrepreneurship also points out that independence and aggressiveness are just as important.
In definition, innovation connotes a business environment that not only supports fresh ideas but also promotes them, experiments and brings creativity that may pave path for development of new and fresh products or techniques or technologies. Taking risks reflects the tendency to dedicate resources to projects that involve a significant option of disappointment, along with odds for high returns.
There are two theoretical approaches discussed in previous literature, that is network theory and stage theory are formulated on the concept that businesses turn out to be successive to the time they have been operating in domestic market. However this is not the case in many instances (Oviatt and McDougall, 1994; Johnson, 2004). These theories project that a highly augmenting number of small firms undergo globalization from the stage that they were formulated. The firm that globalizes from the day of inception has a global orientation from the very beginning (Oviatt and McDougall1994; Crick and Jones 2000; Johnson 2004).
Many scholars have theorized that such firms who take globalization from their very inception are actually a sub set of another kind of firms who took over globalization as a part of their formulation strategy with respect to growth (McDougall and Oviatt 2000; Rasmussen and Servais 2000; Zahra and George 2002; Autio et al. 2000; Zucchella 2002).
Models of Globalization
The three different models of globalization prevalent in the corporate world at present are discussed below. These are namely, Proactive approach, Entry Strategy Adopted, Marketing leadership, the choice of Global Market and the Market, Vernon and Dunnings idea of Globalization
Proactive approach
Proactive approach as compared to re-activeness has opposite implications. It encompasses initiating a process; insistently pursue projects and being at the centre of actions taken to formulate the surroundings in a manner that brings positive results for the firm. Independence points out that any action taken independently by an individual or a group especially in giving rise to a single idea or a vision for growth and then taking it down to the road of completion. In the final round, aggressive competition refers to the firms propensity to confront its opponents intensely and unswervingly in order to do better than them in the market (Covin and Slevin 1989; Khandwalla 1977; Lumpkin and Dess 1996; Miller and Friesen 1984; Morris and Paul 1987). Based on evidence from various literary sources, Dess, Lumpkin, and Covin (1997) draw a conclusion that shaky and multifaceted environments often demand a positive strategy making capacity which is only possible in entrepreneurship. This environment is only prevalent in globalization, especially for SMEs, which may not possess the relevant resources to go down the competition lane extensively in both the local and international markets.
The factors that come to mind when we discuss global firm growth are usually classified into a category of positive and negative factors that actually conclude the factors that determine the growth of the business generally (Czinkota and Tesar 1998; Lawless 2007). Positive factors are linked with the proactive quest for international market opportunities by the entrepreneur. Equally, entrepreneurs only give importance to global market expansion owing to the minimal growth opportunities in local markets. In this scenario, the entrepreneur undergoes a passive and risky move towards choosing the market and the kind of market entry strategy that has been decided (Czinkota and Tesar 1998; Lawless 2007).
Globalization poses many challenging opportunities and can make the environment quiet aggressive for smaller firms (Organization for Economic Co-operation and Development 1997). Dess, Lumpkin, and Covin (1997) note that passivity in these environments often give rise to downward performance, because in such environments, the main purpose and reason behind competitive advantage, structure of the industry and standards of performance are usually small and in a continuous condition of instability. Success of products is favorably achievable through competitive aggression and a positive stance that moves the enterprise away from the competitors (Dess, Lumpkin, and Covin 1997). In short, orienting to entrepreneurship may be particularly helpful in unsure or unstable environments (Dess, Lumpkin, and Covin 1997; Miller and Friesen 1984). Given the turmoil posed by globalization, it is predictable that SMEs with openness to entrepreneurship will work better than those that are not open to entrepreneurship (Sauser 2005; Monk 2000).
Most of the literature has been written to emphasize on the connection between entrepreneurship and strategy development of a firm (e.g., Covin and Slevin 1989; Dess, Lumpkin, and Covin 1997; Miller and Friesen 1984; Morris and Paul 1987). Development of strategies is done at a firm level and involves a variety of activities that organizations take on to create their planned mission and goals. These activities comprise study, scheduling, decision making, and administration and are instilled with the organizations traditions and common value system (Miller and Friesen 1984; Porter 1980).
