SEM 2018-2019 2 IS SPECIAL INDIVIDUAL ASSIGMENT - SEM I 2018-2019 2 Contents Question 1 3 5 Question 4 10 Reference 13 3 4 10 Question 1 Small and medium sized businesses

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IS SPECIAL INDIVIDUAL ASSIGNMENT – SEM I 2018-2019

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Contents
Question 1..................................................................................................................................3
Question 2..................................................................................................................................5
Question 3..................................................................................................................................7
Question 4................................................................................................................................10
Reference..................................................................................................................................13

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Question 1
Small and medium sized businesses are organisations with a small scale of operation. The
firms are also small in terms of the resources and financial back up as well. In a world of
globalisation, there is a huge opportunity for the SME's. One of the biggest opportunities that
intrigue the managers of the SMEs is the vast global market which provides a huge customers
base with different capabilities, preferences, and needs (Clercq, Sapienza, and Crijns, 2005).
The international operation also paves the way for becoming a large business in the world as
well. However, there are many constraints which are there in front of the SMEs which makes
it tougher for them to invade the international economy.
First and the foremost challenge faced by the SME are economies of scale. The economies of
scale are referred to as the size of production system that can produce a huge number of
products at a time. The size of the production capacity impacts the cost of production of the
companies. If a company produces in large quantities, the average cost of per unit of
production goes down. Due to lower demand and low market share in the domestic market,
these SMEs fail to produce in a larger quantity and hence the price of the goods or the
services remains high. The big players of the market reduce the price of their product using
the huge scale of production and give the huge fight to the small and the medium businesses.
Holmlund and Kock (1998) stated that big companies get to exploit the cheapest resources
around the world in order to keep the operational cost low. Another major challenge faced by
the SME is the lack of knowledge in terms of global operation. International operation
requires a lot of connections and networking that helps the management to smooth out the
processes of the businesses. Apart from that, networking also helps in generating the initial
sales as well. For example, Nokia is a well known mobile phone brand headquartered in
Finland. The company dominated the global market until the emergence of advanced Android
devices. It restructured the production process to deliver the technologically advanced phones
but failed miserably (Wright, Westhead and Ucbasaran, 2007). The connection and the
networking in terms of the technologically advanced phones were not up to the mark.
Consequently, despite being one of the largest sellers of bar phone in the market it lost its
reputation and recognition in the global market.
The third problem faced by the SME in terms of the invasion in the international market is
the risk-averse behaviour of the management of the firm. The risk is an integral part of
expansion and profit maximisation of any business. The main key to the successful operation

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is the management of the risk (Fayolle, Liñán and Paul, 2017). However, the small and
medium companies lack the infrastructure required for the risk-taking process. Risk taking is
an integral part of expanding the business, however, the lack of cash flow and funds limits the
risk-taking processes of the small and the medium size companies to expand into the
international market. These SMEs fail to reduce cost in the future and hence they eventually
go out of the business after a certain point of time (Onkelinx, Manolova and Edelman, 2016).
The fourth challenge that influences the operation of the small and medium-sized businesses
in the international market is the competition from the other sellers of the market. Successful
international players have found a combination of strategies that suite with the demand for
the goods or the service. Therefore, they are more stable in terms of the financial
performance of the company than the new entrants (Dimitratos et al. 2016). This hampers the
competitive edge of the small and medium company and pushes it to go out of business. The
last but one of the important problems is the lack of leadership experiences. International
operation and success require strong leadership management and experiences. Small and
medium-sized business can neither afford to hire an experienced leader nor do they have a
business leader having experience of international operation. Therefore they suffer in the
initial days after penetrating the international market.
These problem faced by the SME’s can also be managed through adequate decision making
and policies. Many of the SMEs have tackled the challenges and emerge as one of the biggest
companies in the world (Mah, 2018). One of the common examples is Wal-Mart which kept
itself isolated for a long time in the geographical boundary of the USA. When it tried to
expand into the global market it faced a huge problem from the established marketplaces and
the supermarkets. Apart from that, other supermarket chains have also put immense pressure
on the operation of the Wal-Mart. However, Wal-Mart undertook pre-emptive strategies in
most of the locations they worked in which helped to fight the rivals in the market. Therefore,
getting hold of the small market is the way the sellers can generate a demand for the goods
and the service they sell in the international market. This can also allow the management to
use a higher scale of production that eventually can reduce the cost of production per unit of
the company (Jacobsen and Van Vugt, 2017). Lack of financial knowledge and the market
operation problem can also be addressed through the learning curves. The management of the
company should take a calculated risk for each of the strategies so that it can learn from its
mistakes. Most of the big companies operating in the global market have made mistakes