1. Many entrepreneurial SME’s do not follow a planned, strategic approach to the issue of internationalization. Most do so by means of an evolutionary strategy based on a combination of methods and options. Using relevant illustrative example for each University of Derby Online Learning approach, review the various options that can be used, the advantages and disadvantages these options and how the probability of success can be maximized.

 

Entrepreneurial SME’S

These are small and medium sized enterprises where the numbers of people involved is very minimal and limited as according to the size of the company. As compared to the large companies the small companies employ such wide ranges of people and in many cases always outdo the large enterprises in a big margin (Karami, 2007 p.132). They employ employees of less than two hundred and fifty in numbers and use evolutionary strategy in their skills of entrepreneurship. The small enterprises which are categorized in to three groups namely micro, medium and small firms which contribute much in economic development and provision of employment opportunities to many people. For example in United Kingdom the small and medium sized entrepreneurs comprise the highest percentage of the countries GDP and hire most of the people there. The enterprises venture in to high risks business which large countries cannot venture into. Their failure is often linked with their failure to use competent strategic planning in their entrepreneurial activities. Their failure is linked with the fact that they do not plan on long term basis and thus do short term planning which often affects them unlike the large companies where strategic planning is the main key to success (Carayannis, 2013 p.152). Many small businesses are contented to remain small and are not affected by the success of the large companies who emphasize on use of strategic planning. Entrepreneurial SME’S are known to take risks and grow continually for a period of up to three years where the process of making decisions in these firms is very different from that in the large firms.

It is claimed that most of the entrepreneurial of the Small and Medium Enterprises (SME’s) across the globe do not follow a planned, strategic approach to the issue of internationalization. They often do so by a mean of an evolutionary strategy that is based on a combination of methods and options. However, it is essential for them to use a strategic planning as it enhances their performance. It becomes more essential for these organizations to have a proper succession planning at all level. The fact that they do not use or follow a planned, strategic approach to the issue of internationalization, they do not survive the succession from one generation to another. Normally, the entrepreneurs do not use this approach due to the fear of family conflicts on the ownership or stake holding issue (Organization for Economic Co-Operation and Development, 2010, p.42). This means that the decision makers in the Small and Medium Enterprises (SME’s) have a perspective that real entrepreneurs do not plan instead, they assume that it is more effective to use their limited time resources more effectively for operational or sales activities (Peng, 2009,p.140).

In addition, the entrepreneurial of the Small and Medium Enterprises (SME’s) normally regard formal planning as limited to only large enterprises. Therefore, they claim that it is not transferable to the requirement of the quick moving and stretchy structured Small and Medium Enterprises. From an entrepreneur’s perception, there are a number of objections that are expressed against use of a well-planned strategic process in these small and medium enterprises. The first objection of the reason why the many entrepreneurial Small and medium enterprise do not use or follow a planned, strategic approach to the issue of internationalization is that they have a perception that all the strategic instruments limit the elasticity and the capability of their improvisation. This means that they perceive the strategic tools as a preventer for their improvement and succession regarding to the issue of internationalization. In addition, these small and medium enterprises always prefer to use limited time resources for their operational and sales activities instead of strategy development approach (Peng, 2009, p.140). The other objection is that they perceive the strategic management as too inflexible. Due to their lack of using a planned and strategic approach they tend to offer a more limited range of products. This means that they will not be in a position to succeed in the international market as they compete with large companies that offers diverse products. They also have a poor level of resources as well as lesser access to human and financial capital (Lloyd-Reason & Sear, 2007, p.45).

Growth planning approach as an evolutionary approach used by small businesses

The small enterprises growth is attributed and affected by characteristics of the firm and the decisions of the firm owner. The owners are the only decision makers and have control over their businesses in terms of the vision and action of that business. The growth and development of small businesses depend on the opportunity and requirements of the small firm. The owner is the key determiner where they enhance on the use of limited time resources efficiently for operational and appropriate sales methods. This option is enhanced since the owner is in control of the resources allocated to the businesses since strategic planning is not done to determine such fixed allocation of resources (Lloyd-Reason & Sear, 2007, p.45). Growth panning emphasizes on the owner to plan for the future requirement of the business which will contribute to good success of the business. The failure to involve formal strategic planning makes them successful at times since strategic planning is expensive even in large companies. Growth panning is influenced by three factors which include the background of the owner as a way to determine capital required the characteristics of the business and the decisions and plans made by the owner (Lloyd-Reason & Sear, 2007, p.45).