Marketing leadership amidst Globalization
Marketing leadership is typified in this study to be an innovation strategy, building a strong and result oriented sales force, and diligent control of channels used for distribution (Morrison and Roth 1992). For many organizations, to be successful, a viable marketing strategy is necessary.
There have been numerous studies that have put emphasis on significance of a well oriented marketing strategy in the daily activities of the firm. Quality leadership is simply as the term relates the interpretation of products and services of excellent quality, which meet or sometimes go beyond the expectations of the consumer (Buzzell and Gale 1987; Szymanski, Bharadwaj, and Varadarajan 1993). When a product is of high quality it tends to breed a strong bonding with the customer thus increasing loyal customers and enabling high prices to be charged as compared to competitors (Buzzell and Gale 1987). Specialization in products is often emphasized in specialty products, which are usually charged heavily and targeted to smaller markets (Porter 1980). It is similar to Porters focus approach, in which the firm targets explicit markets with original or extremely distinguished products greater to those of rivals. At the strategic intensity, firms endangered by globalization can react in various ways.
The focus here is acquiring technology, getting prepared to globalize and prepare the enterprise for the globalization. Technology acquisition involves research and development (R&D), to enhance and extend the objectives of the firm. Advanced technology is a key to enabling firms to go ahead with innovation and positively take action to cope up with the altering conditions prevailing in the external setting (Miles and Snow 1978; Porter 1990). Technology acquisition was considered to be contextual in large firms, but the space has slimmed down significantly in last few years. In proportionality, SMEs are now using latest technologies to approximately the same degree as big firms (Organization for Economic Co-operation and Development 1997).
Acquiring technology is an important way companies tend to cope up with the increasing demand to globalize. One very high possibility for this is that globalizing extensively may induce commerce to move up the value-added chain, a procedure that typically ensures R&D. Additionally, globalization compels organizations to customize their products in order be suitable for the global markets, match the complex standards governing product development or make them globally desirable. Also, with globalization the global competition increases and the production time for products shrink as the demand increases. Thus, companies need to extensively invest in research and development to upgrade and speed up their capacity to innovate (Kotabe 1990; Porter 1990; Zahra 1996).
In supplement, various micro and macro elements assist to conclude why a business should go global. These encompass components affiliated with the clientele and affray, communal, heritage, financial and technological facets of worldwide enterprise natural environment and supply affirmative or contradictory determinants of the globalization of SMEs (Bell 1995; Tybejee 1994).
Once the conclusion to trade items becomes vibrant, the entrepreneur has to consider the suitability of the merchandise or service in its present pattern for acceptance in new worldwide markets. The grade of adaptability and accessibility of economic assets to support the modification of the merchandise or service, and in purposeful localities for example worldwide trading, sales, output and circulation sway the viability of the trade items activity. At the identical time, the entrepreneur should consider its own firm promise to worldwide enterprise development and accessibility of information and abilities essential to manage so.
The choice of Global Market and the Market Entry Strategy Adopted
The globalization of business activities of entrepreneurs tends to occur in the markets, where the main route of entry into the market is through exports, since it allows the employer to maintain control of the primary decisions (OGorman 2001; Pope 2002 Zahra and George 2002; Lawless 2007).
The reason why entrepreneurs grow their business globally is essential in shaping the strategies for entering new markets, according to Hollensen (2001). The choice of the overall strategy is inserted into the broader strategic direction or vision of the entrepreneur and the achievement of a strategic fit between supply product / service of the company and the demands of a different business cultural world, social and economic landscape (McGee et al. 2005).
The achievement of this strategic fit usually requires a degree of structural reconfiguration of the SME. Small businesses often operate with limited resources and have a lower threshold to absorb risks in international markets compared to larger companies. Therefore, the networking, strategic alliances and partnerships is an important means to compensate for the lack of resources in SMEs (Fliess and Busquets 2006; Nummela, et al. 2006). This structural change should be supported with the acquisition of knowledge and skills at the level of entrepreneur to effectively manage relationships and global networks.
In essence, the SMEs are facing three options: direct export, indirect exports or a combination of both. Direct exporting means that the entrepreneur to assume full control over export activities. This may be the initial strategy of globalization, but as the number and diversity of sites of increased then it becomes difficult to maintain this level of control by the employer (Hollensen 2001; Nummela, et al. 2006). The indirect export involves a third party, usually an agent or distributor who will take responsibility for a series of activities (sales, market studies, the distribution of the product / service, etc.) and provide support and guidance on legal issues (Pope 2002; Lawless 2007).
