Introduction
In this blog, we will
explore different entrepreneurial practices in order to thrive with globalization.
We selected four key factors that have changed during the past decade and how
it affects global entrepreneurs. Our analysis will start with the most
important factor which is technology, and then we will continue with
environment issue, global market and finally political and legal issue.
1.
Entrepreneur’s
practices shift due to technology
Technological
change is an ongoing process. Innovation in labour management, work techniques, logistics
and the computerization of the work space have lead to change in one very
influential factor: productivity. Increased productivity results in higher
production efficiency, meaning less resource are needed to achieve a certain
level of production. But productivity is also about the time required to reach
a certain objective, and this also has improved due to technological
advancements. These two aspects are the main reason why entrepreneurs nowadays
have more tools at their disposal and the perception of the risk starting a
business has significantly decreased.
1.1 Entrepreneurial leap
Good Idea
-
A good idea can come from one individual that has created a
new concept, product or service and feels that only trough a new company that
new idea will be marketed effectively.
-
A good idea can arise out of a "braintrust" or
"thinktank", where a group of specialists meet and through their
discussion on some predefined topics they can accumulate ideas and amplify the
reach and productivity of their thinking process.
-
A good idea can come from observing a specific environment
and trying to find a way to adapt or improve the current state. One example
would be the development of the exterior shell of cars, which used to be heavy
and squared and now is light and round, in order to improve aerodynamics.
Effective tactics
It
has become easier for a startup to begin its activity due to the decreasing
entry costs, especially for tech companies, where capital costs are minimal
(computer, power & internet connection).
The
availability of freeware and open source software has made it possible to set
up extensive server applications without the need for high-level programmers.
Remote
control of server systems has given SMEs the edge in terms of cost-to-benefit
ratio compared to MNCs, because ever fewer workers are needed to handle the
order-processing and data transfer monitoring activities of a company; a
handful of workers can coordinate the automation of multiple orders due to
programs like "Python" (Automation Software).
Substainable strategy
Workers
have increased their computer usage a lot during the last two decades, for
private and business use, so acceptance and integration of the computer in a
workers daily life has also increased and companies can make use of this fact
by giving employees the option to complete certain tasks from home, submitting
their results online (= labour flexibility). [control variable costs]
Startups
can reduce their costs in the first years of their existence by constantly
opting for cheaper hardware solutions and freeware, thereby enabling them to
stay competitive even against large established firms; when a new company seeks
to maximize market share it will very often use this strategy, to enable high
potential future returns (= low-cost focus). [control fixed costs]
Entrepreneurs
can seek to market in exclusivity, so that their product or service creates
excess demand, which will not be met. In that state, a company does not have a
cost anchor in its strategy, but rather a production target, so the entire
company activity is linked to periods of high demand or low demand, as
determined by management. (= stable return). [pull strategy]
1.2 Technological change
Internet
The
commercial and private use of the internet began during the 1980s; at that time
the two main areas in which it was used for were e-mail transfer and
accounting. When connections became faster and computer more performing,
companies and governments used closed and open networks for security, data
transfer, payment processing and employee management. It is in those early days
that collectives were able to create influential software like Apache or Linux,
that simplified the work process of companies in a very general way.
The
transaction speed is a major factor when talking about the benefits of the
internet for entrepreneurs. As the order-taking process can be fully automated,
more transactions can occur at any time, because time zone difference is not a
barrier anymore. This trend will continue, as can be seen from the increasing
internet coverage in developed countries.
The
reach of operations has enormously risen, because business-to-business
relations and CRM have been facilitated through the use of internet. Whereas in
the past entrepreneurs had to actively search for partners and suppliers and
promote their company on multiple channels to increase customer reach, now it
is possible to combine all these activities on just one platform, the website.
Logistic
Availability
of logistics increased, especially for SMEs that engage in product selling,
rather than services. So called "industrial parks" bring suppliers
and traders together on one common ground, where the offices of companies are
conglomerated and so enable synergies across industries.
