Small and medium-sized enterprises, globalization and the internet

MA-Thesis / Master von Oliver Burgis

Abstract:

The last decade was characterized by mainly to major developments. The first was the ongoing globalization of the markets. A development that was not absolutely new in the nineties, since it is already progressing since the fifties. But it was in recent years when this development gained such an unprecedented momentum and dynamics, which most people and enterprises were just not prepared for. The second was the emerge of the Internet and the following e-hype about the „new economy”.

Larry Downes named both in his much considered article „Behind Porter” as two of three new driving forces and influencing factors for the economic affairs of the new century. And he might probably be right. Although one of them suffered quite a setback at the end of the nineties when the Internet bubble finally busted. But if one looks on the technological developments taking place then there is no doubt, that the Internet will continue its triumphal procession. Certainly in a different way as it did in the last decade. And probably it will not constitute a „new” economy, but it certainly will extremely change the old one.

The same is true for globalization, although its effects are maybe not that obvious. But the trend towards one global market is obvious. The last event in that respect was probably the Peoples Republic of China entering the World Trade Organization and opening thereby up its markets for foreign enterprises.

Before that background and as policy-makers and business-people look for development paths which might take economies successfully over the next decades, three of the issues which are receiving a lot of attention are:

What is the effect of „globalization”?

What is the role of small and medium-sized enterprises?

What is the impact of „electronic commerce”, the rapidly changing ways in which commercial activities may be undertaken using innovations in information technology?

The small and medium-sized enterprises are building the backbone of the German economy. These companies where responsible for the fast recovery of Germany after Second World War and since them have greatly contributed to develop Germany to the third largest economy – in terms of gross national product – in the world. Ludwig Erhardt, former German Chancellor and influential Minister of economics, once described the importance of the „Mittelstand” for the German economy and society in a speech held in Göteburg 50 years ago. And his words retain their full validity even in the beginning of the 21st century.

And now these enterprises probably face their greatest challenge ever: the coping with the afore mentioned developments.

As ice hockey great Wayne Grezky repedently said, that „the key to win is to get first where the puck moves next.” Compared with today’s situation of the small and medium-size enterprises in Germany one can say, that some do not even see the puck, some are just behind it and only a few are really at the game. This assessment might be a little bit exaggerated, but it somehow fits the situation.

It is true, that German small and medium-sized enterprises have caught up quite a bit over the last two years when speaking about the utilization of the Internet and their internationalization efforts. But regarding the Internet, they still use it far beyond its possibilities especially regarding eBusiness and eCommerce. Although utilizing them in a proper way – not the way enterprises thought of during the e-hype years -, but rather in a realistic one, this would really help them to better deal with both globalizations and the increased and intensified competition. And speaking about globalization, they do not seem to be fully aware of the consequences and necessities it brings.

The objective of this master dissertation is to give an overview about the special situation of small and medium-sized enterprises in the national economy and regarding to globalization and eBusiness. And finally to have a look on the possibilities that eCommerce offers them in regard to.

The first chapter will give a definition of small and medium-sized enterprises. After that follows a short excursion on the historical development and the importance of these enterprises for the social-economical environment. Then the characteristic features, that determine the behaviour and also the advantages and disadvantages of this class of enterprises, are derived from the discussed before. Finally some thoughts about current trends concerning the small and medium-sized enterprises are given.

The second chapter will first discuss the meaning of globalization and internationalization, followed by an how this affect small and medium-sized enterprises. At last an overview of a market entry strategy and the advantages and disadvantages of certain forms of market entry possibilities is given.

The third chapter deals with the implication of the Internet and eBusiness and how small and medium-sized enterprises have so far been affected and have reacted to this developments. An outlook to where these developments are heading will conclude this chapter.

The fourth chapter finally will show, how a possible market entry by means of the Internet could look like, what has to be thought of and how this would facilitate small and medium-sized enterprises in overcoming their size-immanent disadvantages. At last will be a short discussion of chances and risks arising from such a pursue.

Table of Contents: