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A Yawning Gap In Globalisation For SMES
Professor Margaret Cording, the Director of IMD of Southeast Asia & Oceania Photo: GSME News Network
April 2nd, 2016 | 08:48 AM | 6288 views
Globalisation refers to changes in the world where we are moving away from self-contained countries and toward a more integrated world. In actuality globalisation of business is the change in a business from a company associated with a single country to one that operates in multiple countries.
According to Professor Margaret Cording, the Director of IMD of Southeast Asia & Oceania, for decades, the trend has been for companies to expand their presence overseas. She added that globalisation has been the catchword. Yet only a few are actually ready to build and run global operations.
Cording said everybody wants to go global, and yet are struggling with it. She was addressing special talk at Securities Commission Kuala Lumpur recently.
Cording said a study was designed where in a survey done, 360 executives from all over the world from different industries, asking them 24 questions, which assesses the company’s capabilities and what it takes to truly run a global organisation.
“We were quite surprised at the results. We found that 75% of the 360 companies wanted to grow non-domestic revenues, however only 49% had the capability to do so. That means over half of the respondents felt that their companies did not have what it takes to significantly grow their non-domestic revenues. That is a shocking amount to me. It is a huge gap.” She said.
“And only 10% of these companies believed they are better than average,” she said.
Speaking to MALAYSIA SME® and GSME News Network she said SMEs cannot run away from the effects of globalisation she believes that that is an issue all on its own. Cording said there’s no right or wrong answer to it.
“Everyone should globalise, at least in ones mind-set. Whether or not SMEs should globalise will depend on what industry they are in. I would be more comfortable saying clearly there are opportunities to leverage the strengths of SMEs which typically is great focus, great energy, and great flexibility.” she said
“I think SMEs have an opportunity to really explore their agility in competing with the large players, the global players. There are a number of studies done recently that shows the local SMEs are much more effective in meeting customers’ needs and adapting to that local market, then the big players are. It is interesting because the big players never say my competition is the SMEs.” she added.
Obstacles SMEs face going global?
Cording said that studies have shown, the bigger an organisation is, the more complex it is. One of the obstacles sometimes is getting the local markets attention. It really helps when going global when there is a brand.
“You’ll have a much better chance of succeeding when your brand is recognisable or known. Again it depends on what industry you are in. Sometimes getting noticed is a big obstacle,” she said.
She added, “Getting access to the distribution channels because you’re small can be an obstacle. But this obstacle can be overcome by being very strategic and very smart about who you partner with in those countries.”
She said because the nature of SMEs, given their size will need partners and the interesting question is who the SMEs should partner with and what should that partnership look like? It is difficult to globalise all by yourself as a small company.
In a partnership, one of the things SMEs should look for is complimentary resources, Cording said.
“The organisation can do things that the SME can’t do, and the SME can do things that the partner cannot do. It always forms a good foundation for a partnership,” she said.
She added that in a partnership, it is actually a relationship between people. So there needs to be a fit there in the styles of working, values, approach to business, the work ethics and importantly the goals between the parties involved in the partnership looking to achieve.
Professor Cording suggests that potential partners can be identified from a far, but who an SME select to partner with need, is a decision to be made after getting to know each of the criteria’s.
“On paper the strategic fit maybe beautiful but the interpersonal relationship is terrible, then don’t go for it.” She said.
Continuing on the obstacles SMEs face, Professor Cording said, “There is a need to focus on how things get done. It is actually a complement about what strategy should I pursue to thinking about how effectively am I actually doing what it is I want to do, whether its organisational alignment, go-to-market, business capabilities, etc. .”
“Now we can’t solve all problems. So once we identified on where those problems are being strategic about which ones am I going to focus on, which ones are actually going to give me the biggest benefit from a reasonable level of effort.”
“As the phrase goes, we have seen the enemy and it is us. Let’s look at the enemy and call it what it is. Let’s fix it.” She said.
Cording added that it the size of an organisation does not matter but paying attention to technology and adopting the mind-set that says ‘what worked yesterday might not work tomorrow’ is absolutely critical. Those who adapt to technology, thrived, and those who resisted it are no longer in business.
When asked her opinion on how governments can provide an easier route to companies to go global, Cording replied that “in general in issue as we see that as technology changes so quickly, governments are not staying abreast and not rapidly changing in a regulatory environment. Which is understandable, I’m not criticising at all.”
She said, “The constraints that regulations present and the needs of the very rapidly changing market are beginning to collide more than they have in the past. So the governments could really have to look are they regulating the right things in the right way given these changes. If the world the changing, that world has to change too.”
Apart from handling issues and situation of going global strategically, Cording said that “SME’s have an advantage. They are more agile, they make decisions more quickly, and they get people aligned to those decisions more quickly. If you are in a fast changing, fast growing and fast moving market then the flexibility of smallness is actually very much to your advantage.”
courtesy of GSME NEWS NETWORK
by Mishallani Nair
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