Cover Stories

Impact of Globalisation on SMEs

Dr. Ipshita Basu Guha
Feb 2011
Page 3 of 9

Opportunities to Grow

Opening up of markets, practical lessons in management programs, relaxation of entry barriers, opportunities to raise funds and capital, increasing purchasing power of the masses, information flow due to the Internet revolution have all helped create a new generation of entrepreneurs who have emerged from all walks of life. There is a spate of news around us regarding people who have quit well paying jobs to start their own ventures including the privileged lot from the prestigious b-schools. They are willing to take risk and pursue their dreams. Innovation and value creation are the corner stones of today's business. There are people coming up with ideas like customized food for pets delivered to the owners' residence, background check agencies, portable blood pressure measuring equipments, home gym kits, and market analytics firms to name a few which were not commonly heard of a decade ago. Why are these ventures cropping up in the first place? Because the entrepreneurs feel that there is a niche for each of them and a market that is void and awaiting to be served.

It is often mused that globalization will hamper the growth of MSMEs and many companies might get wiped off. Yes, it could be true but there is a counter argument too which needs a glance. Life cycle of companies is not studied and there is serious lack of data to pinpoint problems. The situation is like “commercial loss of electricity” data. All non-technical losses are categorized as commercial losses but where is the supporting data – what is actual commercial loss, what part is theft and what part is largesse? The lack of database on MSMEs is one of the root causes of inappropriate and ineffective policies and plans.

Professor Saburo Kameyama in his paper on 'Model for SME Sector Development' has clearly stated how businesses start from being a SME and then transforming itself into a full-fledged large enterprise. Professor Kameyama states that SMEs initially play the role of support enterprise for larger companies (sub-contracting). The example of Sona Group (which is primarily in the steering business) reinforces the above statement. The company, which was established in 1985 today, has multiple joint ventures. Their customer list consists of all big names in the auto industry in India. This point is also reiterated in a research conducted in 2007 by Economic Research Institute for ASEAN and East Asia (www.eria.org). The project titled Developing a Roadmap toward East Asian Economic Integration, stresses on the fact that SMEs have to play a supporting role for 'intermediate inputs' for large enterprises in developing countries.    

A news item featured in Business India (13th Aug 2006, pg. 28) mentioned a comment from an executive director of Stanford Technology Ventures Program (part of Stanford University) that “we are teaching our students to be entrepreneurial not necessarily to be entrepreneurs”. Education and information age is really making a huge difference in our attitude towards economics and commerce in particular.

Another interesting news item in the same page highlights the opportunity that an Indian company named Blue Star visualized based on the onslaught of retail in India. They formed alliance with an Italian company ISA that has world renowned retail giant like Carrefour as their client. Blue Star envisaged a market for cold storage as retail business flourishes.
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ErmaCARDENAS24
01 Dec 2011 (11:05:02)
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