Globalization, Entrepreneurship and Small Business

Here, bellow, you will find a link to a pdf document, which is the synopsis of the six posts, of my blog (http://globalentrepreneurship.wordpress.com) about Change Management. The posts were organized and created a table of contents.

The link will take you to the Box.net web page and it will ask you, if you want to download it.

http://www.box.net/shared/y5gqbei0a8

Here, bellow, you will find a link to a pdf document, which is the concatenation of the three posts about the Blue Ocean Strategy. The posts were organized and created a table of contents.

This document is based on the book of Kim and Mauborgne, Blue Ocean Strategy, and its objective is to give a quick and simple vision of the principles. (It will take you to the Box.net web page and it will ask you, if you want to download it.)

Bluen Ocean - Synopsis at:
https://www.box.net/shared/ufia34k232

Businesses fail because of people, period.

The effects of the failure can be observed, for example, on organization, processes, product or service, finances, marketing and sales.

The causes can be related, for example, with strategic planning, implementation, management, control, human resources, absence of competitive intelligence and external factors like market dynamics or government regulations.

If we are talking about new ventures or small enterprises, with less than two years, the most common issue, which takes to the reasons of discontinuing businesses, is related with financial problems.

The most common cause of the financial problems is related with managerial faults and a weak strategic planning.

Managerial faults can be because of absence of organization, control, follow-up, course corrections, or maybe wrong people in the wrong place, underestimation of the target market, costs were wrong estimated, and so on.

A weak strategic planning, or inside the drawer, is a great source of cause generation to a business fail. A strategic plan is a dynamic document. As the enterprise evolves, so does the market. The defined strategy must be updated and in the course of time corrections must be made to keep the boat in the right course with the right velocity.

Talking in a global context, each cause has its likelihood, which depends on the venture, the business environment, the global region and the profile of the entrepreneur. But all problems usually start with managerial faults and bad planning.

Also, usually, small entrepreneurs have a small cash flow, which causes the impossibility of a "second chance". If a large enterprise makes a wrong investment and fails, it is only a bad investment and shareholders (or the government) will pay the bill. Small entrepreneurs do not have that chance.

Now, if we are talking about well established enterprises and large companies, usually the problem starts with managerial incompetence and expands to financial problems.

Well established enterprises need to have a continuous process of reinventing themselves. They should use a process like learning organizations, always learning and upgrading. They must be updated with market trends, new products, new demands and they must control costs, prices and margins. Resuming, they need to have an effective process called competitive intelligence.

We are in the Knowledge Era and in a globalized world, so the horizon of business changed radically in the last two decades. Companies that did not follow this trend, resting in the old market share already achieved, will be vanished by new entrants, new products and new ways of doing business.

Similar thought should be used by new entrepreneurs. They should explore the new technologies, internet, social networks, blogs, chats, and so on.

New entrepreneurs need to create competitive advantages with these new technologies to enter and enlarge their market, and exposition. There are plenty of tools, at a low cost, and also free, already available on the web.

Last thoughts, develop a consistent strategic plan, take care of day-to-day operation, and make a continuous follow-up and control. Take some time, but chose the right people to the right place. Be always near your collaborators, hear and understand their feelings, needs and aims. Watch the competitors. Keep near of your clients, feel their feedbacks and needs. Fortune favors the bold.

First, we need to have a clear concept of what it is Ethics and the difference between the actions and processes of business development related with cultural aspects and Ethics.

Colins Dictionary defines Ethics as moral beliefs and rules about right and wrong. An ethic of a particular kind is an idea or moral belief that influences the behaviour, attitudes, and philosophy of a group of people. Webster Dictionary defines as a discipline that deals with what is good and bad and with moral duty and obligation, or as the principles of conduct governing an individual or a group. Larrouse, a French Dictionary, defines as a part of philosophy that focus on the fundamentals of moral, or as the set of moral principles that are the base of conduct of anyone.

What induce more noise in international negotiations are the cultural aspects, which are misunderstood and confused with Ethical differences.

The cultural aspects that need to be highlighted are: the protocol, the religion, the use of colours and their meaning, the corporal language, meal customs and gifts.

There is, also, another perspective about different cultures, which is from Geert Hofstede, and analyses the Cultural Dimensions. They are: Power Distance Index, Individualism, Masculinity, Uncertainty Avoidance Index and Long Term Orientation. One possible use of his method is exactly in International Businesses. The score of dozen of countries is available on his web site.

Business is Business and Ethics is Ethics. The grey area that many people try to develop, to be used as excuse to failure or to allow, or endorse, unacceptable ethical situations must not exist.

A great sentence from Peter Drucker was, when a reporter asked him what he will teach in a lecture, about Ethics. He answered that it will be the shortest one in the world, we will just say: "If you can't look yourself in the mirror for something you're about to do, don't do it."

Ethics is about moral and to not provoke damage to anyone, to the business, environment, colleague, partner, neighbour, friend, and so on.

A common idea that I read a lot, it is that bribery is expected and usual in some countries. Bribery is wrong in any place of the world. It is difficult to me, to believe that are some people, serious people, that endorse that practice and say that it is natural in some places.

