Dissertation Completa-Final Al 20 de Agosto

TABLE OF CONTENTS
Chapter 1: Introduction
Chapter 2: Analysis of globalisation and its impact on the Third World
Small and micro business
2.1
Introduction
2.2
Defining globalisation
2.3
Perspectives of globalisation
2.4
Factors of globalisation
2.5
Impacts of globalisation on the Third World Countries; small and
micro business
2.6
Conclusions
2
4
4
4
7
10
18
26
Chapter 3: The Peruvian context and small and micro businesses

3.1
Introduction
3.2
Main characteristics of the Peruvian small and micro business
3.3
PEST Analysis
3.4.1 Political
3.4.2 Economical
3.4.3. Societal
3.4.4. Technological
3.4
S.W.O.T. Analysis
3.5
Conclusions
28
28
28
30
30
32
36
39
42
43
Chapter 4: Methodology
4.1
Introduction
4.2
Literature Review
4.3
Primary Research
4.4
Questionnaire
4.5
Sample
45
45
46
46
48
Chapter 5: Findings and Analysis

49
5.1
Introduction
49
5.2
Impact of Technology on Peruvian Small and Micro Businesses
49
5.3
Impact of Transnational Corporations and International Organisations on
Peruvian small and micro firms
50
5.4
The role of the Peruvian Government in the small and micro firms context
related to globalisation
52
5.5
Summary
55
Chapter 6: Conclusions and Recommendations
List of Table and Figures
References
Bibliography
57
1
58
LIST OF FIGURES
Figure 1
Distribution of GDP per capita in the world
xx
Figure 2
Importance of small and micro firms in Peru
xx
Figure 3
Number of small and micro firms attended by the government

