Globalization Offers Chances to SMEs
by: Michael Richter
- Translation of a German interview -
Globalization is a
terrible phantom for many small and middle sized companies. Michael Richter (see picture) works as a marketing and sales consultant to SMEs since 1991 and has a totally different view. He specializes in
practically marketing and selling investment goods and long-lasting consumer goods to all five continents for more than 356 years and knows more than fifty markets from visiting and selling and he looks at
the globalization as a chance for his clientele. MittelstandsBlog interviewed him.
*Mr. Richter, ‚the world is a village'. What does this mean for an entrepreneur?
When I started more than 30
years ago my business career I had to travel the world to meet representatives, discuss targets with them or visit clients. Although the personal contact will be absolutely necessary during the development
of a business connection it is sufficient today to have contact via the Internet – for the day-to-day-business. We can have online-conferences; see us there and save time and money. Insofar the world really
is a village. However, it is often overlooked in business: We should accept and help each other and this holds also true for business. In a real as in a virtual village.
* Is it justified that globalization is seen as a terrible phantom for the local economy?
No, in my opinion this is totally wrong. Many entrepreneurs are afraid of increased competition, sinking
prices by immigrated competition or copying, when supplying into foreign countries, and so on. But this is overvalued.
* Dumping, however, is a fact?
Correct, but first of all the fact that
Germany is the export champion that many foreign companies are very interested in products ‚made in Germany' and secondly the free market is an essential part of our social system. Its positive impacts are
welcome by most of the people; I would like to refer here to the affordable products of the electronic industry, foreign cars with a better price/performance ratio and much more.
* But immigrants do load our social systems.
Germany is not a country that can survive on its own. Especially also because we are part of the European Union, the advantages of which are profitable
for us. Besides of that some of the negative results are 'home-made' and accountable to political mistakes in the past. One is the integration of immigrants which has to be made good now but more expensive.
* Back to globalization: Has Germany found the right way?
Only in part. We are called the 'export champions', however, the figures are mostly based on huge enterprises. The SME-sector is far
behind – whether we look at Europe or to other continents. An example: In Germany – as in the rest of Europe – far more than 90 percent of the companies belong to the SME-size. If we look, however, into the
sales per inhabitant, we have to ask where the SMEs are. According to the Worldfactbook of the CIA – 2005 – Germany exports only for abt. US$ 12.330 per inhabitant. A comparable value for Austria reaches
abt. US$ 14.900, for Switzerland abt. US$ 19.800 and for Belgium even US$ 25.900. According to this Belgium is nearly double as strong – on the exports per inhabitant – as Germany. Here we can notice that
the German SMEs still have quite some room for improvement and has to be more active.
If we take into consideration furthermore that the exports stand for about 30% of the German GNP, the average
export portion per company – producing goods which are generally ready for exports - should at least reach this figure. Rather more than less, as not all companies can export at all.
* Can one internationalize overnight?
Surely not. However, a company can balance an economical change to the worse in Germany (the local market) better if exports are prospering. This holds also true
if there is a comparable change in any other country.
I always advise my clients to care for the fact that they are no more depending on one client, one market segment or one country at more than 10
or 20 per cent, so that it cannot become really dangerous for them if this specific client or market omitted for any reason. The real 'danger zone' depends on the kind of business and products. A loss of
this size, however, normally does not endanger the existence of the company nor its working places.
* How should someone proceed then?
A comprehensive answer can be found on my website, thus
only a short reply here: Each and every company – as the human beings – has its own 'fingerprint' which is not comparable with even the toughest competitor. As every human being has its personal strengths
and weaknesses this is the same for a company. My recipe – which, of course, has to be adapted individually to the specific company and which leads also to an increase in business in Germany (the home
market) – would be:
1. Define the "fingerprint" and the core competences. These are two different things!
2. Define the right market segments to be supplied and look for potential
partners, through which such market segments can be supplied ideally
3. Analyze the competition being already active locally and define the own strengths/weaknesses compared to them
4. Elaborate a suitable marketing plan and
5. consequently implement this plan
I present comprehensive information and material regarding this on my website – which would go beyond the scope of
* When should one begin?
When business is running smoothly. Such comprehensive additional tasks need time and money.
* But especially during these times we can earn a lot of money back home?
All the more so because you do earn money! You always need money to do further steps. Every new client needs an investment.
Whether for stamps, a visit by a representative, an advertisement or only a telephone call. That is the growth process.
You always have to pass a bottle-neck, personally or financially. For this
reason a company should start when it is easier financially. Contrary to big companies who in most cases have somehow a war chest, SMEs rarely possess of it. For this reason it is easier in good times. As in
all times an entrepreneur is forced to deal permanently with the planning of the future of his company, new ways and new clients, etc., in order to stabilize his company and protect it for the future.
* rovided we have a good time in our business and want to become active. Where do we start?
Now we get to the point, i. e. ‚marketing'. Marketing, contrary to what it is often seen is not only
advertising and PR, but the philosophy of a company. Why?
A company only can survive if it offers something to its potential clients that they want to have, i. e. if it orientates itself at the
market. This includes watching of the markets as well as obvious or possible trends. This only can be done by the marketing department. It is below the overall management the 'governing and controlling
instrument'. There the possibilities as well as looming trends have to be recognized as there – via the sales department and its people – we have the direct connection to the markets and clients. The
information gathered by them have to be discussed and implemented internally, so that the company always has a certain advantage towards the competition – locally as well as internationally.
near to the customer will always be honoured by him, because the company becomes a real dialog partner to the client. He may give the client even some hints for new developments. In general clients treated
this way are less price-sensitive because the feel cared for. That in turn softens the pricing pressure.
* What is your role in this process?
I consult companies willing to ‚take off' in all
matters and questions – from market analysis to market research, from elaboration of a marketing plan to implementation of all results of a consultation – in Germany, Europe or worldwide. If necessary I
execute internal trainings and work in the markets myself for or in the name of a client in whatever marketing task is needed. As long as necessary for him to replace me by an own employee.
Such an extension into foreign markets – isn't it expensive?
I have been waiting for this question – it comes, sooner or later. Surely there is a cost, but I am only 'too expensive', if the same
task, reaching the same goals, can be executed less expensive or if the cost is higher than the profits realized. On my website I confirm that you are entitled to a refund if results agreed between us before
are not reached.
Besides of that my fees are depending on the tasks to be performed as well as the duration of our cooperation – the longer, the lower. Furthermore they are agreed before depending on
the financial strength of a client – and I give the possibility to work – partly – on a 'profit basis' – depending on the discussions.
* Which are the minimum requirements before we can start acting internationally?
We have to deal with different languages and diverging mentalities. That is a learning process which cannot be taken
away from the individual company. However, in the 'age of globalization' – and this closes the circle from the beginning – we have to talk at least English, in order to act whether buying or selling.
Anything else has to be learnt and experienced on the spot.
* Mr. Richter, thank you for this interesting interview. *
Phone: +49-7371-93210, Fax: +49-7371-93217
This article was posted on November 23, 2006
About The Author
Michael Richter - International Marketing- and sales consultant - concentrates for more than 35 years on marketing and selling of investment goods
and long-lasting consumer goods to/in all 5 continents - since 1991 he works as an independent marketing consultant, especially for SMEs worldwide.