To exist bribery, we need to have at least two actors, the one that "donates" and the receiver, what happened was a long and old process, where the powerful offered advantages, gifts and bribe to have their interests attended quickly, and that process in some world regions become more usual. It is easier to buy the guy than to explain what I want.

In 1999, I read on a local newspaper, or magazine, an absurd, difficult to believe, but it is real and I think that I have until today that article in some place. A diplomat from a developed country said, in an emerging country, and it is written, something like: "who has the money makes the orders". I think that I don't need to make more comments on how bribery was expanded in some regions.

Another point that I read, it is that each country makes or interprets their business ethical standards. I believe that it is, also, not true. Each country has a level of "corruption contamination", that should be the reference. An observation, corruption is not only a characteristic of poor countries. We find it, also, in developed countries, and frequently.

So, Ethics is one thing, business rules and cultural aspects are another.

Cultural aspects and how to deal with their particularities, depends on the study and interest of each one that wants to develop international business, and it is needed, before making suppositions about it and delegate that responsibility to ethical differences.

To kill, to steal and to harm others aren't a moral acceptable behaviour in any place in the world. Business rules are made by the human beings and followed in a moral or immoral way, as their conscience and education says.

This article is focused on the Harvard Method, the MIT Negotiations Course, and the Harvard Negotiation Project.

The method is based on four basic points: people, interests, options and standards (objective criteria).

Negotiations should be based on principles and each negotiator should focus on objective criteria and legitimacy.

Before start a negotiation, some work must be done. Analyze yours and other parties' interests. Align both interests and develop options for mutual gains. Be prepared to avoid bargain positioning and to return to principles, and objective criteria.

Observe the quality of information when evaluating options, do not overestimate choices, have a broad knowledge of the context and market, and avoid emotional or subjective evaluations.

Now, returning to people, interests, options and standards (objective criteria).

People:

Separate people from problems. Be aware that the value of incentives may diverge from one party to another. What is fair allows different interpretations. Develop mutual understanding, trust and respect, and sustain the negotiation within the reason field. Avoid emotions.

Avoid fixed positioning. If some divergence comes up, try to revise opinions, share information, and clarify some points by understanding the other party, making questions or asking for help. Sustain the focus on objective criteria and principles.

Experienced negotiators are prepared for people conflicts, they analyze emotional traps, have strategies to deal with emotions, have active listening and empathic actions.

Interests:

Interests are what we want to achieve. Positioning is what we decided according to the interests. For each interest we have different positioning.

We negotiate to have our interests achieved, and negotiation is the use of power, time and information, though, all aspects must be optimized in the right and ethical manner.

To accomplish it, we need to be sensible to the negotiable issues, must recognize the interests of the other party and demonstrate it, maintain the process strictly on objective criteria, standards and principles. However, we should be affable, polite, with a constructive spirit and a facilitator.

In the case of impediments to develop the negotiation toward an agreement, try to identify the reasons, suggest alternatives by asking "why not", discuss other options with a "if we", and try to involve the other party with some question like: "why should we do that way?".

Options:

Some options (alternatives) should be already planned before start the negotiation. All involved must have their interests attended, or, at least, close to. The objective is to have a balanced negotiation and, at the end, have all parties satisfied, without hard feelings or a feeling of frustration.

What makes harder the search of options, with mutual gain, is the vision of a unique answer to the problem, or a premature judgment, or the focus on the interests of only one party, or still believe in zero-sum games, with a winner and a loser.

A unique solution tends the negotiation to an impasse, because the absence of options. Other options are eliminated without the correct evaluation if we have a premature judgment. Observing only one party's interest will provoke difficulties and delays. The zero sum-games perspective diverges from the vision of mutual benefits.

Standards (Objective Criteria):

The definition of objective criteria is fundamental to be able to use the Harvard Method, because the method is based on principles, clear values and impartiality.

A common feeling is that, what it is on the table, it is not fair. So, all issues must be clear and don't have any doubts. The best way is to have transparency, impartiality and that the standards (objective criteria) are accepted by all, and assure that they are easily understood and applicable.

When defining them, we must have in mind the balance of mutual interests and impartiality, be open to different perspectives, and not give up under pressure, when the matter is about principles and objective criteria.

If the objective criteria are clear and impartial, the negotiation is facilitated, the stress is reduced, the relationship is preserved and it will be feasible new businesses in the future.

Final considerations:

The Harvard Method is explained in the book "Getting a Yes" from Roger Fisher, William Ury and Bruce Patton.

The book "Difficult Conversations" from Douglas Stone, Bruce Patton and Sheila Heen, has the focus on human behavior. They also are from the Harvard Negotiations Project.

Another perspective is from Richard Shell, from Wharton School, and it can be read on the book "Bargaining for advantage".

To know about the human behavior, understand emotions, empathy, synergy, and conflict resolutions, it is also important.

Just to relax a little in these days of turbulence, before start talking about serious turnaround.

John Bird and John Fortune (the Long Johns) brilliantly, and accurately, describing the mindset of the investment banking community in this satirical interview.