The use of networks, strategic alliances and franchising and licensing agreements are additional options of indirect market entry for analysis by the employer. To date, a brief overview of the approaches to globalization is complemented with a discussion of what they say are the main components of the globalization process adopted by the SMEs. Participation in these stages will result in a number of challenges in achieving international growth. These issues are examined in this theoretical study, and identify the main challenges are in the global firms growth of SMEs.
Globalization generally is seen to be a response of firms to opportunities and threats that are prevalent due to globalization. It is often seen to be a characterization by management to modify business strategies, marketing activities, and general practical exercises carried out on daily basis in the organization. In universal markets, since the organization encounters varied consumer needs and challenging offerings, as well as changeable financial and technical conditions, being receptive to globalization may be mainly significant in the achievement of the SME. Certainly, foreign competitors are often supported by restricted governments, use unexpected and new strategies, and are widespread over many national markets. The primary challenge faced by firms is to develop value for buyers as competently as possible. Companies that are ever ready to take up the challenges of globalization are better in position to achieve a greater success and globalize as compared to non responsive firms.
Coming down to globalization, many firms tend to extend their sales into international markets. Globalization provides new and extensive profitable markets which are helpful in increasing the competition level of the firm and pave path for fresh product ideas, innovation in manufacturing processes and the latest technology (Cavusgil and Zou 1994). However, globalization is unlikely to reap good results unless the firm is not prepared for it. Planning in advance has often been considered as significant to the achievement of taking up and successfully completing new ventures (e.g., Chakravarthy and Perlmutter 1985). Such planning is particularly vital in ventures involving international markets, in which the business surroundings can be significantly more composite than in local market (Bloodgood, Sapienza, and Almeida 1996; Chakravarthy and Perlmutter 1985).
Thus, in conclusion, preparing to globalize describes the efforts of a firm to prepare beforehand as it looks forward to expansion in the international markets. Such preparation would encompass global market research; indulging human as well as financial resources to support the global venture and; and producing products that match the needs of foreign markets which are targeted (Nummela et al 2006). Marketing activities and processes are considered to operate along different dimensions within the firm: culture, strategies, and tactics (Webster 1992). As Webster points out, culture is a primary set of beliefs that govern the firms. Strategy is a reflection of how the firm prepares itself to target and positions it and how it will indulge in competition at the cost of its products and markets. Coming to the operations level, strategies and actions are fulfilled through the marketing mix tools and other elements within managements grasp.
All dimensions, included must be produced and brought into action in the succession to the preceding level. That is, society or culture is primarily a precursor of strategy, and strategy is primarily a precursor of techniques, which in turn leaves a great influence on business performance (Webster 1992). In this study, we look at entrepreneurship is placed in line with the culture of the company; strategies include marketing leadership all actions related to strategizing; and techniques include acquiring technology, going global and preparing to spread out at an international level.
Vernon and Dunnings idea of Globalization
The globalization method is conceptualized as the method of acclimatizing firms procedures (strategy, structure, assets, etc.) to worldwide environments . Globalization ideas try to interpret why businesses select to function after their household market and the schemes and organizations they evolve to manage this. Many ideas have been sophisticated to interpret the method of globalization, for example the customary trading set about that focuses on the companys centre competences blended with possibilities in the foreign natural environment, the cost founded outlook that proposes that the business should own a compensating advantage in alignment to overwhelm the cost of foreignness , Vernons worldwide merchandise life cycle, Dunnings eclectic idea, etc. A helpful beginning issue in the idea of globalization is Johanson and Vahlnes Uppsala form of globalization, which vitally posits that firms globalization rises as its foreign market information does, which has been verified as being crucial (Pope 2002; Lawless 2007).
This behavioral outlook is drawn from case investigations of the globalization routes, taken by several small and medium sized companies. The idea presented in this phase takes businesses as being either (1) a non-exporter, (2) a digressive exporter, having (3) overseas sales procedures, or (4) overseas output uni
Order from us for quality, customized work in due time of your choice.