Sunday, June 24, 2007

The characteristics of MMNCs

In his reply to my June 19, 2007 post Cedric puts it in nice words that the uniqueness of a micro multinational  "is the venture capacity to build a strong brand equity in a narrowly defined market with very limited resources, using the most efficient tools".

As I see it, following are the characteristics of a Micro Multinational Company.

  1. Operates in several countries.
  2. Normally a small group of people runs it.
  3. People are scattered around the globe.
  4. Resources are limited.
  5. Many people wear several hats.
  6. Financing available for growth is not sufficient.
  7. Usually can be categorized as a small business.
  8. Adopts the new technologies very quickly.
  9. Heavily leverages the Internet for expansion.
  10. Uses resources very efficiently.
  11. Mostly managed by entrepreneurs with extensive technical backgrounds.
  12. Most of the people in the company are stake holders instead of employees on salary.
  13. Routine daily tasks are outsourced to countries with low cost technical labor.
  14. Yearly combined budget of the growth and management tools is only a fraction of the annual sales.

The last point in the above list needs special attention. I'm glad that Cedric mentioned this characteristic in his reply because ideally it should be true.

It was true for Heaven Fresh for the first three years. When we started the business, we used open source software tools and low cost services to manage every thing. For example, osCommerce as shopping cart, mySQL for databases, shared Linux servers for a low monthly fee, Google/Yahoo pay-per-click advertisement, Quick Books for accounting,  self-managed computer network, open source e-mail clients, in-house developed scripts/programs for various automation tasks and so on and so forth.

First of all I myself have software development background and I also got lucky to find people to work with who are quite technically adept.  We kept our overheads low by using any tool available for growth and management of the business. But eventually, it became increasingly difficult to use all the bits and pieces in an integrated fashion. We simply do not have enough time to manage the growing business and in parallel develop the technical infrastructure as well. Instead of trying to use bits and pieces we went on a hunt for a comprehensive low cost /open source business management software that could keep up with all the technological advancements without us having to spend way too much time or hire expensive IT guys.  After spending 10 months and a few thousand dollars on experiments with various software packages, to our astonishment, we could not find a single system that could meet our needs. 

At last, against our own wishes, we ended up biting the bullet to invest in a commercial software management service called NetSuite. NetSuite, in my opinion is the best of the worst situation for us. Any other solution is simply not viable at this point in time.  Being a software developer myself, I feel painful to acknowledge that we are spending about 15% of our annual revenues on the IT infrastructure to manage the growth of Heaven Fresh.  The surge of our IT costs from fraction of the the sales to consuming almost all of our profits overnight is a bitter fact that we have to live with. This difficult reality made us believe that the 21st century businesses (the micro multinationals) need a radically different approach to stay competitive and take advantage of the opportunities provided by the Internet. We also realized that a monstrous opportunity exists for any one to provide business management software and tools to this new breed of entrepreneurs and companies across the globe. Therefore, we decided to develop it.

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