The
speed at which logistics take place also changed considerably over the past 20
years, with faster airplanes and larger boats that can carry large amounts of
goods. Even the billing process is faster, as the post offices have larger
fleets of transporters and the practice of "24 hour delivery" is a
strategic asset for trading companies to motivate customers.
Costs
could be greatly reduced due to more efficient diesel engines in the truck
sector and more aerodynamic airplane models that consume less kerosene. In the
past, companies tried to control the entire supply chain themselves, which
resulted in very high operating costs. Now that some firms have specialized in
logistics, a single freighter can transport goods for thousands of companies,
reducing overall costs.
Productivity
More and more workers become knowledge
workers (Marcus., et al. 2000) as their competence to manage and their skills which are
unique to the company grow and so companies need to seek a state of
self-governance for these new "effective workers created by technological
advance", as the Solow growth model states.
Production processes are shortened due to the
computerization of the work space; less mistakes occur and less interference is
required. The negative side to this development is the increasing maintenance
cost companies are facing, as computer hardware is depreciated at a high rate.
In
general the advancement of technological progress has resulted in a shift in
entrepreneur practices, where entry costs become lower, adapting to market
conditions is crucial and the business environment is increasingly more
dynamic. It is no longer enough just to have a good idea, innovation may come
from many different sources and entrepreneurs are forced to keep track o
technological progress to stay competitive.
2. Entrepreneur’s
practices shift due to environment issues and sustainability
Entrepreneur
and the Environment
The climate changes and environmental issues such
as global population growth, increasing life expectancy, resource scarcity and
lack of equity in the world not only drive most existing business organizations
to go green but also provide basis for substantial new business opportunities.
Many entrepreneurs have seen increasing market opportunities for sustainable products and services. Nowadays, customers are becoming increasingly
environmentally conscious.
Besides market demand, entrepreneurs also find that making their
business more environmental friendly can bring them benefits including gaining
good reputation, improving efficiency, potentially lowering operation costs and
having a cleaner and healthier work environment. So more and more entrepreneurs
choose to contribute to environment protection while making profits through
following practices:
.
2.1 Reduce energy costs
Many companies start to reduce
their energy costs to save energy and resources. For example, in the last decade,
Continental Airlines has spent over $16 billion to replace its entire fleet of
airplanes with more fuel-efficient ones, in addition to installing fuel-saving
“winglets” that cut emissions 5% on its 737 model aircraft. Besides, nitrogen
oxide emissions from Continental’s busy Houston hub have been sliced by an
astounding 75% since the year 2000. Continental alsohave 12 full time “staff
environmentalists” on the payroll who are constantly pairing up with engine
manufacturers to design greener, more efficient processes into company
operations.
2.2 Use and provide green products
Entrepreneurs
nowadays seek to eliminate the use of toxic and non-environmentally friendly
products and replace them with environmentally sustainable products, including
biodegradable drinking cups or food containers, furniture created from recycled
materials. They also provide more eco-friendly products to their customers. S.C. Johnson, maker of indispensable household
products such as Windex, has gone on a mission to lessen the environmental impact of its products. Through their
use of the Greenlist Process (a system that ranks your impact on the
environment by evaluating the raw materials you use), the company has slashed
1.8 million pounds of volatile organic compounds from its Windex line of
products. Another 4 million pounds of polyvinylidene chloride has been
eliminated from Saran Wrap, a major drop in harmful chemicals that seep into
landfills when they are disposed of. The company has also scaled back its
coal-fired plants by working to replace them with natural gas and methane
powered facilities.
