The importance of location to the success of a business
What are the key success factors of a business enterprise? This question has preoccupied generations of scientists and business leaders, but it is becoming increasingly important given current developments relating to digital transformation and internationalization. Prof. Dr. Norbert Zdrowomyslaw and his colleagues at the Steinbeis Transfer Center for Network Planning and Evaluation in Stralsund have also been examining this topic in detail as part of a project looking at driving economic development and the promotion of small and medium-sized businesses in Mecklenburg-West Pomerania. Their particular focus lies in SMEs in the state and the role the region plays in economic growth. The lessons they have learned can be generalized and applied to other regions and companies.
Business structures are diverse and the overall economic circumstances companies face are constantly changing. If anything, change is even accelerating. Today’s knowledge-based society thinks in increasingly short time lines in almost all areas of modern life, and no two companies are the same. Whether it’s a small or medium-sized firm, or a major corporation, all businesses are confronted by the challenges of megatrends such as globalization, urbanization, digitalization, and individualization (Horx, 2011). To safeguard innovation and competitiveness, decision-makers have to meet and overcome a whole host of different challenges.
STRENGTHENING SMALL AND MEDIUM-SIZED BUSINESSES
Companies face particular challenges in areas characterized by poor infrastructure, especially in rural areas. It is essential that politicians and local stakeholders think about long-term goals and strategic needs, driving regional development and fostering SMEs, especially given the nature of Germany as the land of the “Mittelstand.” For decades, the Federal Government has been trying to support and strengthen Mittelstand firms in the regional economy. In 2020, based on the collective task of “improving regional business infrastructure,” a nationwide funding system will be set up, primarily targeted at areas with underdeveloped infrastructure. The idea is to offer nationwide federal programs aimed at funding innovation, digital technology, and skilled workers – also expanding regional infrastructures by offering special financing terms to support economic development within different regions.
TIME FOR COMPANIES TO ACT
The external and internal business environment faced by companies is subject to continual change, and the challenge of management is to shape this change. But to do this, organizational structures also have to adapt to the changing situation faced by companies, or systems have to be realigned to maintain competitiveness and prepare for the future. This entails formal models such as change/transformation management, in order to systematically implement measures that foster change, in keeping with defined objectives and strategies.For many decades, scientists and business managers have observed the nature of megatrends and the numerous challenges posed to business and asked themselves an important question: What are the key success factors of a business enterprise? There is no such thing as a standard recipe for setting up a successful company or achieving long-term sustainable growth. For their firms to survive and remain competitive, company decision-makers have to continuously adapt monitoring and control processes in keeping with developments within the company. “In this fast-moving world, early recognition and risk management are becoming more are more crucial to the development and survival strategies of companies,” summarizes Steinbeis expert Norbert Zdrowomyslaw. Politicians have instruments and measures they can introduce to combat the gradual drift away from rural areas and regions with weak infrastructures, and they can use these to safeguard jobs, but the decision-makers at companies and other organizations are on their own when it comes to their image as employers, recruitment, staff retention, training, education, and succession planning.
INNOVATIVE ADVANTAGE AND COMPETITIVE EDGE THROUGH COLLABORATIVE STRATEGIES
Business locations and companies more or less face both national and global competition. One of the main focal topics of the 2030 National Industry Strategy is how small and medium-sized manufacturers and major companies interact with one another when it comes to sustainable value creation: “The aim of the strategy is to strengthen key enabling technologies and fundamental innovations. Other points of emphasis include the structures that underpin networks and business clusters, accelerating how research findings are shared with small and medium-sized businesses and startups, and the technological promotion of innovation.” This does not mean, however, that areas with weak infrastructures, rural areas, or small or medium-sized companies should ignore the possibility of collaborative strategies – quite the opposite. Communication skills and a willingness to enter into partnerships are extremely important, especially for SMEs. Given the fact that every city or region is basically competing for infrastructure investments, investors, new companies coming to the area, jobs, and tourist destinations, areas that are particularly weak in industrial terms and have very few hidden champions are highly dependent on strong networks and robust partnerships (Simon, 2012). This lends even more meaning to the saying that “We stand stronger together.”
Awareness levels, image, and the appeal of a region are extremely important factors when it comes to stability and the growth of industry and companies. Regions are like complex service packages that need to be marketed, and they depend strongly on the interchangeability of “hard” location factors. “Soft” location factors such as culture, the innovation community, the creative scene, entrepreneurial spirit, or the special characteristics and unique features of a small city or region also play an increasingly important role when it comes to the perceptions of stakeholders, especially with respect to the appeal of a location, not to mention the competitiveness of a region and companies that are based there. Not all rural areas are in a position to advertise themselves by showcasing hidden champions or attractive employers. But every city or region has something special about it, its so-called unique selling proposition (USP). So a state like Mecklenburg-West Pomerania has to base its marketing strategy on other USPs to “score points” among its main stakeholder groups (Zdrowomyslaw et al, 2019).