Internationalisation, Competitiveness and Development of Small and Medium-Sized Enterprises: Segment Reporting by Geographical Area and the Strategic Time and Cost management of Logistical Process

Globalisation means that enterprises face fierce international competition. Development through internationalisation is, at least logically, a rational response to the threat posed by foreign competitors. However, undertaking development through internationalisation is not sufficient to achieve success. Profound changes are needed in leadership style, organisational structure, reporting system and process management patterns in small and medium sized enterprises. SMEs, as we know, are usually controlled by a single family and suffer from the influence of this family in fundamental decisions, including the start up of a development process. It is well known that the leadership of these enterprises is hostile towards the entry of new partners and managers from outside the controlling family and towards aggregation with other enterprises. The ability of the family owners to bring in the necessary financial resources and management expertise for development limits their growth. It is to be hoped that the shock of foreign competition will help to remove these “cultural” barriers, which restrict development and can even threaten the very existence of an enterprise, given the shape taken by competition dynamics over recent years. Among the many changes needed for success in the internationalisation process, we pay particular attention to those regarding the reporting system. This system must be adapted so as to supply economic-financial values and disaggregated results by geographical segment. Thus, it allows for internal segment reporting, addressed to top management, and external reporting, addressed to stakeholders. In international enterprises, disclosure of information on the economic-financial performance of individual segments (geographical and/or operational) is essential, both for strategic and operational management and for the improved quality of external economic-financial reporting. We know that investors and financial analysts, in making portfolio choices, evaluate information on the economic-financial performance of individual segments, as well as that of the enterprise as a whole (or that of the group). Segment reporting by geographical area increases the confidence of the financial markets and, thus, should reduce the cost of equity and credit capital. Internationalisation inevitably increases distance from markets and, thus, the time and cost of logistical processes (purchasing, internal movements, sale). This puts competitiveness and the survival of the enterprise at risk. The time and cost management of these processes, therefore, becomes strategically important and makes the evolution of programming and control systems and internal reporting necessary. In order to be able to carry out the characteristic functions of decision support and organisational co-ordination, these systems must highlight information, suitably disaggregated by activity and process, on the costs and times of logistical processes, as well as on the other variables decisive for success.