2.3 Increase virtual communication
Due to technology developments,
companies can save large amount of energy in daily operation thorough
increasing virtual communication. For example, traditionally,
entrepreneurs would drive or fly to meet clients or colleagues in distant
offices, but now in order to reduce energy costs and the impact of greenhouse
gas emissions on the environment, they can have virtual meetings through web
cameras in their own offices. Instead of using paper reports and documents,
employees are encouraged to increase the use of e-mail for the delivery of
reports and documents. They also try to consider utilizing electronic archiving
and e-filing systems to help reduce excessive paper trails.Take Bank of America
as an example,According to their corporate website, the company reduced paper use by 32% from
2000-2005.Bank of America also runs an internal recycling program that recycles
30,000 tons of paper each year, good for saving roughly 200,000 trees for each
year of the program’s operation.
2.4 Recycle
Recycling is also a trend for
entrepreneurs to do
make their business green. In the past, when customers bought a new computer,
they would throw away the old ones which didn't work anymore. Those old
computers become waste and caused pollution to the environment. HP came up with
an idea on those old and useless computers. The company has gotten out in front
of the computer disposal issue, owning and operating enormous “e-waste” recycling
plants that shred discarded, obsolete computer products into raw materials that
can be recycled into the industrial food chain. HP has also agreed to take back
computer equipment of all brands, and taken steps to ensure that its own
products are 100% recyclable in the manner mentioned above.
Starbucks also did well in making use of recycling materials, giving up
common paper coffee cups, the company decided to use those coffee cup sleeves
made of recycled paper, which saved roughly 78,000 trees per year since 2006.
3. Entrepreneur’s practice shift due to global market:
cross-country collaboration
Nowadays, going global is a dream for many
entrepreneurs and also a response to the saturated domestic market. In order to
be successful on the competitive international market, entrepreneurs have to
know their internal strengths, weaknesses as well as the external threats,
opportunities and make the right strategic decision. Neuman Pollack stated that
advances in technology, communications, and transportation have transformed the
world into a global village, and SMEs can take advantage of this. Off course
that these factors are more accessible for entrepreneurs, but accessibility
doesn’t necessary mean success? By having more resources and not knowing how to
use them is inefficient. Thus, over the past decades, many visionary
entrepreneurs have already adopted an important new practice which is
cross-country collaboration pursuing the idea of optimizing their resources and
internationalize “correctly”.
According to the Business Dictionary, the definition
of collaboration is a cooperative management in which two or more parties work
jointly towards a common goal. Therefore, cross-country collaboration is simply
involving parties working together at a global level towards a common goal.
Cross-country collaboration
The first international entrepreneurship research
started out in 1994, so we assume that this practice goes back a while ago.
However, it did not attract much attention until now. Under the circumstances
and the impacts of globalization in our daily life, it is normal that this
practice is now put in the spot light.
First, this practice is not as clear as black and
white because it can take various forms depending how much implications for the
degree of control a firm can exercise over foreign operations. For example,
options for going global include exporting, licensing, franchising,
joint-ventures, and wholly owned foreign subsidiaries (Shrader, 2000), and each
of them comes with different degree of collaboration among parties.
Second, the most common reason for small enterprises
in adopting cross-country collaboration is the lack of knowledge in the foreign
market, (MNCs also have the same challenge) and their resource-constrained
nature. Anecdotal and case study evidence has strongly suggested that
collaboration with foreign partners is required for young and small enterprises
(Shrader, 2000). Local partners have knowledge about domestic market trends,
government policies, workforce, distribution channels, supply chain, etc;
obtaining these knowledge, competencies can be extremely costly for a foreign
SMEs. In that sense, cross-country collaboration is the most cost-efficient
strategy, and a wise option for small enterprises.
