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STRATEGY

One World

How will globalization affect small businesses?
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Tomorrow's Entrepreneur

International trade will surely continue to grow during the next several years -- but will it continue to be the province of billion-dollar conglomerates? Not necessarily, say experts: advances in technology and an increase in service exports -- not to mention the strong dollar -- have created new opportunities for small companies interested in expanding their operations abroad. Three specialists elaborate:

  • "With the changes in communication and technology, small busi- nesses can be international from their inception," says Tim Pett, assistant professor of management at the Barton School of Business at Wichita State University, in Wichita. "There's also more of a demand for what small firms can do in terms of services. Small businesses can customize their services for different regions if they understand the international customer." In addition, says Pett, the more that trade involves software and technology, the more large companies may lose some of their edge. "In knowledge-intensive businesses, where there's not as much competition on price, small, nimble busi- nesses have advantages in an international market."
  • Not only are there opportunities abroad, but many small businesses providing services or distribution can't afford to ignore them, says Jim Wolff, Pett's colleague at Wichita State. "Free trade agreements and alliances like the EU and NAFTA are really creating an environment in which some small businesses should look at international issues," says Wolff. Otherwise, he argues, they'll face stiff competition from businesses in countries that are U.S. trading partners. Most small businesses considering expansion into international markets have a host of questions and concerns, but research and language study can help equip owners for the journey, says Wolff.
  • Roger E. Brinner, partner and chief economist at the Parthenon Group, a Boston-based strategy-consulting company, suggests that there's another reason why small businesses should be thinking globally this year. "The dollar is so strong against every other currency in the world right now," he says, "that if you're a small-business man relying on domestic suppliers, you're going to end up in competition with someone else who has wised up to lower-cost alternatives abroad."

U.S. exports of services
(in billions of U.S. dollars)

1998: $262.7
1999: $271.9
2000 (Annualized, based on 11 months of data): $294.7
Source: U.S. Census Bureau.

The 2001 State of Small Business issue


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