Advantages of using the growth planning approach

The resources and capital required is minimal and very low as compared to the large companies. The owners of the small businesses use less capital thus can start many more companies and employ many more people thus leading to creation of employment opportunities which contribute to economic growth of the owners and the country at large.

The small firms have good relationship between them and their customers. Their setting is informal such that they employ face to face communication to their customers and know the needs and appreciations and the feed back of the customers and thus they are capable of correcting the failure in good time (Portland International Conference on Management of Engineering and Technology et al, 201, p.98).

The small scale enterprises are advantaged in terms of economies of scale where they are flexible and can strike the market very first as compared to the large companies where strategic decisions are clearly made and thus flexibility of change in decision is vey minimal, difficult and also expensive to apply.

Disadvantages of using this approach

The growth is not on a high rate since the capital used is small and the number of employees employed is also small thus making the profits unequal to the large companies. The growth does not involve strategic planning and is so informal which makes the owner change the decisions from time to time which some times affect the growth of the company(Portland International Conference on Management of Engineering and Technology et al, 201, p.98)..

International Entrepreneurship strategic approach as an evolutionary approach

This is an approach which involves combination of risk factors and how to solve them and innovative measures regarding the small businesses. They enhance use of modern technology in manufacture and sale of their products which they apply very fast as away of improving their sales. They apply new and modern technology in developing new ideas which will bring positive results to the business. For example Ford Motor Company uses this approach in the sale of their products which are mostly used by various industries (International Conference on Industrial Engineering and Engineering Management, et al, 2013, p.110). This approach is used as a way of improving technology and sales of the small business firm. There are two types of environment involved in businesses which include external and internal business environment. External business environment includes those factors that affect the business externally for example customers, competition and taxation from the government which affect the business indirectly. The internal factors include the decisions made by the personal owner of that business and ways in which the factors affect the business positively or negatively (International Conference on Industrial Engineering and Engineering Management, et al, 2013, p.110). The combination of both external and internal factors affects the growth and development of the business where the small businesses must be in good relation with the external factors since they are inclusive of the government policies which must be followed accordingly.

Advantages of using this approach

The factors affecting growth of various small firms varies from one country to another. Good government policies favor development of small firms thus improving the economic conditions of the countries. Employees motivation is key factor in small enterprises and thus since the numbers of people employed is few the employees are easily motivated which encourages them to keep supporting the businesses. The small scale businesses are able to link with other huge companies and also link with other small entrepreneurs which easily motivate them and support that success (International Conference on Industrial Engineering and Engineering Management, et al, 2013, p.110).

The owners of the businesses are the sole business decision makers and thus directors are not involved in running the businesses. The owners will always make decisions that will contribute positive results to the businesses unlike in large companies where directors are the key decision makers and in most cases are not the owners of the businesses. Small businesses are advantaged since the owner will always do things that contribute to the success of the business. They can easily find funds and donors through involving family members for funds and the government as their donors where they easily transform the vision and mission of the entrepreneur in to action.

The entrepreneurial behavior always depends on the motivation of the owner of that organization which is affected by the internal and external factors of the business (Nwankwo & Gbadamosi, 2011, p.380). It is advantageous since the owners link their resources with other resources so as to add value to their firms. Intentionality is highly used in small firms since the firms use it as a way of achieving the set goals of the firms. The set goals in small firms highly depend on the owner and amount of resources the owner is willing to provide as a way of contributing success to the whole business.

Disadvantages of using this approach

The number of employees employed in the small firms is few as compared to the large firms which is disadvantageous to the success of the firms. The owners can make negative decisions regarding the firms and cause failures since they are the only decision makers. They should include some other people in key decision making since errors are prone to occur when one person makes decision where many other employees are affected by the decision (Nwankwo & Gbadamosi, 2011, p.380). This can lead to a negative effect on the growth and success of the business resulting to failure.

The internal and external factors can lead to failure of the business. The government policies some times affect the running of the business since they are not considered favorable to the well being of the business. The change in behavior of the customers affects the business negatively since increase in prices results to decrease in the demand of the goods. Increase in taxation contributes to negative results to the business since the higher the taxation the lower the quantity demanded by the consumers who are the key success factors to given businesses whether small or large.