programmes for developing and supporting the small
and micro sector
xx
Figure 4
Annual variation of the GDP
xx
Figure 5
Annual variation of the inflation.
xx
Figure 6
Annual variation of the trade balance
xx
Figure 7
Principal commercial exchange countries
xx
Figure 8
Annual variation on the Balance of Payments
xx
Figure 9
Annual levels of unemployment rate
xx
Figure 10
Annual amount of external debt.
xx
Figure 11
Distribution of poverty.
xx
Figure 12
Evolution of the illiteracy rate
xx
Figure 13
Evolution of life expectancy
xx
Figure 14
Evolution of the migration in the rural areas
xx
Figure 15
Evolution of the infant mortality rate
xx
Figure 16
Levels of access to education
xx
Figure 17
Home with access to personal computers
xx
Figure 18
Home with access to telephone service
xx
Figure 19
Number of mobile phone users
xx
Figure 20
Home with access satellite Tv
xx
LIST OF TABLES
Table 1
Conceptualising globalisation: three tendencies
xx
Table 2
World Bank classification of developing countries
xx
Table 3
SWOT analysis on the Peruvian small and micro firms
xx
Manuel Carpio-Rivero
1
Chapter 1
Introduction
We have been living, for the last years, in an irregular and unpredictable
environment. Many changes have occurred since the last century. Those shifts
have not only been shaping countries cultures, politics, economies, and lifestyles,
but also companies atmosphere. This latter have been adapting themselves
during time and space, changing their strategies in order to maintain presence in
markets and coping with these new-world order of facts and challenges.
Many describe the scenery presented above as a phenomenon called
Globalisation. A term supported by ones and rejected by some. A word that
means a good deal for many and nothing for others. It divides as much as unites.
(Bauman 1988) Globalisation has being, in the last ten years, a matter of debate,
as Dicken (1999:3) points out: a subject of enormous controversy amongst
academics, politicians, popular writers and journalist alike. There are many
interpretations of it, and therefore many different implications on our societies.
However, we believe that although there are different opinions, there is a common
agreement that it [globalisation] is, in fact, affecting our world. Nevertheless, it
seems that powerful and rich countries are the only ones who are benefited from
it, and that Third World Countries are lying behind, with higher levels of poverty
and undevelopment never seen before.
It is under this scenery that came the necessity for studying how globalisation is
impacting the Third World Countries, particularly on Peruvian small and micro
firms, and see whether it is enabling or obstruction their development and growth.
In the Peruvian context, small and micro businesses employ 78.5 percent of the
economic active population. Therefore have extremely and crucially implications in
the generation of employment. The latter is an imperative issue in trying to tackle
poverty on one hand, and stimulate economic growth on the other. Small and
micro enterprises are becoming an instrument of relieving poverty by generating
workplaces. Harper (1984) Therefore, there is an important call for analysing what
have been the impacts of globalisation on that particularly sector.
Today, over four billion people, three quarter of the all humanity live in the Third
World, therefore it is extremely important to analyse the consequences of
globalisation on them. Peru, is suffering tremendous changes in its socioeconomical-political environment since its economy became neo-liberalise and
capitalism become a form of pillar for the countrys structure and economic model,
which are the requirements for becoming a globalised country.
In order to have a clear understanding, this dissertation will be structured in the
following manner:
Chapter 2 will focus on the analysis of globalisation and its impact on the Third
World small and micro business, giving in that way an overview of the theory that
surrounds globalisation, its different perspectives. It will explore the fundamental
consequences that it is bringing on countries of the Third World.
Chapter 3 will relate in a pragmatic, but objective way, the Peruvian context and
introduce the micro and small business sector. In order to achieve this purpose,
the Peruvian macro environment will be analysed. Chapter 4 will present our
method of research when analysing the micro and small business sector in Peru.
In chapter 5, the findings of our research, supported in primary information will be
presented. Finally, chapter 6 will draw conclusions and recommendations.
Chapter 2
Analysis of Globalisation and its impact on the Third World small
and micro businesses
2.1 Introduction
The objective of this chapter is to review the theory that surrounds globalisation
and the impacts it is having on the micro and small business in Third World
Countries. In order to achieve this purpose; first, we will attempt to define
globalisation, under the bases of the literature available. Second, we will present
the different perspectives in which globalisation is conceptualised. Third, we will
explore the factors that integrate the process of globalisation. Fourth, we will
analyse the main impacts of globalisation on Third World Countries, particularly in
the micro and small business sector. For the latter analysis, we will focus on the
factors of globalisation such as technology, nation-state, and transnational
corporations, linking them with the small and micro business sector.
2.2 Defining Globalisation
Before defining the concept of globalisation it is important to search its origins.
Wallerstein (1974) found that early faces of capital expansion in Europe in the
thirteen century, which originated medieval transnational arrangements and the
disappearance of national identities influenced by international trade was a form of
globalisation. However this shift was consolidated in Europe between the mid
eighteen and the late nineteen centuries as Axford 1996 has claimed. This trend
was intensified between the late nineteen-century and the mid twentieth century,
particularly after the Second World War, where capitalist expansion reached its
high level of prosperity, particularly in critical areas of trade, production and
finance. Since then we have being witnesses of the drastic changes that the last
half of the twentieth century has brought. (Dicken 1999)
Previous to start analysing the different interpretations of globalisation, it is
relevant to mention that many attempts to define this term have being made.
However there is not a universal agreed concept for it. Referring to this latter
mentioned, Axford (1996) claims that there is now much literature about the
concept of globalisation, however much of it is allusory. Dicken (1998:3) affirms,

Although the notion of globalisation has become pervasive, there are strong
opponents, who argue, in effect, that globalisation is a mirage.
Axford (1996:27) points out that:
Most attempts at defining globalisation are tentative at the same time as they
are sweeping. This is hardly surprising, given the scope of the enterprise, but it
does leave room for a good deal of confusion, as well as the suspicion that
anything might qualify as a possible indicator
Usually the term globalisation is correctly associated with economy, although is

wrongly to think that is circumscribed to it. Parker B. (1996) points out that there
are events occurring in the world that are shaping a single-integrated world.
Factors such as economic, cultural, social, business, technology and other
influences are trespassing borders and boundaries of nations culture, time, space,
role, markets and economies.
Smith and Bayliss, (1988) wrote:
By globalisation we simply mean the process of increasing interconnectedness
between societies such that events in one part of the world more and more have
effect on peoples and societies far away.
Govindarajan V. and Gupta A. (2000:275) define globalisation as: a growing

