Current Operational Practices of U.S. Small and Medium-Sized Enterprises in Europe

Article excerpt

This article presents the results of a survey of all U.S.-owned small and mediumsized enterprises (SMEs) with physical facilities in Europe. It is a snapshot of the role of key strategic, tactical, and operational elements of U.S. SME globalization in Europe. It presents descriptive results regarding drivers of expansion, barriers to entry, entry strategies and current operating strategies, growth strategies, operational barriers, and the use of strategic alliances by SMEs in Europe. The findings are also compared with the literature on large firms. This allows the reader to see the distinct differences between small and large U.S. firms operating in Europe.

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Introduction

The global market has traditionally been the battlefield of large, multinational corporations (MNCs). However, the past 20 years has witnessed the evolution of a new global manufacturing environment, with firms of all sizes now competing globally in order to obtain new competitive advantages. Unfortunately, most global operational research has focused on the practices of MNCs and neglected the fact that small and medium sized enterprises (SMEs) and MNCs do not operate in similar ways. This paper helps fill that gap by presenting the results of a survey of all U.S.-owned SMEs in Europe and detailing their key strategic, tactical, and operational elements.

The literature's neglect of smaller firms is ironic because, in developing countries, SMEs account for more than 90 percent of all jobs, sales, and value added. In developed countries, SMEs account for over 50 percent of these measures (UN 1992). In fact, firms with fewer than 500 employees employ almost half of the U.S. workforce, and over 88 percent of U.S. firms have fewer than 20 employees (Fiegenbaum and Karnani 1989). In addition, U.S.-based SMEs are increasingly active in global markets. A survey of over 400 winners of the Entrepreneur of the Year (EOY) Award found that 56 percent of the respondents were active in the global arena and that another 39 percent plan to expand into new global markets (Ernst & Young 1995).

The objective of this paper is to further investigate the salient features related to some of the strategic, tactical, and operational elements of SMEs as they globalize. Although some research has looked at general SME issues and foreign direct investment, most studies have focused on large multinational corporations or small firms that export directly (Czinkota and Johnston 1983). This neglects the operational needs of those firms that have moved beyond exporting to establish a physical presence in markets abroad. For those SMEs that have moved beyond direct exporting and actually placed facilities overseas, research on understanding the strategic and operational aspects of the globalization process is virtually missing in the current literature. This is of concern as there are differences with respect to both general and specific operational issues (Cagliano, Blackmon, and Voss 2001).

This paper presents the results of an investigation of the role of key strategic, tactical, and operational elements of U.S. SME globalization in Europe. It presents descriptive results regarding drivers of expansion, barriers to entry, entry strategies and current operating strategies, growth strategies, operational barriers, and the use of strategic alliances by SMEs in Europe. The findings are also compared with the literature on large firms. This allows the reader to see the typical differences among these factors between small and large firms operating in Europe.

There are several reasons to focus on Europe. First, for U.S. SMEs, Europe has been the most popular location for overseas expansion because of the relative similarities in markets, language, and culture in comparison with other areas of the world. Second, we feel that the overall globalization process of U.S. SMEs in the world can be effectively studied by focusing on U. …