An Advantage To Internationalizing Smes Economics Essay

Colombia is a state which economic is supported in smalls endeavors. The SMEs represent at least the 90 % of the companies in the state and bring forth the 73 % of the employment and the 53 % of the entire production of the industrial, commercial and services sectors.

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Taking into history its importance, the authorities and many-sided establishments focus progressively on promoting farther development of these companies in a theoretical account of integrating into the planetary economic system, besides it has become priority mark market in several economic sectors and many NGOs have directed their attempts to turn to them. Therefore, in Colombia to beef up this group of companies given its possible to bring forth employment and its part to the growing of untraditional exports has become a precedence.

Spite that the SME represent a really high per centum of the Colombian economic system ; it have a batch of jobs that detract its efficiency, productiveness and fight since it must to confront with large companies that have a batch of experience, resources and market. Some of its failings and defects are its low administrative capacity to prosecute with the external sector, the deficiency of information about export chances and sustainable competitory, its minimum direction preparation and direction in the international sphere and their limited entree to engineerings, particularly those associating to foreign trade as the selling such as the suitableness of the merchandise to external market demands, deficiency of information of the markets, entree to suited distribution channels and the deficiency of preparation in international selling.

An interesting manner for SMEs to get the better of this jobs, travel into new markets, expand its frontiers and turn the per centum of entire Colombian exports will be the web construction or bunch because it is a good tool for them to confront large and good acknowledge companies ; That is why this paper is traveling to explicate the consequences of get this option, with its talk will be known the current state of affairs of SMEs in footings of internationalisation and its possible advantages and disadvantages, utile for employers and for those who can happen in it a growing option.

SMEs in Colombia

Colombia is a state which economic system is base on little endeavors. However, exist really few information about it, it does non be an norm of how many endeavors belong to this categorization. There is a jurisprudence that defines it and gives different standards to sort them harmonizing to this jurisprudence.

Ley Mipyme[ 1 ]set uping as “ … micro, little and average endeavors every unit of economic development by natural or legal individual in concern, agricultural, industrial, commercial or services, rural or urban, … ” that meets the standards of assets and figure of employees for little and average endeavors, harmonizing to the definitions in the jurisprudence 905, that introduced some alterations to the jurisprudence 590 of August 2 2004, the micro, little and average endeavors ( SMEs ) are defined as:

Definition of SMEs in Colombia

Company Size

Sum of Assetss

Number of Employees

Micro

Less than 501 SMW

Less than 10 employees

Small

Between 501 and 5000 SMW

Between 11 and 50 employees

Medium

Between 5001 y 15000 SMW

Between 51 and 200 employees

Beginning: Ley 590 de 2000 – Mipyme

Harmonizing to the commercial registry, the Colombian concern constructions is formed chiefly for microenterprises ( 88.9 % of the constitutions ) , followed by the SMEs ( 9.83 % ) , and a really low figure of large companies.

The micros, little and average endeavors, have become a cardinal participant in the productive development and economic system recovery thanks to its productive construction because are really of import in the coevals and employment flexibleness, have the possible to accommodate new engineerings and innovate, they adapt more easy to the alteration and have holiday as a distributer and provider in the value concatenation. The comparative importance of SMEs in the local market contrast with is comparative weight in the external sector: involved less than 20 % of the entire exports of the state.

The Colombian economic system in recent old ages showed clear marks of stagnancy or minimum growing what has non allowed the state to accomplish important betterments in the degree and quality of life of its dwellers. This reflects the pressing demand to place and plan advanced schemes that allow a significant addition in industrial production and services in assorted concern sectors aimed at run intoing the turning demand for different universe markets, given the failing of domestic demand.

To work out the job of low economic growing has generated worldwide and in Colombia in peculiar, a great involvement in micro, little and average endeavors for their great potency in bring forthing employment, advancing progresss in local environment and its flexibleness to go an of import add-on to the work of the corporation, given the experiences that have taken topographic point in Italy, Germany and the U.S. , among others and therefore has been considered as a really dynamic concern sector and possessed the greatest potency to develop productive relation to its size.

A?Why expression for internationalize?

