Challenges that Face SMEs within the Current Economy - Literature review Example

Section/# The current globalised world presents a host of challenges for businesses of all types. For purposes of this analysis, the author will focus specifically upon the challenges that face SMEs (small and medium sized enterprises) within the current economy. Although this such a discussion will necessarily require a very broad understanding of challenges, it is the hope of this author that such a broad and over-arching understanding will be beneficial in providing useful inference concerning how these challenges can be ameliorated and reduced; so that they do not provide the existential threat to continued survival in the market that they have for some many SMEs that have fallen prey to them. It is without question that one of the defining aspects of business, both large and small, is that fact that the business environment is continually shifting. These shifts create the need for the business entity to change as a means of integrating with the market and continuing to accrue a profit from the goods or services that they provide to the ultimate consumer. Market changes can either prove to be advantageous for the entity or potentially destructive. However, the ultimate determining factor is the manner through which the entity seeks to evolve as a means of engaging with the business environment and forcing the situation to their competitive advantage. Yet, it must not be understood that large corporations are able to benefit from international business at the expense of the smaller firm. The fact of the matter is that globalization and the era of increased technology has created a situation in which even smaller firms have the potential to penetrate deeply into foreign markets and integrate the respective consumers with their good or service (Holburn & Zelner, 2010). Whereas it is of course true that certain large corporations have the financial capital to present products or services more rapidly and to a greater degree of depth, many small firms have seen rapid and exponential growth as a result of effective integration with international markets; effecting a situation in which these firms are oftentimes able to eventually become larger, more dynamic, and more powerful both within their own domestic market as well as the regions that they provide goods or services (Gupta, 2013). Although there are many areas of dissimilarity that exist between small and large firms, within the arena of business strategy, both of these entities behave in somewhat similar ways. For instance, the choices and decision matrices that these respective firms must engage in as a means of staying relevant and profitable are almost identical (Ainsworth, 2013). A quick review of the Ansoff Matrix reveals the fact that whether or not a firm is considered as large or small, it must continually make the decision on whether it is within its best interests to diversify, proceed with market development, engage with market penetration, or focus upon product development. In this way, the overall approach with regards to business strategy can be seen as not contingent upon overall size or financial wherewithal; instead, it is contingent upon the immediate needs that exist within the market. Further considerations can be predicated on cost advantage, market dominance, price leadership or other approaches. Again, a determination based upon strategy is not contingent upon the overall size of the firm; instead, it is shared between both large and small firms. International business and multinational enterprise faces a litany of different challenges. Obviously, one of the first challenges is with respect to integrating with a broad demographic and promoting a given product or service in a unified manner; while at the same time being cognizant of unique cultural and ethnic differentials that promote a different understanding of the product or service within different groups. Furthermore, before any of these considerations can or should be made, there is a simple process of business development that must be engaged (Lucea & Doh, 2012). This necessarily refers to the process of decision-making. Naturally, before any choice can be promoted or any particular approach can be champions, and decision-making structure must first be engaged in order for the respective stakeholders to determine which path forward promotes the best interest for all individuals involved. Accordingly, the discussion that will follow will engage the reader with an overview and analysis of many of the decision-making concerns, approaches, concepts, and realities that face individuals within the realm of multinational/international business enterprise and decision-making (Wijen & Tulder, 2011). It is the further hope of this author that such a level of engagement will further the understanding of these concepts and promote a more readily identifiable metrics through which decision-making can take place irrespective of what particular group or enterprise engages in. Depending on the situation, one of the first concerns that a multinational or international firm must engage is whether or not a given approach is in the best interests of profitability, longevity, and/or promotion of core business interests. As a function of this concern, businesses must engage in the following as a core complement of their decision-making structure: Defining and measuring the alternatives and potential decisions as compared to immediate and long-term profitability issues Weighing the past decisions, both within and without of the firm in question, as they relate to how future performance within a given scenario might be reflected Engaging stakeholders as a means of delineating a strategic approach towards the decision structure and ensuring that all relevant information that can be gathered within reasonable period of time is However, beyond merely the realm of profitability, international and multinational firms must also be concerned with ethics (Zhing, 2004). The recent past has indicated that a litany of different firms have abided by ethical standards within their home country; only to find themselves at fault of violating an ethical standard in one of the markets that they operate in (Eden et al., 2010). Oftentimes, this violation of ethical standards is not intentional and is the product of a situation in which a court level of research is conducted and/ or a level of assumption is promoted with regards to the way in which an international market operates as compared to the legalities and ethics of the manner in which the domestic market operates (Gabrielsson & Gabrielsson, 2012). As a function of this ethical consideration and the need for an ethical response framework towards decision-making, it is incumbent that international and multinational firms engaged in the following aspects of ethical decision-making: Defining what stakeholders are involved and determining the impact of these involvements Asking the proverbial question of, if this information or publicly available in printed on the front page of every newspaper, would we be comfortable with such an eventuality” What ethical direction does the choice or choices that are indicated within a given situation promote for future development of the firm Attempting to promote the needs of the client, the supplier, and the employee without engendering any degree of ethical conflict in decision making amongst and between these stakeholders Although there is most certainly a plethora of decision-making structures that can be leveraged in attempting to engage thoughtful change in an organization, perhaps the most simplistic and ineffective is with regards to Hodgson’s Three Stage Framework (Grimsby, 2010). Within this three stage framework, the first stage of decision-making is necessarily: Examining the situation, getting critical facts, identifying key stakeholders, and identifying the options that face of the stakeholders. The second step involves identifying the norms that surround each principle, projection of possible outcomes for the stakeholders involved, a determination