The Role of Small Firms in an Interdependent World

Global is often used synonymously with big and giant. A global industry is often characterized as one in which only a few giant multinational enterprises can survive, the enterprises themselves engaging in cross-subsidizing and/or exchange of threats. In fact, however, industries in which the same product is sold all over the world may be very fragmented, as in the case of the watch industry. In many other cases, small or medium-sized firms have been able to become significant global players, by dominating a niche, for example. These firms became global in order to survive in an increasingly interdependent world.Since most firms in the world are small or medium sized, it is important to understand what are the major necessary conditions for successful global operations of small firms. On the basis of a comprehensive research study, this paper lists these necessary conditions. The first is shown to be the identification of a product and a market in a non-global industry, namely one in which more than a small number of giant firms can operate, not only on the basis of economies of scale. In that specific industry, the small firm must dominate a niche, employing a focus strategy. It should maintain flexible systems, allowing fast response time. It should develop learning ability from the different parts of its organization. The paper will also give several examples of successful global strategy of small and medium-sized firms in different industries. Finally, the paper analyzes the necessary entry strategies, distinguishing between entry as a subcontractor or OEM and entry on one’s own brand name.