2. The OECD suggested that SME’s have a tendency to move to market that are geographically or psychologically close to them.
3. What are the advantages of this approach?

Various studies were conducted by the OECD project with an aim of finding why the Small and medium sized enterprise do not move to market that are geographically or psychologically distant to them. By the end of their study they concluded that SME’s have a tendency to move to market that are geographically or psychologically close to them due to their perception of barriers to access to high-growth markets (Nwankwo & Gbadamosi, 2011, p.380). Normally, the small and medium sized enterprises are faced with different constrains that hinders their ability to move to market that are geographically or psychologically distant to them. One of the major advantage of not operating to market that is far much distant is that these small and medium sized enterprises are able to face lesser competitions. This is due to the fact that firms that market only within its national boundaries only has to consider local competition (Nwankwo & Gbadamosi, 2011, p.380). This means that if they could be operating in market that is geographically or psychologically distant to them, they would face a stiff competition. Therefore, their way of operating in a market that is geographically or psychologically close to them helps them to gain a competitive advantage as they are not facing global competition. Additionally, they will only focus on the entire competition that exists between its home markets. The fact that small and medium sized enterprises deals with market that is close to them, this becomes beneficial to them as they essentially deal with only one set of customers. This means that they will not face difficulties as they try to focus on many sets of customers (Nwankwo & Gbadamosi, 2011, p.380).

Another advantage of operating in market that it closer is that these enterprises are able to have an increased market share as they do not confront an increasing competition from emerged and developed economics (Nwankwo & Gbadamosi, 2011, p.380). This means that these enterprises always get an increased profit as they do not compete with large number of marketers. Additionally, due to the fact that these small and medium sized enterprises operate within the market, they are able to study the customer’s preferences. This is due to the fact that they cannot be able to conduct a research for identifying the customers’ taste towards certain goods. This is because they are not operating in larger areas. Firms that operate domestically can be in a position to operate many segments of products. This means that they can be able to deal with various businesses as they are easier to monitor and manage. Therefore, Small and medium sized enterprises have the advantage of operating in many sectors as they are close to its entire market.

 

1. What are challenges that are presented by moving to market that are geographically or psychologically distant and are these more of an issue for the service or manufacturing sector?

There are many challenges that are presented to enterprises that tend to move to the entire market that are geographically or psychologically distant to them. The first challenge is that the entire enterprises always face a stiff competition. This leads them to incur losses to their market share as they are competing with large number of companies. While moving to market that are geographically or psychologically distant, the entire company can face some risks. For instance, the government can impose different charges that can consequently affect their profit. Enterprises can also loss many customers as they are dealing with long distance customers that they are not able to monitor their taste and preference towards good and service they are provided with. They can also meet different rules that can affect their operations which can lower their entire wages. These issues normally arise to manufacturing sector. This shows that it is essential for companies to move to market that are close to them as they will face less completion. This in advance will raise their market share.

 

 

 

 

 

 

 

 

References

Carayannis, E. G. 2013. Creating a sustainable ecology using technology-driven solutions. Hershey, PA, Information Science Reference.

International Conference On Industrial Engineering And Engineering Management, Qi, E., Shen, J., & Dou, R. 2013. The 19th International Conference on Industrial Engineering and Engineering Management assistive technology of industrial engineering. Berlin, Springer.

Karami, A. 2007. Strategy formulation in entrepreneurial firms. Aldershot, England, Ashgate. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=438750.132

Lloyd-Reason, L., & Sear, L. 2007. Trading places--SMEs in the global economy a critical research handbook. Cheltenham, UK, Edward Elgar.

Nwankwo, S., & Gbadamosi, A. 2011. Entrepreneurship marketing: principles and practice of SME marketing. Abingdon, Oxon, Routledge.

Organisation For Economic Co-Operation And Development. 2010. SMEs and entrepreneurship Poland 2010 key issues and policies. Paris, OECD.

Peng, M. W. 2009. Global strategy. Mason, Ohio, South-Western/Cengage Learning.

Portland International Conference On Management Of Engineering And Technology, Kocaoglu, D. F., & Anderson, T. R. 2001. PICMET '01: Portland International Conference on Management of Engineering and Technology : proceedings. Piscataway, NJ, IEEE.