of the actions necessary to produce a given outcome, and stating the dilemma. Finally, the third level of engagement, according to Hodgson, begins with identifying principles behind its option, comparing these principles, and finally choosing the option that represents the most responsible principles as the final decision. Although Hodgson’s approach to decision-making might appear as overly formulaic and/or scientific, the fact of the matter is that decision-making structures within multinational, international, and even small enterprises should necessarily follow a similar approach. All too often, decision-making structure follows the rigid approach. Invariably, such an approach does not factor in all of the variables or consider the need for maintaining ethics and/or promoting the most responsible principles in the final decision (Verreynne & Meyer, 2010). Whereas performing business at international level creates a litany of different problems and issues that stakeholders must be aware of, it should not be automatically assumed that the decision-making structure that exists within these entities is necessarily completely dissimilar to the decision-making structure that should exist for a domestic small enterprise. Ultimately, concerns and stakeholder’s impact, profitability, ethics, principle, and a litany of other factors all must be engaged in each and every decision that is made. The end take away from all of this is not necessarily the fact that each and every organization must have a rigid structure through which the engage decisions; rather, a far more actionable understanding is with respect to the fact that a culture that promotes a structured response to decisions is ultimately far more likely to experience a level of success in the business environment as compared to a culture that makes each and every decision based upon a different set of metrics (Bhatt & Goshal, 2013). Technological Change and Costs: another core threat that exists for the SME is with relation to the technological shift and change that is being evidenced throughout the globe. For the past several decades, technological change has become something of a stable of economic development. Whereas change in business is always guaranteed, the frequency, race, and overall size of the change that is taking place within the recent past demands that small and medium-sized enterprises focus on these changes and seek to fulfill the as a means of promoting themselves within the business environment (Nomura et al., 2003). Ultimately, history is littered with examples of small and medium-sized enterprises that have stoically refused to address the changes that technology has brought market. As a direct result of this, they eventually collapse; as they are no longer able to fulfill the needs of markets – at least with regards the way in which these needs are being fulfilled by their competitors (Matthee & Heymans, 2013). Yes, even as it is understood that technological change effects a powerful role with regard to the sustainable and existential realities of small and medium-sized businesses, it must also be understood that cultural alone is not main determinant with respect to whether or not the change is important (Tiftik & Zincirkiran, 2013). Due to the fact that small and medium-sized businesses must be engaged with the continual reality of finite resources and the means through which these can be allocated within firms, the overall level and extent to which these entities are able to engage with each and every technological shift that comes along is oftentimes quite limited (Ferrarini & Ottolia, 2013). For instance, as has been discussed previously, the rate and frequency of technological change the current market in this merely romantic. Because of this, small and medium-sized enterprises are faced with continual decisions over which changes that will seek to implement in which they will ignore. Even in the eventuality that a particular small or medium-sized business as a culture the places a high degree of focus upon technological change and the need to maintain relevance within the current market, finite resources will necessarily constraining the way in which this reality is engaged (Saichi et al., 2014). Whereas culture has proven to be a definitive measure of the capacity of a particular SME for continued survival, and a rough barometer of the way in which to interact with threats, it is necessary to denote that one of the primal challenges that exists for current small to medium-sized enterprises within the increasingly globalized world has to do with their approach to the market and the way in which strategy involves. Naturally, the threats that have thus far been discussed have been primarily concentric upon external threats (Nicolescu et al., 2013). However, perhaps the greatest of all threats is with respect to the way in which an intractable culture refuses to optimize strategy as a means of competing in the global market to a more effective degree. For instance, even at such a point in which a particular small to medium-sized enterprises represents a profitable engagement with the market and develop into a larger entity, the continual shifts within the marketplace create a situation in which these further development of such an entity is not assured (Klewitz & Hansen, 2014). As a function of this, the small to medium-sized enterprise that is not able to tweak its culture and provide a new level of integration with the market will be the one that is the most at risk for eventual loss of profitability/market share. As such, the primary threat exists is a systemic understanding that have performance/strategy/culture is an efficient manner through which the firm should continue to seek out future profitability (Martins & Rialp, 2013). The further ability to react to new market entrants and to vary strategy according to the way in which the market is behaving is the very definition of a firm that is proactive and reactive to these shifts and changes; shifts and changes that are very much a part of the business process and guaranteed to have an impact on all firms within the market at some point in time. Accordingly, guarding against the threat of complaisance is one of the single largest internal threats that is represented within SMEs throughout the globe. Conclusion: From the information that has thus far been presented, it is clear and apparent that there exists a litany of different exist a litany of threats for small to medium-sized enterprises throughout the globe. However, rather than taking this to mean that small medium-sized enterprises stand little to no chance of competing within the global market, and more effective understanding of the information that has been presented with be to conclude that continual shifts in approach, dynamic strategy, up-to-the-minute decision-making, and a culture that is willing and able to analyze itself and determine which aspects of his culture should be changed in which aspects should remain the same is essential in any small medium-sized enterprise gaining a further market share and provided profitability for its employees and stakeholders into the future. Additionally, the ethical concerns that were mentioned within the first portion of this analysis indicate that even though ethical issues have play a powerful role in determining how large multinational corporations has succeeded or failed, these ethical issues and concerns are nonetheless relevant to the daily business and globalized interaction that takes place between small to medium-sized enterprises. Furthermore, the overarching impact of ethics and ethical culture within companies is ultimately what allows them to prioritize the goals that they have been seek to promote themselves within a market that is essentially saturated with firms that that do not value ethical cultures and approaches to the issues. Whereas the information that has thus far been presented, it should also be understood that the operational environment that small to medium-sized enterprises engaged is not impossible one. 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