economic interdependence among countries as reflected in increasing crossborder flows of three types of commodities: goods and services, capital and knowhow. Fernandez et al (1998) suggest that globalisation refers to the
interconnection and interdependence between states and societies.
In contrast to the definitions above, Thomas et al (1997) argue that globalisation is
the latest stage of capitalism; it is compounding inequalities already in place and
developing new ones. In simple words; the richer are becoming richest, and the
poorer are becoming poorest. The gap between them is increasing. Thomas et al
(1997) also claim that globalisation is eroding the authority of nation-states when
referring to economic policies, social programmes, and politics. International
organisations such as the World Bank, IMF, the Group of Eight strongest
countries, WTO and transnational corporations (TNCs) are influencing the future of
less powerful and developing countries.
Chossudovsky (1997), - in his book the Globalisation of Poverty- points out that
such international organisations mentioned above, particularly the World Bank and
the IMF, have imposed in developing countries macro-economic stabilisation and
structural adjustments programmes that have led to the impoverishment of
hundreds of millions of people.
Positive views of globalisation affirm that it is creating new opportunities and wider
markets to trade, decreasing cost transaction, optimising countries resources,
transferring knowledge to less development countries, as well as transferring
technology to them. It also increases competition, therefore end consumers are
having much better products and/or services.
Negative views of globalisation claim that globalisation is damaging countries,
organisations and individuals. Those views argue that power nation-states and
transnational corporations are using their economic power over developing
countries by exploiting their resources, eroding its culture and national sovereignty,
imposing unfair trade conditions.
Although there is not an agreement about globalisation and its impact, Dicken
(1999) suggests, there is a universal fact that something is happening out there,
and it is shifting the paradigm understanding of the economic-social world. When
analysing the different perspectives in the next section of this chapter, the views
that exist between this two extremes mentioned in the paragraph above will be
explored in detail.
2.3 Perspectives of Globalisation

As we have mentioned before, opinions about globalisation differ sharply, therefore
originating different opposite views. There are as many views, as authors who
have written about globalisation. In this section we are going to present the main
perspectives and views of globalisation, usually referred to the globalisation
debate (Held et al 2000)
De Wit B. and Meyer R. (1999) have drawn attention to the fact that there are two
main perspectives for understanding globalisation: Convergence Perspectives and
International Diversity Perspectives.
The Convergence Perspective
The Convergence Perspective approach is referring to the fact that countries are
becoming more similar and interconnected. The authors that support this view
argue that globalisation is already present in our lives, and will continue into the
future, erasing the importance of nations as it advances. Under this perspective,
all products and services are going to be equal; standardisation and similarity are
key factors.
The issue of geography is important in the convergence approach. It is referring
that once individuals and organisations are embraced in the process of
globalisation, borders between nations disappear and issues such as culture,
politics and economies will become more closely linked, making a global village
De Wit B. and Meyer R. (1999) argue that Convergence perspective is driven by
low cost and the ease of communication, as we will see when exploring the
elements of globalisation.
The International Diversity Perspective

