How Entrepreneurial Firms from Developing Markets Are Using Unique Business Models - Essay Example

? Executive Summary on Business Globalization Executive Summary on Business Globalization Consider how entrepreneurial firms from developing markets are using unique business models and strategies as they transition into emerging multinationals Globalization has been a business trend that has taken centre stage in the recent years as every business with future prospects aims at going global. The developed world markets have experienced an influx of multinational companies or rather corporations (MNCs) with economies for countries such as Brazil, Indonesia, Mexico among others being among the key locations for growth in the near future. In the attempt to find a niche in these global markets, most of the MNC’s have concentrated their focus on the established and wealthy elite who rank top at on the economic pyramid (Ghoshal & Nohria 1989, pp324). This has given rise to an “imperialistic form of a mindset” where the existing products are sold to the established markets in the global markets. By the maintaining the focus on the affluent consumers and some partner-organizations who participated actively in the formal economy, it implied that much of general consumer capabilities were being taken for granted. Low-income markets also referred to as the base of the economic triangle offers both tremendous opportunities to tap despite the unique challenges. In the recent years entrepreneurial firms from developing markets seem to have noted a loophole in the global market that when capitalized on can aid in the tapping of the untapped sectors of the market. Tapping on the opportunities and challenges at the base of the economic pyramid (Sirkin, Hemerling, & Bhattacharya, 1996, pp73). The opportunities linked with the market at the base of the economic pyramid are gradually becoming significant to both business managers and scholars. There is evidently more than meet the sight when considering the consumers having annual purchasing power parity of 1500 dollars or even less (Hymer, 1976, pp27). In fact, any business trying to find its footage in a new environment is bound to face quite a number of challenges. As a business strategy for new global ventures, entrepreneurs have been turning on to partner organizations for resources and expertise they are lacking (Stiglitz 2002, pp67). Just as is the requirement by most governments, it becomes indispensable that the new entrants in the global market have a corporate partner in the host country who will ensure market accessibility in the new economies. Moreover, the entrepreneurial firms that are entering the base of the pyramid strata of market economy have had to expand dramatically the field of potential alliance partners (Sharma & Vredenburg, 1998, pp729). According to the research work conducted, it is evident that the base of pyramid strategies that were successful relied so much on the partners who were non-traditional. Examples of such partners include the community groups, non-profit organizations, local or rather village level governments (Smith 1976, pp92). The strategies that turned out to be quite unsuccessful relied majorly on the traditional partners who included the national governments as well as the well-established local companies. This could be explained by the reasoning that the traditional partners are far removed as regards to the business knowledge of the low-income consumers (Ghoshal & Nohria 1989, pp327). Having a variety of non-corporate partners is also another strategy that has been employed by the entrepreneurial firms venturing into new global markets. These partners provide pertinent information as regards to the targeted customers and the general business environment that can be hardly found in the corporate sector. This process goes as far as the typical focus on the suppliers and customers. As postulated by Hart and Sharma (2004), the greater the lack of certainty about what sought of knowledge is imperative, the more the importance of radical transaction is increased. This entails the ability to recognize and interact much more effectively with a variety of the non-traditional stakeholders (Sharma & Vredenburg, 1998, pp737). Furthermore, by incorporating inputs from the local community groups, the civil society and the general public sector, these firms are in a better position to comprehend and leverage the existing social strengths in the various components of the business environment. Additionally, they are in a position to understand more clearly the various concerns of the society such as the myths, which are a reality. In summary, these non-traditional partners provide critical information as regards to the local legitimacy, context and accessibility to the needed resources (Hymer, 1976, pp31). Moreover, in pursuant of the low-income global markets in developing countries, the entrepreneurial firms have resorted to strategic plans where they adjust to an environment where they are more guided by the social contracts and not the legal ones. Furthermore, under such an environment, accurate knowledge about the prospective customers is not readily available. This is because of the numerous unaccounted business activities in the computation of the National gross domestic product. The assessment of the information that is context specific is an additional advantage to this strategy of approaching a new global market (Ghoshal & Nohria 1989, pp331). In this case, the information requires a more interactive approach where all the parties participate actively in the sharing of information. This not only covers the national responsiveness nut goes as far as touching on the existing literature on the global strategy. In fact, the research conducted by the Bartlett and Ghoshall (1989) indicates that entrance into the global market at the base of the pyramid. This includes the targeting the low income consumers, which is far much boosted by the idea of identifying the local partners who then actively play crucial roles as regards to the facilitation of the venture conceptualization and spicing up of the local content in the design of the product (Sharma & Vredenburg, 1998, pp734). The business firms that are also venturing into this global market have employed the strategy or rather model of utilizing the local entrepreneurs as regards to services such as the product distribution. This has provided flexibility in the manner in which the final product or service gets to the final consumer. The goal of the strategy is to make the product more flexible through the selection of the third-party partners (Sirkin, Hemerling, & Bhattacharya, 1996, pp77). This could include providing the distributor with some degree of loophole to modify the products in order to target a given caliber of a market. This is much in contrast to the unsuccessful initiatives where the entrepreneurs have tended to be stingier in their way of operation in the global markets whereby they insist on the property rights, including even preventing the distributor or user modification (Stiglitz 2002, pp62). Furthermore, successful entrepreneurial ventures into the global markets have been insisting on the maximization of the functionality of the products they are offering. This strategy has certainly been working for the firms. It includes the process of having both the business model and the product development co-evolve. These partner organizations adopted the joint co-designing and entry strategy (Smith 1976, pp89). In conclusion, it is evident that even when the international markets seem to be much lucrative for most multinational corporations, the venture requires strategy for the proper smooth survival of the business in question. It is essential that any entrepreneur who desires to engage in the global market to not only target wealthy consumers but to understand equally that the low-income earners in the market form a significant part of the untapped consumer potential. As such, many strategies should be employed to reach out to them that include collaborating with the non-traditional partners, recognizing the value of both the corporate and non-corporate partners, and allowing for product and business model design to co-evolve (Hymer, 1976, pp48). Apparently, all entrepreneurs seeking to flourish in the global perspective of their business should be ready to embrace globalization from all dimensions. This extends to include their ability to be acquainted with the culture of customers that they seek to operate with, understanding the laws of the target country among other factors. This will consequently play a critical role in determining the extent of their success. Bibliography Ghoshal, S. & Nohria, N. 1989. Internal Differentiation within Multinational Corporations. Strategic Management Journal 10(4): 323–337 Hymer, S.H, 1976. The International Operations of National Firms: A Study of Direct Foreign Investment. Cambridge, MA: The MIT Press, pp27-51 Sharma, S. & Vredenburg, H, 1998. Proactive Corporate Environmental Strategy and the Development of Competitively Valuable Organizational Capabilities. Strategic Management Journal 19: 729–753. Sirkin, H.L., Hemerling, J.W., and Bhattacharya, A. K, 1996, Globality: Competing With Everyone from Everywhere for Everything. Applecross, pp 72-96 Smith, A. 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Glasgow edition, edited by R.N.Campbell, A.S. Skinner and W.B.Todd (1976). Oxford: Oxford University Press, pp 89-98 Stiglitz, J 2002, Globalization and its Discontents. New York: W.W. Norton & Company, pp 56- 78 Read More