Management:
Advantages of small businesses going global through incremental stages rather than starting as a global start-up are many. A global start-up faces major risks. Even though market research has been carried out on the prospective market, the company has no experience in the global market place as opposed to a small company going global through small incremental stages. When a small company decides to go global, it already has the market experience from a local operation market. This experience will provide the company with the ability to gauge which of its products are suitable for the international market. This is opposed to a company that decides to go global from the start. Such a company does not have the experience even from a local market to judge its performance.
A company that goes global through incremental stages can develop customized products for each market more easily. This is particularly important where the product might not fit all the markets it targets. Going for a global operation from the start carries a huge operational risk. For example, changes in the law where the company’s goods are produced may lead to a breakdown in the operations of the whole company. A company where the global strategy is implemented incrementally, the company usually has a network of producers in the companies they operate. In order to expand, the company looks for ways to adapt their products to the new markets. This enables the company to decide the markets that are best suited to its operations in the various markets. The most obvious benefit of starting small rather than global is the amount of capital required to begin operations.
When a company starts small, the amount needed is usually less than what would be needed than a global company. Therefore, it is easier to raise the capital for starting a small company. When a company needs to expand, the company can use the income as capital. With the operations in the local environment as the security, the company can access resources from lenders. Another advantage of a company expanding slowly to the global market is competition. More than 90% of all start-ups collapse within the first year of operation. This is usually due to the competition in the market. A company that decides to expand slowly into the global market has already survived this test period. In the case of problems arising in the new markets, the company can decide to go back to its original country of operation.
Where the new markets are not making returns, the company can use resources from the original market to support the new operations. A company that decides to go global right from the start has not gone through this test of first year survival. If it does not survive as a business model, the associated losses are greater than if the company started small. The regulations needed to start a global company are many when compared to a small company. A global startup will need to comply with the laws and regulations in all the countries it seeks to operate in all at once. This is opposed to a small company that grows in stages. Such a company will only comply with the laws of a few markets at a time and work incrementally as it expands. It is easier to comply with this requirement for small companies than global start-ups.
