June 20, 2010
June 20, 2010
June 23, 2010
15.622.1 - 15.622.6
Globalization from small firms’ perspective
Gabor Bojar Founder of Graphisoft and Aquincum Institute of Technology (http://ait-budapest.com)
The beneficiaries of globalization
Globalization in the 20th century appeared to be the exclusive privilege of the largest multinational companies, possessing the marketing and financial power to conquer the world with their products. The 21st century, however, is very different in this context. The Internet became the main avenue of marketing for all companies regardless of size, and the Internet is global by nature. In other words, even the smallest companies will spread the word about their products globally, regardless of whether they want to or not, and we can see more and more small and medium size enterprises (“SME”) appearing on the global marketplace. An interesting, and at a first glance surprising pattern can be observed, however, in terms of the geographic origins of the global SMEs. While most of the global giants have emerged in countries with large domestic markets, most of the global SMEs are coming from relatively small countries. It appears that the limited domestic market hindering the enterprise development in the past may become a unique competitive advantage for SMEs in the 21st century.
The financial benefit of the geographic diversification depends on the proportion of development cost on the one hand, and manufacturing / multiplication and shipment expenses of the actual product on the other. The larger the relative development cost, the greater the economic benefit of selling it all over the world. From this perspective, the software industry seems to be the major beneficiary of globalization, as the physical manufacturing and shipment expenses are negligible compared to the development cost. And as the Internet is reducing the difference between the costs of local vs. global marketing, access to the global market for SMEs seems to be the easiest in the software industry.
There is an obstacle, however, to selling a software (or any other IT) product on a global scale: The credibility threshold is relatively high. When buying an IT product, the expected compatibility is a critical factor in the decision to purchase, because being isolated from the rest of the world is a real danger. Therefore the more people using a product, the more secure we are if we buy the same. In other words, we prefer to buy from the expected market leader, rather than from those who offer the best. And the two are not necessarily the same. Ironically, a market leader in IT products is probably the worst on the market, because the only possible reason for the others to still be alive, is that they are better than the market leader.
This purchase pattern leads to the establishment of “global standards”, and only the largest companies have the credibility of imposing their own standard worldwide. A small software company may compete successfully with international giants only by better serving special local needs. As a consequence, even if the physical barriers of selling a software product globally are relatively low and it would be possible even for a small company to overcome them, the credibility threshold is high enough to limit the access to the global market to the largest and strongest players, and to motivate the small ones to focus on the specific local needs of their local market.
How an SME can be global
The only way for SMEs to become global is by becoming local everywhere. Rather than “thinking globally and acting locally” (as the large ones do) thinking and acting locally everywhere. Rather than trying to establish global standards (i.e. selling essentially the same product everywhere), embracing the cultural diversity of the world and fitting the products to the different cultural environments.
As an illustrative example about country-specific variations of a software product, let’s see the floor plan dimensioning feature of Graphisoft’s architectural design software, ArchiCAD®. The software was initially sold in Italy and France, where dimensioning floor plans with centimeter precision (i.e. two decimal digits in metric system) was perfectly appropriate:
Bojar, G. (2010, June), Globalisation From A Small Country Perspective Paper presented at 2010 Annual Conference & Exposition, Louisville, Kentucky. 10.18260/1-2--17021
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