Globalisation: Dangers and Benefits for SMEs

Keywords: advantages of globalisation, globalisation sme, globalisation business effects


Globalisation has become a hot discussion issue for both academicians as well as the corporate world. That is because of the effects globalisation has on Small medium venture as well as the huge benefits they provide to the SME's and national economies as a whole. Globalisation is a significant driver that comes with an impact on practically every business anticipated to internationalization of marketplaces. Technological progress in circulation and other logistics permits every business to trade at a worldwide scale.

Small Medium Enterprises plays a part in over 50% of the nationwide GDP and provides over 60% of the total employment in the majority of the developed high income countries. Small and Medium Entrepreneur's play a major role in creating economic growth in every country through job creation (UNCTAD). Despite small businesses being engines that drive economic growth generally in most economies, smaller organizations in developing countries are greatly disadvantage in conditions of development and profitability anticipated to globalisation.

1. 0 What is Globalisation? '''Globalisation refers to the transfer towards a more integrated and 3rd party world current economic climate'' (Hill 2003). Globalisation has two main proportions thus Globalisation of markets and Globalisation of creation.

1. 1 Globalisation of markets refers to the merging of separate national markets into one global market which is targeted at reducing combination boarder barriers which makes it easy to market and purchase international (Hill 2003). However cavugil et al -defines Globalisation of markets as a continuous integration and growing interdependence of nationwide economies. It is also aimed at standardizing products worldwide and a means of converging customer choices. It's therefore important to note that this is a progressive process which started as far back as 1830 has been done in phases. The integration has led to the formation of regional bloc e. g. the European Union, SADC in southern Africa, COMESA just to refer to a few. Integration is where two or more countries in the same geographical area make an alliance with a view of minimizing barriers to operate and invest to grow their economies. This implies that the bringing down of trade barriers enables firms to see the world as you global market rather than solitary market.

1. 2 Globalisation of creation is the sourcing of goods and services from countries around the world to take benefit of national variations in the cost and quality factors of creation. China is an excellent example of emerging market segments with low labor costs. With globalistaion, it has seen most firms moving their development centers to china to lessen costs and this has increased their economies of level. Using this method, firms aim to gain competitive benefit as globalisation has resulted in increased competition in the global market. Globalisation productions not limited by giants like Boeing but smaller companies are getting into the become they aim to lower costs and increase their profit margins.

Why GLOBALISATION-There are many reasons why countries globalise.

2. 1 Countries globalise to lessen barriers of trade and investment. Which means that the lack of barriers has allowed firms to get access to the total market resulting into a wider selection of selection of goods for customers. On the other hand globalisation has resulted in to the formation of local blocks where governments get into contracts in order to eliminate the hindrances to trade freely on the list of member countries This has not only reduced obstacles of trade but also have enhanced the bilateral connections between member countries.

Globalisation is one way of liberalizing marketplaces indicating its one way of opening up markets with minimal federal indulgence.

It's assumed that globalisation creates opportunities to progress in technology and this has resulted in creating efficiency for companies and has brought about development which enables businesses remain competitive favorably.

The other reason why countries globalise is that it is easy to combine world financial markets. As the entire world is merging business orders are becoming more simplified e. g. the sourcing of money from foreign companies have been made easy.

However, globalisation has its benefits and dangers especially to small firms

3. 0 Benefits of globalisation to smaller firms-. Globalisation has its own pro's and downsides however its important to notice that it's been quite beneficial to smaller firms in various ways.

Globalisation has created opportunities for smaller companies to make alliances (merge) with other small companies allowing them access competence from other countries and creating synergies to achieve competitive benefit.

Smaller firms also have benefited greatly from technology generally brought by globalisation of market segments. Communication has become easy as it i possible to transact with different countries within a short period of time.

More knowledge about development methods, management techniques, and financial policies are often accessible at very low costs which really is a valuable resource specifically for growing countries.

Globalisation has resulted in increased investment running a business even for small companies scheduled to easy sourcing of cash globally and supports small firms get from other supranational authorities

Globalisation has exposed doors for smaller businesses to export their products. Some statistic show that 90% of exporters are small businesses this has helped infant businesses have wider market because of their products and services.

It in addition has created a chance for Small businesses to compete on a global scale

4. 0 Hazards of Globalisation to SME's

Critics of globalisation claim that although there are benefits associated with globalisation, it's also obvious that Smaller Medium Businesses are threatened by globalisation in several ways

With the opening of boarders which includes seen lots of MNE's in most countries offering lower prices, small organizations are forced to market their goods and services at lower costs as it's the only way they can be competitive which has a negative effect on their success.

