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Summary
Business is supposed to be successful and success encompasses growth and sustainability. To which degree a business becomes successful depends on the strategy that one pursues. And the strategy in a broader sense embodies the business model a firm applies. The aim of this essay is to give Small Start Units a manual to elaborate the right strategy and with that a proper business model for the business situation they are in.
This essay that I call “From Zero to Hero” addresses how Micro-Firms, Start-Ups, and other Small Business Entities are able to professionally assess a starting position in order to develop a viable business strategy that gives them competitiveness on a global scale. Entities like this is what I call Small-Start-Unit (SSU) and refer to from now on.
“From Zero to Hero” describes a business model that emerged out of self-made experience that the author gathered with Micro-Firms and by studying Strategic Management over the time. This resulted in the finding that: The common denominator of business entities, as mentioned above, is that they lack resources, a promising business model, and experience in how to convert their promising core competency into successful global sales.
Strategy is a historic term and the past demonstrates at best that isolation was not the way to succeed, but the access to knowledge and resources. Societies succeeded when they were located in places that gave them access to others. In contrast, societies lost in the long term when they haven’t had access: Some of the isolated Pacific islands, for example, didn’t even know the technique to make fire when they were invaded a few hundred years ago by Western conquerors. The isolated pacific islands exemplify the term of globalization and its impacts. Globalization strongly influenced economies for thousands of years and still does. But both, the state of globalization and the shape of an economy are the direct results of strategies that certain groups of people have chosen to pursue. In turn, what has been realized so far, is like a backlash on what we do in the time ahead. So, contemporary globalization dominates our daily routine and is more or less a product from the past – or strategic steps done at certain times a while ago.
The target reader of this essay is not only the expectant executive that leads or owns an SSU, but also the group of stakeholders that back up an SSU: These are investors, consultants, suppliers, and customers just to mention a few. Basically every SSU has its own core competency. To make it more illustrative for the reader, I choose the field of emerging technologies to explain how this business model works. Emerging technology is most likely emerging in a climate where also SSU’s emerge. Touching this makes the essay more readable: On the one hand the author is able to integrate own insight knowledge gathered in this field and on the other hand the outlook on technology that goes off from there, right as we read. Emerging technologies are equally disruptive to established businesses and mass markets, as new business models are. This makes them a risk to established and large scale businesses and thus emerging technologies face a stiff competition right from the beginning. So, how can SSU’s turn their business path into a busy highway?
Despite SSU’s do not exactly hit existing mass markets, they provide potential users with a new or different form of needs satisfaction. What makes them promising is that they better address a certain needs satisfaction than it has been done so far. The starting ground for SSU’s is likely to be an undersized home market that doesn’t give enough revenue to grow, develop, and sustain an emerging technology. Now the right business strategy is needed that addresses not only the market but also the available resources and knowledge a SSU has. This strategy allows to pursue and nurture a firm’s strategic setting (vision, mission etc.) and matched exactly with a firm’s business landscape. Not much news so far? What makes the essay exceptional is that it shows how to adapts strategic knowledge to whatever business situation a SSU is in.
Further, this essay lists the major coherences of business strategies and their impact on the different business levels, as well as what global management is about. This build the reader‘s basic knowledge in order to understand the idea of “From Zero to Hero”.
Let’s assume that executives and business entity owners per se are willing to change a business into a long-lasting and successful organization. This is strongly aligned with sustainability and competitiveness, as integer parts of the own market offering. Real business advantage emerges from strategic work. This can either be technology based (emerging technologies) or management based (business model). Real strategic work always builds upon a clear analysis of the business landscape. This analysis is what I call the Get the Big Picture process, which is a serious engagement for those to turn a SSU into something bigger. The next step then meets the need for Strategical Action which addresses executives to bring a firm’s strategic setting on the road. This includes the core business strategy they have found through the Big Picture process before. This fulfilled, executives are now well prepared to work out promising Operational Action. Here the aim is to convert the strategic ideas into strong operations. Operational actions are carried out in a firm’s functional areas. Here high-efficient business processes are key to accomplish a business’ mission. And this is also were strategic work ends.
While growing globally, a SSU has to compete against big market players (MNE’s, Transnationals, etc.) which do already pretty successfully exploit the benefits of globalization. They serve mass markets that occur through market consolidation and product standardization and they are able to maximize their profits due to the real market power they possess. Besides that, SSU’s have to compete against other emerging entities, primarily of Asian origin, which push into globalized Western markets. They act and react with a vantage in production, cheap labor cost for example. In this global form of rivalry, there is little space for confrontation in terms of volume a SSU is able to produce. So what else should they do to meet the challenging global business environment?
The big advantage SSU’s have is that they are not being caught by previous strategic decisions. They are just starting from zero and so they can apply a clever decision making in order to become a hero. This is where SSU’s can compete with big market players right from the beginning. Decision making can be a qualifying dimension of a business strategy.
