Micro-Multinationals, and How They Will Define Our Era

What's made the rise of the micro-multinational possible is the reality that, in the 21st century, you don’t have to be big to go global.
The growth of micro-multinationals

Raj Subramaniam, Executive Vice President, Global Marketing and Communications, FedEx Services

“No new business is worth starting in these times unless it can go global.”

Sir Richard Branson, founder, Virgin Group

Back in early 2003, a Dane named Janus Friis and a Swede named Niklas Zennström had an idea for a software application, and founded a business with the help of three Estonian software developers. A new multinational, albeit a small one that nobody had ever heard of, was born. They set about registering an internet domain name and preparing for the release of a Beta version of their app later that year.

Fast forward to 2011 and the business had been bought by Microsoft for a whopping US$8.5 billion. The app, Skype, had become a household name – in fact, I have it on the smartphone  in my pocket as I write this, and I’m sure that many of you reading this do too.

This was one of the earliest iterations of the ‘micro-multinational’: small, self-starting companies that are either ‘born global’ or else leverage online business platforms and the increased openness of the global economy to enter global markets1.

What’s made the rise of the micro-multinational possible is the reality that, in the 21st century, you don’t have to be big to go global. Today, all you need is a mobile device, a shipping platform and a big idea.  Even the smallest business has access to communications and computing innovations that were beyond the reach of even large companies just 15 years ago, at little or no cost. This is a hugely significant sea-change: Hal Varian, Chief Economist at Google, believes that this will have a game-changing effect on the world’s economy and culture in the early 21st century. I believe this is no exaggeration.  By combining virtual networks (high-speed internet, mobile communication and other digital technologies) with physical networks (transportation systems and logistics platforms), micro-multinationals have the potential to disrupt industries virtually overnight. They will come to define our era much as large multinational corporations defined global business in the late 20th century.

So what’s the big deal about micro-multinationals? To start with, micro-multinationals are small- to medium-sized enterprises (SMEs) by definition – a critically important part of the global economy that makes up about 90 percent of all businesses, more than 99% of all employer firms2 and more than 50 percent of employment worldwide. They enjoy the same advantages as other SMEs, such as the agility to respond quickly to market changes, a collaborative DNA that fosters innovation, and the absence of the institutional inertia that often plagues larger organizations3. Unsurprisingly, the scale of the opportunity that micro- and small- to medium-sized enterprises (or MSMEs) represent has not been lost on observers. As far back as 2012, McKinsey predicted that, by catering to MSMEs in emerging markets, bank reserves could achieve growth of 20 percent per year between 2010 and 20154.

However, while micro-multinationals form part of the highly important SME category, there is a distinction to be drawn between micro-multinationals and SMEs generally. Micro-multinationals enjoy advantages that are unavailable to SMEs operating in a single market, such as the ability to exploit global variations in knowledge, skills, and labor costs. They can operate their businesses around the world and around the clock across multiple time-zones. Essentially, micro-multinationals have all the traditional benefits of being small and nimble, plus additional ones that come from being able to operate and market their products and services in multiple global markets.

India provides a case in point. On eBay alone, 15,000 Indian entrepreneurs export products through 39 eBay worldwide sites to 128 million active users from 201 countries around the world. There are micro multinationals which have taken on interesting niches, selling leather jackets from Dharavi, horse saddles from Kanpur, Paintings from Kochi and even vanilla beans and essence from Mumbai. Yet the average retail export entrepreneur on eBay only employs about 5.3 full time staff.

Of course, micro-multinationals are subject to the same commercial realities as all businesses. Some will go bust or be bought out. Most of them won’t be the ‘next Skype’. They might look more like Vast.com, a big data solutions provider for homebuyers. It has 25 employees across five time zones, four nations and two continents. Its executives sit in San Francisco, its CTO is based in the Dominican Republic, and its development team is in Belgrade. According to its CEO, “We are building a company in a way that wouldn’t have been possible even two years ago.”

Or consider Local Motors, an Arizona-based car company with a difference. The company has no design team and does little in-house R&D. Instead, it has an online network of 12,000 freelance designers from 121 countries that collaborate on futuristic car designs. Unlike most carmakers, there are no massive manufacturing facilities or shiny global headquarters: the company produces cars using a network of micro-factories. To date, it has designed and manufactured 50 off-road vehicles and plans to produce 1500 more. Low overheads make this a highly successful business model: the company only employs around 15 full-time staff5.

At FedEx, we believe that micro-multinationals will change the face of global business across industrial sectors and geographical boundaries. The logistics industry has a key role to play in their success, and we’re gearing up to support them, not only with rapid and reliable logistics, but also by providing deep expertise in trade regulations and supply chain management6. After all, promoting cross-border trade also promotes the interests of micro-multinationals, contributing to the health of national economies7. And when that happens, micro-multinationals, their employees, customers and communities all prosper.

—–

[1] Mettler and Williams, The Rise of the Micro-Multinational, The Lisbon Council 2011

[2] FedEx GCR 2014

[3] Mettler and Williams, The Rise of the Micro-Multinational, The Lisbon Council 2011

[4] Chironga, M. et al, Micro-, Small- and Medium-Sized Enterprises in Emerging Markets, McKinsey & Company, 2012

[5] Mettler and Williams, The Rise of the Micro-Multinational, The Lisbon Council 2011

[6] FedEx GCR, 2014 & 2013 & FedEx APAC 2014

[7] FedEx-approved press release, February 2015

   SME