Its in addition has increased spending for research and development in market access as it takes a much higher proportion of total spending smaller companies than in bigger businesses.

Opening up of boarders has resulted in mass migration. This includes that countries loses some of its best talented and skilled people which in turn could imply reduced pool of Individual reference SME's can choose from.

Globalisation in addition has caused stiff competition from Multi National Entrepreneurs investing in various countries.

With globalisation most governments especially in producing countries have procedures benefiting MNE's and disadvantaging smaller firms in their quest to attract foreign immediate investment.

It is because of these threats that government authorities and supranational specialists have to come in and protect small organizations from being swept away.

5. 0 What are supranational specialists?

These are international regulating bodies empowered to regulate international trade and investment. Their main target is to save collective interest of member states.

5. 1 Roles of Supranational Authorities-Supranational authorities play key roles in integration of market as they are aimed at fixing common economic problems facing different countries including smaller organizations. Types of these authorities which play major role in safeguarding smaller businesses include; World trade company, World Bank or investment company, International Monetary fund, African Standard bank for Reconstruction and development (ABRD) etc, these authorities work together with government authorities from various countries to see how poverty can be reduced and creation of jobs enhanced. This includes protecting smaller businesses from ramifications of globalisation and making certain they are not swept away by the occurrence of multi national enterprises since they are the drivers of most economies today.

5. 1. 1 IMF: The international monetary fund's main purpose is to raise living criteria of its member countries by making certain countries can support themselves without much dependency on donor money. It's aimed at fostering global financial cooperation and secure financial balance by stabilizing exchange rates. In case the exchange rates are stabilized its easy for the country to attract foreign direct investment. International Monetary Funds also helps international trade and promotes high job and sustainability of monetary growth with the best goal of reducing poverty. Which means that IMF stimulates member countries to look at sound economic policies to promote business people in member claims especially developing countries so as to help them grow their economies. Once these economies have become it will mean they become self applied reliant and career created for the citizens and IMF would have achieved its goal.

5. 1. 2 World Lender: THE ENTIRE WORLD Bank's mission is to fight poverty and enhancing the living standard of men and women in growing countries ''www. worldbank. org''. To achieve this, the bank provides low interest lending options to different organisations to help financing various projects. Not only to organisations however the lender also offer grants or loans to governments to run various projects in various ministries.

World Bank provides advice on execution of various insurance policies that benefits different economies. In addition, it offers technical advice to both low and medium income countries how economies can be increased thereby minimizing poverty. The World Bank companions with governments to create projects as a means of promoting progress in the economies which contributes to job creation. The other reason is to enable smaller firms in order to explore the opportunities arising from globalisation. THE ENTIRE WORLD Loan company has other major wings thus the International Loan provider for Reconstruction and development (IBRD) and the international development connection which work mostly with governments to aid private businesses in expanding countries. Besides the above two wings mentioned addititionally there is the international development bank or investment company which offers advice about how to gain access to IDB financed contracts

5. 1. 3 World trade company: World trade deals with guidelines of trade between nations to avoid exploiting each other. World trade ensure that there is fair trade between your trading nations and this trade should not benefit one country at the expense of the other. The main goal is to help suppliers of goods and services perform their business in a good and transparent manner. This includes Multi national corporations and smaller companies alike

6. 0 Role of Federal government in guarding small firms

Although known reasons for monetary stagnation vary, several factors explain that many producing countries have economical policies that kill wealth rather than creating prosperity. It's for this reason that Government should come up with policies guarding smaller companies from exploitation as they add greatly to the progress of the overall economy. However this task should not be left alone to supranational government bodies but it calls for efforts of various governments to work hand in hand with these authorities to achieve the primary goal.

In up to globalisation has benefited most economies of varied nations globalisation still poses obstacles to numerous businesses especially infant organizations in expanding countries. Government therefore should ensure that these infant organizations are secured from hazards and or exploitation caused globalisation of market segments and creation. Its also important to identify that government needs concerted work from all stakeholders thus the private sector to come aboard in assisting small and medium companies flourish through stiff contests.

Government can support smaller companies through the execution of policies to get smaller firms in form of financial and complex assistance in order to prevent small company from being swept away by today's global current economic climate. This is through offering taxes incentives which can be in form of taxes rebates.

Government can support smaller businesses by injecting capital into these small firms. For example in Zambia there's a government project called the Citizens Economic Empowerment Payment (C. E. E. C) aimed at pushing youths and Zambian small business owners to become internet marketers and develop their businesses. It provides lending options to small business owners in order to grow their businesses and compete effectively. Internet marketers are asked to come up with project proposals which can be then submitted to C. E. E. C for evaluation. After the evaluation process then they are advised as to weather the task is viable of not and are advised accordingly. if they're sound a loan is directed at them after submission of the relevant documents.