You can watch it at:

http://www.youtube.com/watch?v=mzJmTCYmo9g

Cheers,

Mario

The point is that we are in an economical downturn were the end is not foreseen until now. Actually, until now, no one knows the extension of the damage that the greed of half dozen will cause to the global economy. We are seeing recession in many developed countries and the the "wave" is now arriving to the BRIC group and others. For example, India has many companies that provide outsourcing services to global companies, China produces equipments, Brazil supplies commodities and Russia petroleum and gas (just some examples, not a comprehensive list or limited).

Small and Medium Business (SMB) have, and always had, a special role in regional economies and employment, to accelerate the turnaround of this international crisis, it is a key issue to leverage globalization and entrepreneurship SMBs and start-ups.

It is the same strategy of the Internet beginning with the militar application. Do not depend on one spot only. Divide the intelligence on several servers and geographically separated. So, if one spot blows up the net will continue working perfectly.

Making an analogy with SMBs, if we have a network of small entrepreneurs working and trading globally, the effects of local and global crisis will be mitigated in their businesses, because the connections and relationships worldwide will facilitate new opportunities, the research and discovery of new places where the crisis didn't have large impact or had less effects.

That's why I believe in initiatives that leverage entrepreneurship and support small and medium business, and the possible impacts of its' success on people's life.

Embracing innovation is the only way for Western businesses to succeed in the global market, says Indiana University economics Professor David Audretsch. In his new book, The Entrepreneurial Society (Oxford University Press). Audretsch argues that labor will continue to be outsourced abroad as long as the tasks involved are routine and replicable, but companies that reward new ideas, niche markets and community collaboration can thrive on local employment.

The book traces the progression in the United Sates and Europe from the managed economy of the Cold War era through globalization, arriving at the current state Audretsch terms "the entrepreneurial society." This economic climate, he says, supports businesses that are highly adaptable and targeted to specific consumer needs. Drawing on his research linking the number of startups in a community to its economic health, Audretsch concludes that industries must adopt an entrepreneurial mindset in order to remain viable.

"If your company's competitive advantage is based on lowest cost, you're out of here," he said. "If you want to stay and thrive in the United States, the focus needs to be on innovation. You need to think of things we're not doing today."

Baby boomers have had a difficult time grasping the changes of a globalized economy, he said. They inherited the economic success of the postwar era, in which large corporations were the major employers. Their attempts to follow an outdated formula have led to personal and corporate financial failures, Audretsch said.

He hopes The Entrepreneurial Society will "help them rise to the opportunities of globalization rather than be victimized by it," he said. Although Audretsch has written and edited more than 30 books on economic development, this is his first for a general audience.

"I wrote this book to tell my generation what happened to the world we knew and loved-and to tell our children why we're so strange," he said.

Moving beyond the conclusions of Thomas Friedman's 2005 bestseller The World is Flat, Audretsch argues that business innovation actually occurs in geographical "pockets" such as Silicon Valley software development, fashion in Paris and Milan, and finance in New York. Talent-and wealth-tend to collect in these areas known for cutting-edge development. The solution to the off-shoring dilemma, Audretsch says, lies in identifying community strengths and building these areas as hotbeds of innovation.

"It turns out, ideas and creation of those ideas happen in a proximate way-people gathered together make ideas grow, and to proactively respond you need to be in the same place together. Business innovation functions much like the world of music-the best work happens when you get together and jam," he said.

The generation that is now entering the work force understands these concepts instinctively, Audretsch said.
"Young professionals now talk about starting firms the way their parents used to talk about landing a corporate position-it's how they expect their careers to develop. They seem to 'get' the idea that by appealing to niche markets they can fulfill a unique need, whereas their parents, for the most part, are still doing the same old, same old," he said.

Mature managers need to take a lesson from their 20-something children and rethink the way they do business, especially with respect to gathering ideas from all levels of their organizations, he said.

"Corporate culture needs to reorient so that if you try a new venture and fail, you're not going to be penalized. Trial and failure in the entrepreneurial society are just part of the process. We need to create structures and incentives that encourage managers to get out of the way of new ideas. Create a path that rewards innovation and input from all levels, and you won't be able to export that."

Audretsch is director of the Entrepreneurship, Growth and Public Policy Division at the Max Planck Institute of Economics in Germany and Ameritech Chair of Economic Development and director of the Institute for Development Strategies at Indiana University. He teaches in the School of Public and Environmental Affairs.

Source: http://www.kauffman.org/Details.aspx?id=980

To speak with Audretsch or to obtain a media review copy, contact Elisabeth Andrews, IU Media Relations, 812-855-2153 and ecandrew@indiana.edu.

We will use the web site to inform about the project development, to discuss new ideas, to present new topics and available pages, and to allow the participation of every one in this project.

As said, this is a non-profit project and any help with ideas, comments and items that can accelerate and improve the quality and feasibility of SMB and Start-up Business Development worldwide will be welcome.

The added information resulted by an external collaboration, after evaluation and in synchronicity with the project, will have its author or authors identified and added to the collaborator list.

Looking forward to hear your opinion and suggestions.

For more informations: http://marioferreira.synthasite.com

Regards to all readers,

Mario Luis Tavares Ferreira