Despite this, the disadvantage for SSU’s resulting out of fewer potentialities and a lack of resources makes it impossible to risk a direct confrontation with stronger enemies. The gimmick to become successful on a global scale must be a mass market fragmentation through specialization and standardization. Both lead to better satisfy the needs of certain local market segments and so to fragment those markets. As SSU’s either provide emerging technologies or the new business approach, they have the sound starting position to hurt stronger enemies. A synonymic term formarket fragmentation would be diversity. Diversity in needs satisfaction will be an important step to address future market needs.
A way to better explain specialization and standardization is by comparing them with open-source philosophy: Open source stands for a platform that gives members of an community access to a certain value and allows them not only to share this value but also to expand it and to improve it. Open source is a philosophy that inspires people to bring in own content and thus helping the core value to grow. Just as the Internet works nowadays. A clever business model for SSU’s incorporates the open source philosophy. Because it accelerates market fragmentation and so helps them to win ground.
The right strategy allows executives to transform their core strategy into global success, which means in regional and local advantages. The nature of SSU’s combined with open sourcing enables them to quickly realize strong strategic impacts in certain markets, but with fewer costs.
I believe that firms who realize the construction plan that this essay delivers, are those that uncouple competitors and turn their SSU into a long-lasting and successful entity.
Best, Urs Lerch
Introduction
For business professionals It’s plain to question the future of Small-Start-Units: They often lack competencies in business administration and do not know about strategic management. Or in oder words: they do not know “how to do it”. My aim is to explain what really counts in order to turn a SSU into a successful entity with sales on a global scale. This, in a globalized world, that was rocked hard when globalization unleashed the power of free market economy in the 90’s.
The process of globalization is ongoing, accelerating, and demanding. SSU’s have to deal with that right from the beginning. The stiff competition overstretches political, social and technological issues. There are huge firms like MNE’s (Transnationals) which were able to take advantage out of this and expanded their business successfully on a global scale. So, what to do and what to avoid has being proved to a certain degree, by those firms. Market consolidation and product standardization are some of their weapons and enable them to easily create and serve mass markets. This gives them real market power and allows for profit maximization. Besides MNE’s, there are growing numbers of firms, primarily out of emerging economies, which push into globalized western markets. They act and react with a vantage in production (cheap labor costs for example) which leaves little space for direct confrontation between them and SSU’s – and so globalization leaves hardly any place to hide in today’s market economy. SSU’s have to meet the challenge in order to stay competitive against their enemies in the marketplace. It can turn out to be a fight than just a challenge - I specify today’s competition for better market shares a form of war. Not amazing, as the term strategy emerged during wartimes in the past. Hence it’s not far-fetched to use some Military Terminology to address certain domains here in this essay. The proper business strategy has to be embedded into a firm’s organization and being conducted with a large portion of resoluteness.
All of what follows now about business, can be assumed for SSU firms as well.
Globalization cannot be observed without the term economy and vice versa. And so globalization refers to the history of mankind - because it is a part of it. Globalization describes a process that may began in the ancient world (Phoenicians, Greeks, Romans), with the invention of money and the emergence of trade links some thousands of years ago. The space of economic activity has permanently expanded (from cave to village to office) and a constant market presence nowadays can be maintained in a single office. But it was a rather sluggish expansion until the present age of Access: now innovations overrun the globe at the speed of the Internet, and that keeps us all busy. This is alright since the past demonstrates that isolation was not the way of success, but rather the access to knowledge and resources. Countries like Germany succeeded because they were located in places that gave them access to several cultural areas. In contrast, there were some isolated Pacific islands, which didn’t even know the technique to make fire when they were invaded by the West. A promising ground for success of modern economies lies in investment, development, and improvement of products and services. We all benefit from improvement in product quality and lower production costs. And that happens when people deploy their brains and labor. Firms and individuals who invent, develop or improve goods can pocket profit, while the others can benefit from improved or cheaper products. Thus development is truly a win-win situation. Since China freed up its economy, it has become a major supplier of goods. But it’s oversimplified to blame China’s improvements for that the West suffers now. There is plenty of homework to do for Westerners to remain in business, first and foremost strategic work.
Phase I of Globalization: The first of the two major phases of globalization took place during the transfer from the Middle Ages to the Early Modern Period, with the colonialism (capitalism, slavery) in the center of it. Together with other fundamental discoveries (technologies et al.) it had far-reaching implications, which came to the fore especially during the High Renaissance.
Phase II of Globalization: The economic globalization in the (Second) Industrial Revolution was the continuation of the first phase of globalization. The period was characterized by an growth in output and international trade expansion within a framework of a stable monetary system (gold standard). Here the globalization process got a new quality of contribution. This, amongst other factors, because of rapid technological progresses in transportation (maritime, railway), communication (telegraph), and mass production.
Phase III of Globalization: The phase three of globalization addresses the time we are in right now. Some refer to it as the Age of Access or Age of Turbulence. You will find more information about that in chapter 5.
Starting with some theory about world affairs, economy, trade theory and strategic management, I will then turn to the term of global strategy. Chapter 5 sums it. Then I will state the raw materials to construct a promising strategy for Small-Start-Units.
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