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What Are the Challenges Faced by Small Business Owners in This Era of Globalization

What Are the Challenges Faced by Small Business Owners in This Era of Globalization



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Published by Gabreyille Nuya

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Published by: Gabreyille Nuya on Jan 06, 2009
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What are the challenges faced by small business owners in this era of globalization?
According to the study, majority of small businesses (61 percent) considers finding and retaining qualifiedworkers as the most significant challenge to the growth and survival of their business. Other major concerns of small businesses include: state and federal regulations (35 percent), economic uncertainty(29 percent), keeping up with the technology (28 percent) and access to adequate capital (27 percent).Interestingly, only 16 percent of small businesses consider doing business on the Internet as a threat. Infact, half of the respondents of the survey (50 percent) intend to use the Internet as their key growthstrategy for the next 12 months. The report noted the growing acceptance of Internet as the driver for growth, from only 33 percent last year to 50 percent this year. A vast majority of small businesses (85percent) now uses the Internet, primarily for email (71 percent) and research (60 percent).However, a mere 3 percent of small businesses surveyed indicate that e-commerce is an integral part of their doing business. More than half of these businesses currently do not conduct e-commerce (54percent) nor have plans to do so in the next year. Another interesting figure is the attitude of smallbusinesses toward e-commerce: approximately 42 percent of respondents view e-commerce as havingno impact on their businesses.They cite the lack of time to plan or implement (82 percent), the cost of implementation (80 percent), andthe radically changing technology (77 percent) as top three main barriers to conducting e-commerce.Other reasons cited are limited technical expertise (73 percent) and staff training needs (68 percent).In terms of financing, three-fourths of those surveyed (76 percent) indicated that they were able to obtainadequate financing. Credit cards top the list (50 percent) of sources of financing used by smallbusinesses to meet their capital needs, followed closely bycommercial bank loan (43 percent). Only two percent of the respondents were able to get funding from venture capital firms, while angel investors werethe source of funding for a fifth of the respondents (20 percent).One interesting finding about the use of credit cards, though hardly surprising, is that small businessesmix business on a personal credit card (49 percent). Despite being an expensive source of funds (only 36percent pay off their bills each month), the use of credit card for business financing has been steadilyincreasing for the last three years. Respondents cite its convenience (86 percent) as the main reason for its continued popularity. Small business normally use credit cards for travel and entertainment expenses(69 percent), day-to-day expenses (64 percent), large capital outlays (46 percent) and inventory purchase(34 percent).
When we think of globalization, we tend to think of giants - of the GMs and the P&Gs that have thedepth of resources to project their presence anywhere in the world. But that's changing. Today, smalland medium-sized companies are going global as well. They are capitalizing on today's shortenedproduct lifecycles and extending their reach via new computer and telecommunications technologiesand a growing number of strategic alliances and ventures that let them pool resources to tackle large
and distant markets. And these companies are finding a lot of reasons to look beyond their ownborders, with overseas markets- and especially, emerging markets-offering the potential of highgrowth rates and early-entry opportunities that can't be matched at home.But these smaller companies also face significant challenges as they head overseas. Going globalmeans greater investments in technology. It places heavier demands on the time of CEOs and othersenior managers as they oversee far-flung operations and alliances. It requires specialized skills todeal with complex tax and currency issues. And it requires greater care to avoid the pitfalls of doingbusiness in different legal and cultural environments.For a smaller company, then, going global has the potential to stretch financial and human resourcesto the breaking point. The trick, of course, is to plan and focus those resources where they can do themost good. In international business, knowledge is power, and smaller companies can thrive by takingthe time up front to clearly understand the challenges, assess their own resources, and find the rightpartners and markets. Once their international efforts are launched, they should be prepared to learnand adapt, and apply a "heavy dollop of listening," says Timberland CEO Jeffrey Swartz.In this Chief Executive roundtable, co-sponsored with Deloitte & Touche, much of the discussioncenters around the difficulties of working overseas, from collecting receivables in South America tofinding the right managers in Japan. But just as many, if not more, of the CEOs' comments center onsolutions and successful approaches to coping with such international challenges - and above all, onthe importance and inevitability of moving into international markets. By making a serious, long-termcommitment to going global, and "recognizing it for the really strategic step that it is," says Deloitte & Touche's Jim Copeland, small and medium-size companies can play successfully in a global arena -and find a world of new customers.SMALL COMPANIES, BIG CHALLENGESMargaret Mulley (Deloitte & Touche): On the surface, all the ingredients for success for small andmidsize companies going global are there. But it's not that easy; there are real challenges, and ittakes real discipline. Many smaller companies are not necessarily interested in introducing that muchdiscipline into their organizations and their decision making. And when you make a mistake in goingglobal, it can be costly, and smaller companies don't always have the financial wherewithal towithstand those mistakes.In our observations, these companies often underplan their entry into a market. We worked recentlywith an investment firm that had decided to go into the brewing business in Eastern Europe and to
take their practices and ideas there. What's happened with great frequency is that the locals there willlock out the foreigners who are coming to look after their investment and implement the changesnecessary' to move the business forward. It's been a disaster. They underestimated the difficulties of the local business environment and failed to understand who and what they were up against.William R. Berkley (W.R. Berkley): The biggest mistake I've seen is people thinking that thecustomer's culture is the same as theirs. In reality, the things that we take for granted can beunbelievably different. In some places, everyone pays their bills in cash. In Indonesia, a companymight have no general ledger until the end of the year, when they need to balance the books. There'sno electronic payment system any place in Asia that really works, except Hong Kong. The fact is thatthe differences in the culture and in how businesses work are astonishing.We sell insurance, and in one place we have messengers that go around house-to-house collectingpremiums. That's why we were a success there, because we collected the money. Two of our bigAmerican competitors there thought that people would really come in and pay their bills. Just 22percent paid their premiums to one of our competitors.Harry E. Gould, Jr. (Gould Paper): You have to consider the culture's relationship to the financialaspects. When I was a chief financial officer, I was looking at this major manufacturer we owned inFrance. After the obligatory wining and dining and visiting the plants, I said, "Well, we need to look atthe books." And the French gentleman said, "Which books do you want to see?" I said, "How many doyou have?" He said, "Three - one for my family, one for the revenue collector, and the real one." Isaid, "Let's start with the real one." [Laughter] Now, he didn't think anything about that. There's acultural mindset that has no bearing on the reality we are used to here in the United States.http://findarticles.com/p/articles/mi_m4070/is_n137/ai_21200395
Business Process Management
Prof Michael Rosemannm.rosemann@qut.edu.auA/Prof Michael zur Muehlen mzurmuehlen@stevens.eduDr Marta Indulskam.indulska@business.uq.edu.auBusiness Process Management (BPM) includes methods, techniques, and tools to support the design,enactment, management and analysis of business processes. Global analysts have identified BPM to

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