Greek SMEs and the EU common market: Recognizing opportunities

Small and medium-sized enterprises (SMEs) are key players on the global economic playing field, and even though their economic impact may not be as strong as their larger counterparts, they remain the fastest-growing international trade sector. In Greece SMEs represent 99.9 percent of the total number of active enterprises and are those who have been affected most by the recent crisis. It is important to note that Greece, like Italy, Portugal and Spain, has a much higher percentage of employment in SMEs than the European Union average, with a percentage rate above 50 percent as opposed to the EU's 30 percent average.

So how can these enterprises survive alone without financial assistance? As the Greek economy enters its seventh consecutive year of recession, there are many medium-sized enterprises – with less than 250 employees as defined by the European Commission in 2003 – but mostly much smaller (fewer than 50 employees), which are struggling against all odds and could benefit from the increased demand and capital that international markets offer, particularly as members of the EU, either through exporting or collaborations.

The motivators (proactive or reactive) which lead SMEs into exporting, particularly regionally, are many and have prompted academic research. It is a growing academic field with a lack of consensus. Investigating the motivators affecting an enterprise (including government policy), we can discover why some enterprises prosper while others are lost in the global marketplace. This can help shape government policy and international policy toward SMEs. Without a particular strategy, without a plan, a company cannot fully understand and recognize the reasons behind its success or failure.

The knowledge of motivators (for example legal restrictions, unsolicited orders, excess capacity, foreign market knowledge, a firm-specific advantage, networks in host or home country, a competitor beginning to move abroad etc) and their effect help the enterprise to determine a strategy and path, the size of the investment, the mode (exporting, joint venture etc). The difference is behavioral, lies between want and must, and determines which category of motivators affect the enterprise (external or internal) and which don't (at this point in time).

The European Common Market is a special case as it is a varied yet united common marketplace without particular obstacles to trade and offering many opportunities for SMEs to internationalize, particularly when it comes to taking their first steps. The best basis for a SME to take its first steps in the international marketplace is in exports as it is low on resources and transaction costs, less risky, and, as internationalizing is based on incremental learning, a stable start is always beneficial. This is in order to obtain strategic know-how and organizational skills which will be utilized in a longer-term strategy. The more knowledge that is accumulated, depending on management, the better an enterprise picks out opportunities and foreign markets (perhaps even through collaboration, depending on the volumes it can produce, its speed, and its shortcomings and advantages).

According to research, location plays a key role in a SME’s selection of strategy and this shows in the difference the EU common market has made for such businesses' export choices, even for smaller enterprises of 50-100 employees. Policy regarding SMEs in Greece must encourage managers to become more proactive in their international strategies, reduce the burden of overtaxation, and allow them to search for opportunities and create a stable launch platform for Greek small and medium-sized enterprises. Government policy is of crucial importance to Greek SMEs and can change many issues either positively or negatively. Knowledge can aid managers who are undecided on looking into international markets, helping them to fully understand their resources and advantages.

The “pre-export” stage, i.e. enterprises that have never internationalized, is the most critical stage for the enterprise, as that is when the company molds its strategy and that phase is what government policy should target. In addition, of great interest are enterprises which are called “born-again globals,” i.e. trying to internationalize after an exit, or for a second or third time, or those who are international from inception (i.e. “born global” Internet enterprises).

The motivators affecting a Greek SME could be internal, external, reactive (i.e. by chance) or proactive (i.e. coming from internal resources and specific knowledge or advantage). These motivators, aside from the obsession with lack of capital and financial recourses, must be investigated further in Greece so that local SMEs can find an escape route from the crisis and gain as much as possible from the international markets, something for which there extensive academic research has been carried out, for large firms in particular.

* Dr Vassilios Stouraitis is consultant for the Food and Agriculture Organization of the United Nations, with a
PhD in International Business Strategy from the University of Reading.