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Globalization and the Innovation of Small Businesses

Dec 4

Small and medium-sized enterprises (SMEs) can better cope with globalization if they are innovative.

Small business innovation capability can be strengthened for businesses that operate in a single country or single town by implementing a worldwide strategy.


In today's world, small business innovation is significantly influenced by this reality: small enterprises can no longer afford to think in terms of geography. In today's business world, even a small business organization located in a single town will be affected in a way that is global in scope. The fundamental elements of global strategy for the adaptive and agile small firm will be covered next.

When a company is still in its infancy, strategic management becomes even more critical. If we take the example of Bill Gates, who launched Microsoft into the big leagues while still operating out of his garage, with the strategic goal of placing "a computer in every house."

A small business that lacks a global perspective or plan will be unable to capitalize on opportunities or manage the risks connected with global forces that invade locally. This means that small firm innovation is restricted to local requirements, whereas global challenges or possibilities abound.

Understanding the Concept of Global Strategy

In Global Strategic Management, published by Oxford University Press in 2005, Kamel Mellahi, Jedrzej George Frynas, and Paul Finlay define global strategy as a single strategy that applies uniformly to all subsidiaries and partners of a multinational corporation with operations in multiple countries. In order to realize economies of scale, standards at the corporate headquarters are harmonized.

The same writers make a distinction between a global strategy and an international strategy as well. It is defined as the policy of a multinational corporation to let its subsidiaries to "study, design, and implement" their own strategy that is tailored to their own local market. Simply said, it means that you must adapt to the local business climate.

Another sort of globalization that the writers have not explored is the marriage of a global strategy with an international strategy, as in the instance of HSBC, which bills itself as "The World's Local Bank." The innovation in this case is a business strategy that utilizes the benefits of economies of scale in some parts of its operations while also adjusting to the local business climate in other areas.

Another type of corporate entity is the single-country corporation that provides offshore outsourcing services or goods to its international clientele while maintaining a uniform standard of quality. The same outsourced services or goods are also available in a customized version that is tailored to the specific needs of an overseas customer's local business environment.

A Global Strategy for Small and Medium-Sized Enterprises

The small business is no longer considered to be a stand-alone entity. Businesses should have a worldwide or international strategy in place when their partners, suppliers, or even competitors do so. This strategy should be defensive in nature or opportunity-seeking in nature, depending on the situation. Of course, a small firm should not operate in the same manner as a big corporation just yet. Instead, small business innovation should take into account global possibilities that are available as well as global concerns that could endanger it.

Companies with a global reach that outsource or procure from single-country firms

It is possible for a small business to outsource minor projects or certain procedures as part of its overall global strategy. Small enterprises, for example, can take advantage of the time zone difference. Small projects or work packages that can be submitted online can be done on weekends or during the night in a different nation with a different time zone than the one in which they were submitted. This is a management innovation that makes the most of the 24-hour work day or the 40-hour work week while spending the least amount of money possible.

Outsourcing software development for innovative ideas is also an option for small businesses, as long as the business owner is confident in the outsourcing firm's respect to confidentiality and exclusivity agreements.

In this context, entrepreneurs looking for offshore companies should take the following factors into consideration:

  • The outsourcing company should be able to adhere to the norms of the local business environment in order to be successful.
  • Payment options and schemes should be accessible from anywhere in the world and should be generally safe.
  • Before outsourcing a vital component of a small firm, the entrepreneur should first verify the vendor's reliability on little projects that are not as critical to the company's success.
  • Anti-money laundering legislation and government regulations are in effect.

Partners — Global and international corporations, as well as single-country firms having a global footprint.

A variety of options exist for small businesses to collaborate with global and/or worldwide enterprises, as well as with single-country organizations, in the fields of banking, logistics, wholesaling, franchising, exclusive distributorships, and other ventures.

For example, creating an account with a global bank such as HSBC can make it feasible to send money wires to Asia, where there are several outsourcing companies, at a convenient time. Small grocery stores that cater to a certain group of clients, such as Koreans, can order Korean beer and other Korean products from the comfort of their own homes.

Small businesses that are able to adapt to these scenarios and exploit their benefits are more likely to succeed in a worldwide business environment than their larger counterparts.

Possibilities for a Successful Exit Strategy

Entrepreneurs in small towns or single states should not ignore the potential that arises when a large corporate or global corporation decides to expand into their local business environment. Rather of viewing the breach as a threat, small firms should embrace the intrusion as a beneficial exit route for the company. Entrepreneurs can make a profit by selling their enterprises, either in part or in full, especially if their small businesses offer distinct advantages over their competitors.

For this reason, takeover or franchise agreements should be regarded in the same vein.

Small Business Innovation Management and Global Strategy are two topics that I am interested in

Innovation management is no longer limited to domestically developed breakthroughs; it now encompasses external innovations that either threaten or present opportunities for small businesses. Entrepreneurs at small and medium-sized enterprises should recognize that globalization is, in fact, disruptive innovation. Small businesses can either fail or succeed depending on how they respond to it.

As a result, small business innovation and global strategy should be complementary rather than antagonistic to one another.