Question

Multinational enterprises (MNEs) have an impact far beyond their firm boundaries. Assume you are working for a small firm that supplies a product or service to an MNE. How might your relationship change as the MNE moves from Globalization 2.0 to Globalization 3.0 operations? Being a “small firm”, what are some examples of how this relationship change could potentially benefit the company? How might the change affect a small supplier in a negative way?

Answer 1

How might your relationship change as the MNE moves from Globalization 2.0 to Globalization 3.0 operations?

Being a small supplier firm to a large MNE, considering the scenario when the MNE makes a shift from Globalization 2.0 to Globalization 3.0, I think the following shall happen:

1. My reach to company’s other subsidiaries will increase. I’ll be able to cater the other subsidiaries/ locations of the same Firm globally and make myself available to other buyers in different parts of the world. This will help me to grow my potential, goodwill, reach, business, revenue and hence profits.

2. My relationship with the current company shall definitely be fostered as I’ll be taking care of more of its demand and be supplying to its several locations across the globe.

Being a “small firm”, what are some examples of how this relationship change could potentially benefit the company?

1. This changed relationship shall benefit me in the expansion of my business. I’ll be able to generate more profits and my firm shall be able to thrive in the competing market. I’ll be competing in the global market and hence making a transition from a local to the global player.

2. As the world has shrunk from small to tiny (Globalization 3.0), my business will be able to take leverage of improvements like telecom (business communications made faster), online platforms (for online office which will reduce my capital invested & tools like Skype through which I can avoid going physically for an abroad business meet) and other sources to make sure my clients are being served 365 X 24 X 7 across the globe like many MNEs do.

How might the change affect a small supplier in a negative way?

The change shall affect a small supplier in some ways like-

1. The newly invested capital during the transition might not generate results immediately and a small firm like me might not able to take any shocks if the new plan backfires.

2. Going globalized has a demerit of not being accepted by the new culture of the foreign country. For e.g. a small firm in Bangalore, India (when going global) might not able to adapt and deliver the services satisfactorily to a distant firm in France initially. This might take time and help of some local mediator there. This transition time can be loss-making- for a small firm like me.

3. While competing in Globalization 3.0, the small firm might not be able to tackle with the degree of competition in the new market. This is a reason the idea of entering new markets can backfire. Or the firm might take some time to enter and make its place in the new foreign market.