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The entering of small to medium enterprises (SME) into any market is mostly seen as a disruptive product; in the EM these are products are define as fugal innovations due to the altering of an existing developed country product to suit the needs and the wants of the local markets. As the wants and the needs of these consumers change due to technology development and exposure more and more MNC facing the challenges to really understand their consumer in the EM.
Christensen and Raynor have identified indicators that can be used to identify if the market is suited for the penetration of these disruptive products. Hang et.al (2010) cited two indicators i.e.; does the market consist out of consumers that will purchase these less good enough product at a reduced price, and for these targeted consumers does the product help to accomplished a function. Guillen and Garcia-Canal (2009) points out that the “new” MNE’s home-grown competitiveness and advantages are the main factors for SME in EM. The authors also expressed the importance for these SME’s and new MNE’s to enter the developed markets to test and expose themselves to a more sophisticated market.
Competitive advantages and entering the new markets
The competiveness and entering new markets will be highlighted as follows by incorporating the principles of Christensen and Raynor reading with Schmidt and Druehl (2008) on encroachment processes for a sustainable market through disruptive products;
A SME needs to consider all four encroachments alternatives which includes high-end and the three low-end scenarios. The competitiveness of a SME in an EM is that as earlier highlighted by Guillen and Garcia-Canal (2009) is the home-grown advantages. The SME will be able to identify the requirements and wants/needs of the BOP and the high level of the hierarchy. The firm can pursue a balanced growth path; this will enhance the organizations capacity building and close the gap in competing in an EM with MNC. Hang et.al (2010) highlights that the R&D with the capacity growth will play an important role in expanding into other markets, the authors also highlights that for MNC just to change existing products also will not maintain a sustainable future. This where the local SME’s understand the resource-constraint consumers, these SME’s faces robust R&D environment which MNC’s don’t always have access through without a partner in such an EM. Through developing a low entry disruptive product a SME can improve their global vision through partnership and exploiting the BOP in developed countries who will associate themselves with the product.
The SME’s need to do a sensitive analysis on the three step process which will help the organizations to make projections into the future. Although they might market their products for the BOP this market segment will also be introduce to better technology which needs to be adapted as the needs and the BOP increases. This R&D of the SME’s will improve their ability to a better analysis to understand the future development of the product which can be introduced to developing countries. The MNC’s are intend to concentrate on lowering the standards and requirements of the products into the EM at a better price, whereas the SME’s in EM are more focused on improving the quality and requirements of their products which they can introduce into the global market.
SME’s needs to look for situations where consumer segments are negatively influenced across attributes, buy developing a home-grown innovation the consumer don’t see this as a less superior product but as a product especially invited for their own market. By developing this invention it can be introduced into other markets as “new” products, we need to remember that even the developing countries has an BOP which can utilize these inventions.
The advantage and competitiveness of the SME’s or new MNE’s in EM is that they can make quicker and faster decision to adapt to the globalization requirements due to them not facing the organizational bureaucratic process of MNC. This advantage is not just to adapt the innovation but also to introduce the innovation into foreign markets by direct contact between the discussion maker in the SME and the new market.
Tesfom and Lutz (2006) express the challenges organizations experiencing to export into EM. The local SME’s have an advantage to understand and manage the local authorities and legislation relating imports and exports. The SME’s in EM pricing benchmark is much lower as in developing markets, their business plans are build based on their current pricing which they can use to introduce their products into the developing countries.
If we look at the case studies in hang et.al (2010) they are all SME’s which grew into new MNE’s, these organizations identified unique challenges and through R&D could develop a market related innovation. A SME needs to remember as in case of Suzlon those mergers with organizations in developed countries will play an important part of their expansion into those markets; these expansions will also go hand on hand with patent protection of their products (Hang et.al, 2010). Due to the rapid growth in emerging markets it gives the SME’s the opportunities to invest into new markets, the organization is use to operating under very difficult conditions which make them more adaptable and resilient (The Economist, 2008).
Conclusion
SME’s in EM have competitive advantages due to their knowledge and understanding the wants and the needs. To enter into the global market these organizations need to build on their R&D and by establishing suitable mergers they can introduce their products into other EM as well as other global markets.
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