The International Diversity Perspective refers to the fact that international
differences will not change so easily, and that on many aspects, nations will
not be interconnected among them. This perspective is also known as
Localization. Under this view, heterogeneity is important when referring to
services and goods that companies offer in different countries. Another
differences that arise among countries are the role of nations and their culture.
The latter, will remain diverse in each country and neither time nor space will
transform it.
De Wit B. and Meyer R. (1999), by using examples of brands such as Coke,
Toyota or Rolex, which are consumed in many countries, make clear the point that
the consumption of those products does not necessarily mean globalisation or
global convergence.
De Wit B. & Meyer R (1999:722) state:
The question is whether these manufacturers are globalising to meet
increasing world-wide similarity, or whether they are actually finally utilizing the
similarities between countries that have always existed. The actual level of
international variety may really be quiet consistent.
In a similar attempt for classifying the different views, Held et al (2000) claim that
in fact there are three main approaches that try to conceptualise the different
views
for
globalisation:
the
hyperglobalizers,
the
sceptics
and
transformationalist.
Hyperglobalist approach
Hyperglobalist approach affirms that globalisation is a fact and that it is tangible.
There are significantly changes in social issues such as culture, idiosyncrasy.
Societies among countries are extremely interconnected. National boundaries are
disappearing, national economies are more linked to the global economy, and
political strategies are not created any more by nation-sates, but by international
organisations and more economical power countries. Therefore countries have
less autonomy and sovereignty, and as Held (2000:22) states produce a more
homogeneous global culture and economy. The hyperglobalist approach points
out that this global structure is determining how countries and people operate. This
shift in modus operating is inevitable and any attempt to stop it is not going to
accomplish its purposes.
Sceptical approach
The Sceptical approach, as Held 2000:23 states, Are sceptical about
globalisation. According to this view, there are no fundamentals changes in social
relations. It affirms that globalisation is a myth. This view claims that todays days
are a continuity of the past, and there is not much difference on the interaction
among nations in previous historical times than todays interactions. The trade and
changes of culture between countries is a phenomenon that has occurred before.
(Held 2000) The sceptical approach claims that todays economic and social
activity is remaining regional, rather that globally. They illustrate the latter
mentioned by mentioning how the European Union is more regional than globalise.
Transformationalist Approach
According to this view, there are no extremes in globalisation such as the
presented by hyperglobalist and sceptical approaches. Transformationalist
approach argues with sceptical approach that the hyperglobalists have
exaggerated their case. (Held 2000:23) Transformationalist view points out that
nation-sates remain independent, and have control over its economic-social
policies, as well as their sovereignty. However this view does not deny the impacts
and consequences of globalisation.
Transformationalists find that globalisation has to be viewed as a complex set of
interconnecting relationships through which power, for the most part, is exercised
indirectly. (Held 2000:23) They accept that globalisation is shifting patterns,
however they question the unavoidability of its impacts. They find that in order to
reverse forms of globalisation, new and progressive structures for democratic
accountability and a global system of government (Held 2000:23) must be
implemented. Under this new system, global organisations must be democratised
and empowered; however nation-states must retain their authority in creating their
policy.
Hyperglobalist
A global age
Whats new?
Dominant features
Power
of
national
governments
Driving
forces
of
globalisation
Pattern of stratification
Dominant motif
Conceptualisation
globalisation
of
Historical trajectory
Summary argument
Global capitalism,
global
governance,
global
civil
society.
Declining
or
eroding.
Capitalism
and
technology.
Erosion of old
hierarchies.
McDonalds,
Madonna, etc.
As a reordering
of the framework
of human action
Global civilisation
The end of the
nation-state
Sceptics
Trading blocs,
weaker
geogovernance
than in earlier
periods.
World
less
interdependent
than in 1890s.
Transformationalist
Historically
unprecedented levels of
global interconnectedness
Reinforced
or
enhanced.
States
and
markets.
Increased
marginalization of
South.
National interest.
Reconstituted,
restructured
Combined
forces
of
modernity.
New architecture of world
order.
As
internationalisation
and regionalization
Regional
blocs/clash
of
civilisations
Internationalisation
depends on state
acquiescence and
support.
Thick (intensive
and
extensive) globalisation.
Transformation of political
community.
As the reordering of
interregional relations and
action at a distance
Indeterminate:
global
integration
and
fragmentation
Globalisation transforming
state power and world
politics.
Table 1: Conceptualising globalisation: three tendencies. Source Held et al 2000
2.4 Factors of globalisation

