A study by the European Commission (0.6MB PDF) in 2002 identified 4 key drivers of entrepreneurship and small firm development in Europe. These were:

• Continuous technological developments
• Shorter product life-cycles
• Increasingly demanding consumers
• Global competition

Research in 2006 by the Institute of Chartered Accountants of England and Wales (ICAEW) (based on a survey of 1,000 companies) revealed that 60% of companies with 49 or fewer staff bought goods or services from abroad or had customers or operations there.

“Increasingly, small businesses do not start off trading locally as they did in the past,” said Clive Lewis, ICAEW head of enterprise. “If you have a website you can think globally from the beginning”.

[from Small companies look beyond local to go global in the Financial Times, Thursday October 12, 2006, page 4]

The drivers of this trend according to the ICAEW have been globalisation together with the spiralling cost associated with red tape. Increased staffing costs were also becoming a problem for UK SMEs and was a primary reason for the outsourcing of back office jobs to the low cost economies in Eastern Europe and Asia . This is a trend that is likely to double over the next five years.

It is not just in the area of back office support services that SMEs (Small and medium enterprises) and small business start-ups are seeking overseas resources. If a business’ core product or service is information-based then virtual structures, using the Internet as a conduit, may have spawned new form of mini-multinational. For example, GNI is a biotechnology start-up that carries out research in Cambridge UK, data analysis in Japan, clinical trials in China and sells its outputs in the USA to large pharmaceutical companies.

“We take the best of what is available in each country and put them together,” says Mr Savoie GNI’s founder

[from March of the mini-multinational in the Financial Times onThursday May 4, 2006, page 12]

Video conferencing is used to link up personnel and the organisation is able to exploit national differences, cost and expertise to operate as a mini-multinational. Carol Cherkis, Vice President of GNI says that GNI is not a virtual company but a real company “It’s just that we are not all in the same place” [from March of the mini-multinational in the Financial Times on Thursday May 4, 2006, page 12].

Another example of a virtual mini-multinational is Lingo 24 which is a translation company  employing 40 staff in China, New Zealand and Romania with a turnover of £1.5 million and profits of £120,00 (as in 2004). The company’s headquarters are a two bedroom house in Deptford where clients ranging from BP, Honda, Ikea Orange and Travelex are served. Instead of having to physically travel to expensive offices employees can simply log on to a Lingo 24’s central database to obtain all the necessary information relating to translation projects. Homeworking and using international staff reduces overhead costs by 30% and permits a 24/7 service to be offered. Lingo 24 communicate on a daily basis using Skype and e-mail whilst the company intranet is used to monitor quality and provide an editorial oversight.

Richard Portes, an expert on globalisation at London Business School, said: “Small businesses are now operating on a global scale. They could not have done [this] 15 years ago.” Professor Portes added: “The advantage small businesses have is that they are not burdened with long lines of command, where important pieces of information come from operations in one country [back to the centre] then travel up and down chains of command”.

[from Small companies look beyond local to go global in the Financial Times, Thursday October 12, 2006, page 4]

So has the Internet spawned a new form of organisational structure and a new source of competitive advantage for agile and responsive entrepreneurial companies? Are the “big boys” shaking in their boots and would it be premature to start throwing out the textbooks on downsizing, delayering and business process re-engineering…….. or is this just a passing fad?

About the author

Nigel Walton is an associate lecturer for the Open University and the University of Worcester, specialising in strategy, entrepreneurship and international marketing. He previously worked as a management consultant, primarily advising medium-sized companies with growth problems.

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With transatlantic air travel set to boom as the Open Skies policy sweeps away old restrictive practices, it seems that nothing stands in the way of our enjoying an ever increasing globe trotting lifestyle. Rising oil prices and climate change seem mere side issues, but are now moving towards aviation’s centre stage.

Until recently aviation has neatly sidestepped the environmental debate. Its CO₂ emissions were excluded from the Kyoto agreement, international agreements banned taxing fuel, and aviation’s emissions were small compared to other sectors. But now the sheer growth in air travel has brought aviation into the environmental spotlight. Aviation is the fastest growing source of CO₂ emissions, having doubled since 1990 and expected to double again by 2020.

"the sheer growth in air travel has brought aviation into the environmental spotlight"

Aviation can no longer be ignored by national and international policymakers, so a pretty big political battle is in the offing that could well change the economics and role of air travel in our lives.

To date environmental actions have been limited. Because international air travel treaties ban fuel tax on international flights, the only real price measure has been on passenger departures (e.g. the UK’s Air Passenger Duty, varying from £10-£80). From 2009 this will shift to a tax on the operator, which'll be passed on in fares.

Of more significance are the European Commission plans for aviation to join the EU carbon trading programme from 2012. Carbon trading is a major plank in the EU’s strategy to control CO₂ emissions. Major energy users are given a CO₂ quota. If they emit more they have to buy permits, or can sell surplus permits to others. Total emissions are capped and then cut back over time.

The EU proposal is for aviation to be capped at its average emissions for 2004-2006. If an airline wishes to exceed its quota, it'd need to purchase carbon permits from any other sector with a surplus. So, if airlines expand their services, as is anticipated, they'll have a major new cost to pass on in fares.

More speculatively, ideas are emerging for personal carbon trading, whereby individuals would be allocated an annual carbon allowance, which would probably allow for only about 1,000 air miles per year. This may sound draconian, and may never happen, but what is now becoming clear that, like it or not, we're going to be forced to face up to the carbon reality of air travel.

Weblinks

•  
• Open Skies - will the consumer benefit? - The Money Programme investigates
• Big business goes green - watch two high-profile business leaders explain their plans
• Calling companies to account - as companies fight for supremacy, how do we make sure they play by the rules?
• What shall we tell the children? - when it comes to climate change, politicians and the media have treated us like kids. Discover what they’re not saying.
• Join the discussion - how do we curb carbon emmissions from aircraft?
• EU cap on air emissions from 2012 - from BBC News

Courses

• Why sustainable energy matters - free course material from OpenLearn
• Energy for a sustainable future
• Working with our environment: technology for a sustainable future

About the author

Stephen Potter is Professor of Transport Strategy at the Open University. His research includes work on the diffusion of cleaner transport technologies and the development of sustainable transport policies.

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