Factors of Success and Risk, Opportunities and Strategies for Western SMEs Doing Business with China

Smaller firms, as a group, form the basis and largest proportion of the Western economy, whether in terms of GDP, employment or innovation. Yet they account for only a minor share of exports and foreign direct investment, showing a low level of international activity when compared with multinationals.

The recent globalization of the world economy puts considerable pressure on SMEs to act globally, with usually only very limited resources available. China, at the beginning of the 21st century, is becoming the latest (and the most efficient) of the “workshops of the world”, taking over the position that the USA benefited from in the early 20th century and the one that England created for herself in the early 1800s as she went through her industrial revolution.

As such, China becomes an essential consideration for SMEs, because it is:

• a key source of components and services, as well as a capable contract manufacturer through which foreign companies can outsource their production
• an increasingly important location for set up of operations by the customers of SMEs
• an attractive and potentially enormous local market, as well as
• a vast and fertile ground for the development of competitors for SMEs
  

Research into both SMEs and China as separate subjects has attracted considerable attention recently. Very little study has actually been carried out into occidental SMEs dealing with China, however; neither into their opportunities and successes, nor their motives and strategies. This review of existing literature and qualitative fieldwork intends to shed some light on this particular aspect of small firms international activities.

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