In this section, we will explore the main factors that have been playing a critical
role in the process of globalisation. Those are shaping todays societies, countries
and firms. Because of the purpose of this dissertation, we are going to focus our
efforts on examining how those factors are impacting on small and micro
businesses in the Third World. However, it is important first to have an overview of
those.
10
Transnational Corporations
Many authors regard this factor as one of the principal developers of todays global
interconnected world. Govindarajan V. and Gupta A. (2000) point out the fact that
there is no exact definition or agreements about what transnational corporations
are. However, Dicken P (1999:177) defines transnational corporation as a firm,
which has the power to co-ordinate and control operations in more than one
country, even if it does not own them. He argues that transnational corporations
are the primary shaper of todays global economy.
Supporting Dickens view, Parker (1996) suggests that large organisations are
important actors in internationalisation and globalisation. However, she draws
attention to the fact that there are questions concerning the social impact that
those organisations are having in different countries around the world, particularly
on the Third World Countries. There are views that claim social irresponsibility on
part of this organisations, and lack to control and regulate them from part of the
nation-states.
Referring to the latter mentioned, Dicken (1999) claims that transnational
corporations, particularly the ones that have huge operations around the world are
seen to be a major threat to the autonomy of nation-states. He points out that
transnational corporations have three main impacts in countries: Capital and
Finance, Technology and Employment and Labour issues.
When referring to capital and finance, Dicken (1999) suggests that the inflows of
capital are the most obvious and immediate impact of foreign companies in host
countries. He argues that transnational corporations transfer technology, having
imperative impacts in countries, as we are going to explore in the following lines.
Finally he finds that employment and labour issues are for most of the people as
well as governments the most important issues in the debate over transnational
corporations.
When evaluating the cost and benefits between transnational corporations and
nation-states, Dicken (1999:245) states:
11
Transnational corporations either expand national economies or exploit them;

they are either a dynamic force in economic development or a distorting
influence; they either create jobs or destroy them; they either spread new
technology or pre-empt its wider use and so on.
According to Dicken (1999:245) there are two radical and contradictory positions:
At one extreme the charge is one of political interference in national affairs or of
bribery of national officials. At the other extreme the transnational corporation is
regarded as a greater force for international economic well being that the
parochially bounded nation-state.
In developing countries, as we are going to observe in detail in the last section of

this chapter, transnational corporations play a critical role. However, when trying to
define globalisation in the section above, we have observed that there are
opposite views, which are causing debate about the consequences of them in poor
countries.
What is a fact is that transnational corporations are making countrys boundaries
more permeable than ever before. When transnational corporations start
operations in any host country, they move not only the company itself, but also
very important issues such as labour, skills, culture, capital and technology as we
have mentioned earlier. Those factors, -in time and space- are reshaping the host
countrys environment. Nevertheless adversary to the latter, it is also a fact that
transnational corporations are being affected by host countrys national
environment, making them to rethink their strategies. Thus we could say that both
have influenced in each other. However, as Dicken P. (1999) claims, much will
depend on the size of the host country and the size of the transnational
corporations operations.
Another important issue when exploring transnational corporations is related to the
web of enterprises that they are originating, making a network of relationships
among them. Transnational corporations are interconnected among each other. It
could be between the same firm in different countries, and different firms in
12
different countries that have a relationship in some stage of its production

processes. These series of complex relationships make countries to be more
linked.
Technology
Considered by many authors, such as Dicken P. (1999) who finds that technology
is without doubt the most important factor in the process of globalisation. Verlag G.
(1999:1) states; This new revolution, based on the combination of computers,
telecommunications, and other information-based technical advances, is once
again transforming business and societies as did the industrial revolution.
Aggarwal (1999) draws attention to the fact that we are living in the age of
technology and information that is changing the nature of the businesses and
societies. He claims that technology and globalisation have become mutually
reinforced. On one hand technology enables business to globalise, on the other
hand, globalisation makes technology more profitable. Further more, he finds that
technology is contributing to global economic growth, changing social and
business atmosphere.
Aggarwal (1999:2) states:
While technology seems to be the fundamental transformational force, it is
being mutually reinforced and supplemented by the globalisation of commerce.
As technology leads to increasing productivity, higher levels of cross-border
communications, trade, and investment, it facilitates business globalisation. In
turn, globalisation makes technology more profitable (e.g., by extending its use
to larger markets), and accelerates its development by enlarging to many
nations the set of people developing technology. Thus, technology and
globalisation seem to be mutually reinforcing.
Similarly, Parker (1996) suggests that technology issues such as digital

electronics, miniaturisation, telecommunications, computers, robotics, artificial
intelligence, genetic engineering, low-flying satellites, laser conductors and so on
are modifying dramatically relationships between people, organisations and
13
nation-states around the globe. She argues that particularly telecommunication