The internationalisation of SMEs is non merely a affair of now, for some old ages a figure of Colombian SMEs have been motivated by depression of the domestic market, high Colombian peso devaluation in 2002, regional trade understandings signed and to subscribe the duty that provides the ATPE and authorities plans to advance exports, to convey their merchandises and services to international markets particularly neighbouring states, but without accomplishing high engagement in entire exports achieved by SMEs from other states such as the one achieved by Taiwan, Italy, or Korea.

Despite the internal and external barriers that may originate in the procedure, it has come to the decision that the lone manner for these companies are lasting in the long tally is the internationalisation[ 2 ], used as a manner to accomplish a sustainable national economic system in the long term. This requires beef uping the state ‘s trade balance and coercing the Colombians to assist in the hunt and building of theoretical accounts for this of import concern sector becomes the true engine of the economic system, as it is in many other states that have managed head and support to little and average endeavors.

It is clip for SMEs to acquire chances in today ‘s economic system as the phenomenon of globalisation of markets and the gradual attenuation of trade barriers, every bit good as the creative activity of new economic blocks that one time were unthinkable. Confirming that economic patriotism is non for a life-time and that cosmopolitanism is no longer the monopoly of a few companies, but the feature of any market anyplace in the universe and what is more of import is the duty of a company, either is its size: the internationalisation.

To accomplish this end and to doubling and diversifying non-traditional exports, the Government developed in 1999 the Strategic Export Plan which has Expopyme Program, designed and coordinated by Proexport Colombia, aimed at advancing successful and lasting place of exports by SMEs and adapt to the demands of the planetary economic system. However, Colombia still represented merely 0.2 % of entire universe ware exports, despite the fact that the SME exports stood at 14 % of entire Colombian exports, with the minerals and metals sector with more high engagement. All this shows that SMEs were born and raised in Colombia taking into history the local market fundamentally, and merely when local demand has fallen have searched the universe market.

Problems of SMEs to Internationalize

When Colombian SMEs decided to internationalise run into one of its greatest troubles and its it low administrative capacity to associate the external sector, the deficiency of information on export chances and sustainable competitory with high degrees of local value added, as a consequence of minimum preparation and managerial disposal in the international sphere and their limited entree to engineerings, particularly those associating to foreign trade. The major obstructions in the export procedure of domestic SMEs are the factors related to marketing such as: the suitableness of the merchandise harmonizing to the demands of foreign market, the deficiency of market cognition, the equal entree to distribution channels and the deficiency of preparation in international selling.

If they do non get the better of these failures is really hard for Colombian SMEs to acquire and see the chances offered by the planetary market, in item those arise from the integrating understandings and the penchant strategies such as: Can, ALIDE, ATPDEA, SGPA and the possible FTA, signed and given to Colombia. Although this means a great chance to get the better of the growing jobs of the Colombian economic system and develop the productiveness and fight of little and average endeavors, besides represent a great hazard for them remained on the market, particularly those with no experience or civilization export.

That is why the purpose of this paper is to urge to entrepreneurs, directors and proprietors the web construction[ 3 ]or bunch[ 4 ]as a tool that Colombian SMEs can utilize to accomplish the longed internationalisation. Now we proceed to explicate the importance of utilizing the tool in the undermentioned subdivisions, and the advantages and disadvantages of making.

Internationalize by utilizing the Network Structure

Now is clear that one of the great failings of SMEs is their size compared to the big and good known companies. So when we ask ourselves A?which chances for internationalisation can be good for little and medium endeavors? We recognized that, while some concern chances might be successfully exploited by large companies to the extent that they can command critical resources and accomplishments needed for these companies, there can be concern chances for illustration, in the short term that big companies are excessively complex or excessively hazardous to run. These chances may good be operated by a web of SMEs ; networking offers an of import path for SMEs to work out their jobs and besides better their place against competition. By organizing their activities, endeavors can jointly accomplish economic systems of graduated table beyond the range of little scale houses and obtain bulk-purchase inputs, achieve optimum graduated table in the usage of machinery and pool production capacities to run into big scale orders. Inter-enterprise cooperation besides allows SMEs to specialise in their nucleus concerns and give manner to an external division of labour therefore bettering their production efficiency. The partnership besides encourages companies to larn from each other, exchange thoughts and experiences to growing merchandise quality and take on the most profitable market sections, with a reduced investing because it requires a high sum of investing to run globally. This license little and average endeavors belonging to developing states become more competitory by furthering inter-enterprise linkages for assisting SMEs uniting their strengths and jointly take advantage of market chances or work out common jobs with a combined attempt.

