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Title: Global - local dilemmas for a medium-sized firm
Authors: Witter, Jan Victor
Keywords: globalisering
Issue Date: 14-Jun-2008
Publisher: Open Universiteit Nederland
Abstract: In a rapidly globalizing world, business organizations increasingly operate on a global scale. In order to do so effectively they face the dilemma that, on the one hand, they have to operate globally whereas, on the other hand, they must be firmly rooted in local cultures, markets and power networks and also must accord to local laws. For Multi National Organizations (MNOs), this dilemma focuses on a specific field of management knowledge, Human Resource Management (HRM). MNO’s on the one hand feel the pressure to standardize HRM practices while on the other hand they must implement HRM practices in such a way that they can accommodate a multicultural workforce that operates in a wide variety of market and juridical conditions and power networks. In this study the following problem is central: “Which management challenges do internationally operating SMEs face in the globalization – localization dilemma?” Based on an analysis of contingency factors for SMEs the above, general question is specified into the following research questions: 1. “Which management challenges do internationally operating SMEs face? Is this HRM or are they related to contingency factors for SMEs such as a better planning and control process within the firm in order to have better control of the firm and to increase synergy within the fimr, in the case of a commercial firm to select product-market combination(s) and a market approach that will fit best within the company? 2. Why this choice is made by SMEs, what is the logic of it and what can be the nature of the adaptation? In Chapter 2 a review of literature on the globalization – localization dilemma for internationally operating organizations is presented. It is seen that most of the existing literature deals with MNOs. These studies underline the relationship of HRM to both cultural dimensions and more general (socio-economic, market, etc.) external conditions and to organizational / structural factors. When studying which management challenges internationally operating SMEs face, one finds little literature. Some indications of the management choices that do matter for internationally operating SMEs can be found in the literature. The lack of a institutionalized planning and control system as a specific difficulty for internationally operating SMEs is mentioned by some researcher. Also mention is made of the limited financial and managerial resources that will result in an internationalization approach that is often prudent and ‘step-by-step’. Some of the scattered literature on the global – local dilemma for internationally operating SMEs also refers to the problem of adequately identifying and serving markets. These indications have been corroborated and deepened in this research. In Chapter 3 the methodology used in this study, grounded theory, is discussed. The choice to use this methodology was both a challenge to the author, being trained in the physical sciences and holding a PhD in statistics, as well as a necessity given the paucity of literature on the subject ect. ‘Grounded’ in this sense means that the theory will be grounded in the data. The data in this study mainly come from an Italian SME, Tekno Point, that is operating in four countries: Italy, Hungary, Romania and Slovakia. The company started in Hungary in about 1990 as a firm selling electrical equipment. This is a market, however with very low margins and strong competition, whence the company changed its profile to that of ‘professional supplier of comfort technology’. The Slovakian market is served by an agreement with a Slovakian company. Branches in Italy and Romania started around the year 2000. The number of employees is about 50 (Hungary 35, Italy 10, Romania 5). The owner and president of the company resides in Italy and operates from the Italian branch. Typical for grounded theory is its approach to data collection and data analysis. In grounded theory the pattern is that, guided by some initial research questions, the researcher will collect a first set of data, preferably quite small. This set of data will be analyzed but after that the research is not completed. Instead, a repetitive sequence of data analysis and data collection stages begins which is only stopped at the point of theoretical saturation (which might be a theoretical endpoint only). This particular study used three of these repetitive stages. The first stage was in May 2007, when the author visited the company for the first time, aimed at a first analysis of the company. It was concluded at that time that there was insufficient business and management data for a detailed analysis. This in itself seemed to be related to the global – local dilemma as it presents itself to a SME. It was concluded that the first step would be to make that information available. The second stage was in October 2007, aimed at a deeper analysis of the global – local dilemma for this particular SME on the basis of the now available information. In a series of interviews and workshops held in October 2007 with all managers from each of the branches of the firm and with the owner / director. In the interviews a set of trigger questions developed at the Institute of Future (see van der Heijden et al., 2002) was used that included the four driving factors discerned by de Man & Yang (2005) with respect to local adaptation. A further set of questions related specifically to HRM was added, as was an additional question about the market approach. It was found that the main consequence of the global – local dilemma for the firm was some kind of fragmentation and a subsequent need to improve synergy within the company, in particular with respect to the selection of optimum product-market strategies and channels. In a third stage, in March 2008, the ideas developed during the second visit and afterwards, have been discussed with the management of the company, resulting in further deepening of the analysis. Chapter 4 starts with an overview of the four countries Tekno Point operates in terms of their socio-political, economical and cultural characteristics (Chapter 4.1). Slovakia and Italy have the most open modernized economies. Hungary still is, despite its rather modern economy, less entrepreneur-like than Slovakia. Slovakia and Hungary share much of their history and in a sense Italy – as a neighbour of the Austro-Hungarian empire – shared part of that history as well. Romania is more or less the outsider, in a historical (its roots in the Ottoman – Turkish empire), economical (strong focus on oil and natural gas, transition to a modern and open economy not yet completed) and cultural sense. Also its integration into the EU has only recently been started and is far from complete yet. Also with respect to cultural characteristics, Romania stands apart from the other countries. From a SWOT analysis performed in May 2007, it appeared that, apart from some occasional struggles with language problems, between-country differences were not seen as a cause of a bad ‘fit’ of the company in some country (Chapter 4.2). A focus on Human resource Management because of a global – local dilemma, such as is often reported in the case of MNOs, was not found. Being small, a company like Tekno Point does not experience such problems. It adapts itself one way or another to local conditions and that happens ‘automatically’. Also it was realized that, the more countries the company operates in the larger sales volumes and, consequently, profits can be generated. For a small company like Tekno Point the global – local dilemma seems to materialize in the form of insufficient Planning & Control data and procedures and lack of business information. For an internationalizing SME, the dilemma to its owner / director is that he has to run what has characteristics of a divisionalized firm with the resources of a simple structure. How can he manage and control this? The decision was taken to implement weekly reporting systems of sales and costs. This information system was in place in October 2007. The management challenge that appears from the SWOT analysis, to strengthen information and control within the firm seems to be related to the contingency factors for SMEs. However, information and control are means, not goals in themselves. Once it is there, what underlying management challenges become apparent? This is the subject of Chapter 4.3. To answer that question during the second visit to Tekno Point in October 2007 a series of interviews were held (Appendix I). It appeared that the need to create synergy within the firm, particularly by selecting optimum product-market mixes and sales channels, was the most prominent management challenge. Again, there seems to be a relationship with contingency factors for an internationalizing SME. Practical implications of this study and future research are discussed in Chapter 5. Director / owners and managers in general of internationally operating SMEs should have a keen focus on information within the firm and on its use for and use in learning processes within the firm. Organizations such as the OECD but also national organizations that try to help SMEs in internationalizing should provide assistance in these management fields. Future research may be fruitful in widening and deepening the analysis presented in this study by analyzing more and diverse cases. Also in a more practical sense attention could be given to ways in which internationally operating SMEs can increase synergy. For instance, how can they successfully use scarce financial and management resources to establish their own outlets by means of a franchising system? I hope this study serves as a stimulus to such initiatives.
Appears in Collections:MSc Management Science

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