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  On "Subject" mention article name and author

Latin enterprises must move swiftly into new economy

 Jerry Haar

Jerry Haar is a senior research associate for the Dante B. Fascell North-South Center at the University of Miami, and a visiting scholar for the Department of Management at the Wharton School of the University of Pennsylvania.

Spanish version>>

Until several years ago, being entrepreneurial in Latin America was a choice, not a necessity.

However, market reforms and trade liberalization have been changing that.  Technology – notably the Internet and e-commerce – is making it an imperative.

The new economy is bringing unimagined challenges, as well as opportunities, to Latin American enterprises – small, medium and large.

George Land in his 1973 hallmark book, Grow or Die, argues that growth and its creative management are the unifying principles of corporate transformation.

The book’s thesis and prescription aptly apply to Latin American firms and the new economy. This holds true especially for small and medium-size firms, or SMEs.

Researching the impact of regional economic integration on SME suppliers in Mexico, my colleagues and I are finding that neo-liberal reforms, market liberalization and deregulation are forcing many to change their strategies, structures and operations, or wither.

Moreover, technology and the intensity and appropriateness of its application is found to be a determinant of survival and sustained competitiveness. Also, the more entrepreneurial the firm the greater the likelihood it will embrace technology and the new economy.

And a myriad of business-to-business dot-coms are aggressively marketing their wares to help SMEs develop, sustain and improve their business competitiveness.

For example, Decidir.com provides information on companies’ credit, tax, import, legal and financial histories. Asista.com provides a portal for buying and selling products and services, as well as a hosted Web-based eProcurement application bundled with e-catalog management and invoice payment consolidation services.

As for the large firms, they too are under tremendous pressure to reform, re-engineer, merge, acquire, as well as develop strategic alliances and joint ventures and continually invest in and apply new technologies.

Moreover, innovative large companies, such as Vitro in Mexico and CTI in Chile, are following in the footsteps of firms such as 3M and General Electric in fostering “intrapreneurs” to inject new economy approaches, methods, and spirit into product development.

Here at home, new economy global leaders like Microsoft, Oracle and Hewlett Packard are doing the same, for other reasons as well, to deter defection to competitors and dissuade employees from leaving to launch their own firms.

A telling finding of the new economy’s transformational impact on firms may be found in The Economist magazine’s survey last March of Latin CEOs. Nearly one-third expect to earn 20 percent of their revenue from e-business by 2005. Large firms especially are rapidly expanding both their business-to-business and business-to-consumer operations.

Steel companies can avail themselves of e-commerce firms such as Mexico’s Aceronet, a Latin American steel portal for buying, selling and transport. Food company Bimbo and Oracle are developing a $50 million project to start Internet trade with clients and suppliers; and business-to-consumer business is also expanding rapidly in the region. Pão de Açucar, one of Brazil’s largest supermarket chains, sells 3 percent via the Web and expects to grow to double digits in the near future.

The greatest challenges facing entrepreneurial firms in the Americas pertain to human resources and technology.

In the first instance, companies of all sizes that aspire to compete and boost profitability in the new economy are faced with a critical shortage of workers at all levels who understand the rudiments of technology as a business tool.

The concept and practice of knowledge management and organizational learning are absent in most Latin American firms. Far too many firms have yet to recognize the applicability of the Internet and e-commerce to the business functions of production, marketing, logistics, procurement, management, recruitment and finance.

As for technological impediments, Internet service provider fees, the costs of computer purchase or lease, and charges for local telephone connection usage are not inexpensive.

In Brazil, the most wired country in Latin America, the Internet access cost for heavy users averages $83 per month – double that of the United States. Expanded use of e-commerce by SMEs is especially formidable.

As reported in a recent study by InfoAmericas, merchants are erroneously investing far too much in promotion and far too little in technology. Among the major capability gaps are automated purchasing software, secure Web environments, integrated inventory and shopping solutions and logistics.

The transformational prowess of the new economy will multiply as technological change and globalization advance throughout the Americas. Entrepreneurs and entrepreneurial firms that act swiftly, decisively, creatively and aggressively in embracing the cyberworld for their advantage will grow, not die, and produce benefits for both themselves and society at large.

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