Some of the signifiers that SMEs can utilize the web construction as an internationalized manner are:

Horizontal Networking ( among SMEs ) : most of the constructs valid for bunchs are besides applicable to web, the difference is that here the mark is groups of endeavors with a common concern enterprise. The importance of this enterprise is because endeavors that are portion of them are able to better public presentation and overcome obstructions imposed by size.

webs are non easy to set up despite their possible advantages, because SMEs are seldom willing to presume the costs that joint enterprises imply such as those of organizing and accomplishing a consensus among different, frequently competitor spouses. Coupled with misgiving and fright of timeserving behaviour, this frequently blocks concerted enterprises.

Agents, nevertheless, can assist entrepreneur ‘s lower costs and kick-start joint enterprises. The stairss of this procedure are similar to the bunch development:

Promotional and motivational activities of possible web spouses.

2. Aid in strategic planning of web activities.

3. Pilot undertakings ( normally short-run activities to advance trust ) .

4. Strategic undertakings ( longer-term and of more strategic nature ) .

5. Self-management.

Vertical Networking ( among SMEs and larger endeavors ) : besides offering a possible market for SMEs, larger makers in a underdeveloped state as technological leaders can offer interesting acquisition and modernisation chances for smaller houses able to interact with them. Most of these industrial leaders recognize that there are benefits in bringing clip, client service reactivity, transit costs and the similar, in working with local providers. But frequently do non see it as their occupation to put clip and money into developing such beginnings. They, hence, frequently prefer foreign providers due to concerns about local house ‘s ability to fulfill their demands in footings of quality, dependability of bringings, and low purchase monetary values. The formation of perpendicular webs aims to get the better of these concerns and facilitate constitution of collaborative dealingss between big and little graduated table endeavors. The rules stairss of this procedure are:

Evaluation of possible and current providers

2. Round-table treatments between client and provider houses

3. Detailed analyses to find countries of betterment with the provider ‘s operation

4. Integrated betterment programs execution

Clustering ( Refers to the big concentrations of companies runing in the same location and belonging to the same or complementary sectors ) : the SME bunchs have established themselves as of import and dynamic participants within the international market reacting to planetary competition challenges by capitalising on local chances and corporate competitory advantage.

Mere concentration of endeavors runing in the same sector is, nevertheless, no warrant of success, since the advantages associated with constellating do non ever emerge automatically. In many developing states, SME agglomerations are a widespread phenomenon. Significant Numberss of little and average endeavors frequently operate close to one another and bring forth similar goods. While a batch of endeavors plants in bunchs of this sort are common, few of them portion the virtuousnesss of successful bunch theoretical accounts. In most of the instances, cooperation among houses is inadvertent or no existent. Although working and frequently populating in close propinquity, enterprisers do non portion concern information, discuss common jobs or form joint activities. SMEs have merely sporadic relationships with others mediators, these bunchs are characterized by low degrees of trust, latent struggles and cut-throat competition among houses. As a consequence, they are locked within a barbarous circle of stagnancy and poorness.

The passage from this phase of disorganisation and stagnancy to one of organisation and accomplishment is hard. The edifice of trust, constructive duologue among cluster histrions, exchange of information, designation of common strategic aims, understanding on a joint development scheme and its systematic and consistent execution require significant attempts and committedness to common ends. Above all, this requires:

Time to put in mutual cognition and coordination.

Development vision beyond the day-to-day modus operandi.

Long term committedness.

For assorted historical, societal and economic grounds, some bunchs have been able to carry through these conditions and capitalise on common strengths and chances. In many other bunchs, nevertheless, this does non go on spontaneously. In such instances external proficient aid can be good to assist trip a procedure in which local enterprisers organize themselves and take advantage of common chances.

Advantages and Disadvantages of utilizing the Network Structure to internationalise

Advantage

Disadvantage

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