Government can create market linkage through global trade centers to potential buyers abroad this will help ensure that there surely is always ready market for small organizations' products. More often than not small organizations may have the product but no market for the coffee lover at they wrap up offering their product cheaply without making profits to reinvest. Trade centers on the other side will do your research on behalf of the business people and advises them about how to include quality to their product to meet up with the international standards and everything the logistics should be put set up. In Zambia, the federal government through the ZDA offers a service of market sourcing for rising SMEs.

Development of good street network system is yet another way government will come to support these firms. This is because most small organizations think it is hard to move their product to advertise places scheduled to poor roads. That is most suitable in expanding countries like Zambia where small businesses especially those working with agricultural products have problems transporting their produces to major market segments where there are better offers hence they conclude selling the products cheaply

Government can also work together with local banks and lessen interest and financing rates to be able to enable small organizations have access to loans to financing their business this will ensure development to this infant firms.

Government can also come up with regulations where small entrepreneurs especially in the agricultural sector sell immediate to the Food Reserve Company (F. R. A) at a profitable price. This may deter buyers wanting to exploit them with lower prices.

Smaller firms fail to compete effectively scheduled to insufficient planning. Most of them fail to come up with comprehensive business proposal packages because of this they have no direction how to compete. This is where government's co-operating companions can come directly into help by working workshops in order to give them path. The Government Republic of Zambia offer such training via a administration wing called Zambia Development Organization (ZDA).

For firms in the exporting business federal government can offer bonuses in form of invoice discount or warehouse receipts this will encourage more smaller businesses to project into exporting which really is a way of broadening their market and it is less high-risk and cheaper that foreign immediate investment.

Government also needs to introduce price sealing to deter multi nationwide Companies from exploiting market for baby firms wanting to use the price leadership strategy as a way of going into the overseas market. This will likely ensures there is certainly protection of the house grown up products as there's a floor limiting price factor

Governments from the same local blocks can bring in one stop boarder post where small entrepreneurs are allowed to cross over with goods and with no tax on certain goods. Within the SADC region for example, Zambia, Malawi and Zimbabwe have signed this contract although its much less effective as it will be

If all these measures are put in place and necessary regulations are put in place by the federal government and its stakeholders then smaller businesses will make it through from globalisation risks and can eventually be translated into financial expansion and increased gross local product percentage.


In conclusion, as globalisation has progressed the living conditions have improved upon significantly in virtually all the countries. However the strongest increases have been particularly on high income countries (developed countries) and only a few in developing countries. It is because low income countries have not been able to integrate with global economies quickly as the developed countries partly due to policies implemented in various countries and other factors beyond their control.

Every country should seek to lessen poverty thus motivating entrepreneurship by conditioning their financial muscle so that they can endure stiff competition amid globalisation. This is the only way to ensure that smaller businesses have access to benefits of globalisation and reduced hazards.

Finally for so long as Small Medium Businesses shortage financial support, with poor infrastructure and insufficient federal government assistance and support, small organizations will remain threatened by globalisation and eventually will be swept away. This may have an adverse impact on the market as small businesses are the back bone of the strong economies.


The Federal government of the Republic of Zambia must increase the allocation to the wings accountable for youth and businessman job e. g. the Citizen's Economic Empowerment Commission and really should be inspired to lend to women teams and have the guarantee to acquire from bankers as almost all of this federal government wing offer inadequate to small firms and cannot borrow from high interest Lenders due to insufficient collaterals. Regulations that protect local manufacturers should be strengthened by growing country governments. It is because currently the laws and regulations on this angle are too weak therefore investors source recycleables from their country of source and not from local suppliers.

There is also great need for governments to enhance education, training and research and development to promote efficiency among small firms through its cooperating lovers. This could be an opportunity for small businesses to obtain right skills in active economies. Other insurance policies will include structural reforms to encourage home competition. If local businesses can remain competitive domestically it can help improve product and service standard thus preparing these to contend internationally.

Developing countries should lobby from wealthy countries to relax restrictions for developing countries to export into European and western marketplaces. This is done through systems like SADC, COMESA and A. U. There may be a better potential for being heard if they speak with one strong words. Supranational authorities should expose parallel lending designed for small firms so that funds aren't diverted. They should also channel funds for capacity building which helps instill learn how to infant firms so that they can contend effectively. Supranational authorities should work together with Non governmental organisation by financing various assignments e. g. when it comes to running workshops. They should also lower rates of interest to small businesses to enable them access loans with minimal passions.




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