Finally, we will see one successful example of a type
of cross-country collaboration. Franchising represents the most wide spread
type of cooperation among entrepreneurs. (Gassenheimer et al., 1996). Nowadays,
ambitious entrepreneurs can’t wait to conquer the global market with their
products. Pho 24 is a fast-food chain and one of Vietnam's most successful home-grown
franchises. Three years after the opening of the first restaurant, in 2003,
entrepreneur and founder of Pho 24, Ly Quy Trung had already planned to expand
his restaurant overseas through franchising. In 2010, Pho 24 had already opened
a total of 77 franchises in Vietnam and overseas (Indonesia, Philippines,
Korea, Cambodia, Hong Kong and Australia). For 2012, the company plans to reach
a total of 200 restaurants by franchising more in the domestic and the global
market.
This example is to illustrate the success of
franchising in the food industry (the most common type for this industry).
However, cross-collaboration can also be outsourcing-production for
manufacturing SMEs in order to take advantage of the low labor-cost in other
countries. To conclude, globalization has indeed made everything easier, but
without knowing how to optimizing your resources is an issue. Cross-country collaboration allows the firm to concentrate more on
its core competencies, leverage others firms/partners assets and grow into the
global environment.
4. Entrepreneur’s
practices shift due to political and legal issues in globalization context
No matter how globalization tends to get the
countries closer, in particular when it comes to business, we can still observe
different entrepreneurship practices and approaches worldwide.
We actually think that the example of China is
interesting, especially considering their role in the current worldwide trade.
Government helps more and more entrepreneurs, in particular by helping them to
raise funds: 9 billion Yuan have been collected and spread among private
investors (6.8 billion Yuan), provincial governments and the state.
However, even if China seems to be willing to
help its investors and entrepreneurs, many obstacles still have to be faced and
overcome. For example, we notice first that the different procedures to start a
new business require more time in China than in OECD countries (38 days against
5.7 days in average). There is also some controversial about copyright,
patents, brand names, trademarks and trade secrets since these can easily be
violated without getting China really alarmed about this issue. The frame for
the entrepreneurship stays sort of hostile and consequently obliges
entrepreneurs to adapt themselves to China’s lack of legal and regulatory
transparency. Finally, taxes for Chinese entrepreneurs remain higher than in
developed countries: according to a report by World Bank, start-ups in China
sometimes face unreasonable bureaucracy and fees. Forbes indeed even states in an article that rich businessmen and
entrepreneurs sort of have enough reasons to leave the country, considering how
Beijing has been targeting and abusing them since 2008. According to Xia
Xueluan (of Peking University): “We can only hope the rich people stay out of
patriotism”, which illustrates well how entrepreneurship is harder and requires
more courage in China…
Moreover, culture also plays a big role in
Chinese entrepreneurship for two different reasons. First, entrepreneurship is
not really part of Chinese culture yet and this makes it harder for
entrepreneurs to take risks. Yan Junqi (vice chairwoman of the standing
committee of National People’s Congress of China) actually states that
“innovation can more quickly gain a foothold in an entrepreneurship-friendly
and failure-tolerating culture”. Secondly, Chinese culture plays an important
role in the general Chinese business and consequently also in Chinese
entrepreneurship. For example, what certainly has the biggest impact on Chinese
business is the Guanxi: if you want
to do business in China, make sure first that you have the necessary
relationships..! Management, leadership or sometimes even just the everyday
business manners are also really specific and have to be taken into account
before starting any business. Thus all of these cultural aspects must be
considered and illustrate well the entrepreneurs’ practices shift from one
country to another.
Conclusion
In the blog, we have discussed
entrepreneurs' practice shift due to changes in technology, environment, global
market and political and legal issues during past 20 years. Compared with their
predecessors who did business twenty years before, entrepreneurs today have
more opportunities. They are freer to do business in a emerging global market.
Due to technology improvements, they can manage their business in a more
efficient and cost-saving way. However, entrepreneurs today are faced with new
challenges. Since nowadays consumers stress on companies' social
responsibilities, they need to pay more attention to environmental issues .As
they do business in global market, they need to know the culture, laws and
policies of each country very well. In this situation, only those who are able
to seize the opportunities and handle the challenges can survive the keen
competitions in today's business world.
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