technology, capable of transmitting information almost instantaneously through the
world, has made organisations and individuals able to communicate in a manner
that has revolutionised their environment.
Supporting Parkers view, Aggarwal (1999) suggests that we are again living in a
period of great progress, as the one we experimented in the industrial revolution,
however the latter has being replaced by the nascent information revolution. He
claims that technology and globalisation are the major forces that are changing our
societies and business environments.
Technology is changing the nature of businesses and organisations. Globalisation
and implementation of technology are creating higher levels of efficiency as well
as higher levels of quality on goods and services. This increase of efficiency and
quality are creating a very competitive environment, since competitors would
always invest in having better technology in order to gain competitive advantages
and not to lose market share.
Parker (1996) draws attention to the fact that only those with education will have
access to technology, particularly in Third World Countries. Therefore equal
competition in some environments will be impossible to observe. She argues that
under this situation, technology may presents threats rather than opportunities.
Therefore it will increase the gap between the have and the not have.
However, she finds that today, some small business has now access to technology
than before, when it was available only to big companies. Although there are a
vast number of small firms that still can not reach adequate levels of technology.
Barnet (1995) draws attention to the fact that in developing countries, the
introduction of technology has brought benefits. However, he observes that it has
also brought devastated effects on the lives of many poor people; improvements
on machinery has displaced labour, new medicines have contributed to the
extremely fast rate of population growth, new materials have undermined the price
of tropical products and so on.
14
Finally, it is important to mention that technological forces have become important

factors for economies of scale, comparative advantages, and risk diversification.
Furthermore, those factors are decreasing trade costs as well as transport cost,
therefore eliminating barriers to trade globally. This trend of technology is
expecting to continue, changing even more the global environment. (Aggarwal
1995)
The role of the nation-state
It is a fact that the role of the state has changed. As a factor of globalisation
process, it has been adapting different functions through history. As we have
explained before, there are different positions in what has been the role of the
nation-state in the latest years, and what will be the role of it in the future. There
are views that affirm that nation-state will lose its control over the country in some
aspects. In contrast, there are other views, such as Porters (1990) who claims
that todays nation-state have more power that ever before.
According to Washington (1996), globalisation is modifying how governments are
functioning.
He argues that even domestic issues are influenced by external
organisations, and nation-states cannot have control any more. Therefore,

governments appear to be loosing autonomy and national sovereignty. Issues
such as economic policies, and social programmes are becoming out of control of
governments. International and globalised forces are the ones that establish those
parameters in which countries have to operate. Economist Robert Reich (1991)
emphasises that globalisation in fact reduces national autonomy.
Axford (1996:102) summarises the above issue well:
The new, globalise international economy affords much less scope for
national autonomy and a consequent loss of control for national policy-makers in
key areas of economic management like control of interest rates or levels of
public spending. The globalised economy thus problematizes the question of
economic governance and the regulation of markets and systems of production
which are no longer under the control of nation-state.
15
According to Simai (1994), in Parker (1996) globalisation has shifted influence

from national political leader to transnational business domain, debilitating the
ability of policy makers to control key aspects in economic issues.
Today economic expansion is a reality. Economic activity has trespassed
countries
boundaries.
Dicken
(1999)
observes
that
the
degree
of
interdependence and interconnection among countries economies has increased

dramatically. He also makes imply the fact that international political systems have
strongly influenced in national governments. World Organizations such as World
Bank (WB), United Nations (UN), International Monetary Fund (IMF), World Trade
Organizations (WTO), Organisation of American States (OEA) and Transnational
Organizations (TNCs) can shape todays national policies in most countries,
particularly in developing countries and the ones that have left communism.
When referring to the global institutions such as the World Bank (WB),
International Monetary Fund (IMF), the Group of Eight Wealthy Countries (G-8),
and World Trade Organisation (WTO), it is appropriated to mention that there is
much debate about their role and the manner they influence countries policies. In
this respect, Chossudovsky (1997) claims that the structural adjustment and the
macro-economic stabilisation programmes, imposed by the World Bank and the
IMF on developing countries have led hundreds of millions of people poorer than
even before. He points out that these structural adjustments have ruining the
economies of developing countries. Similarly, Thomas et al (1997:1) observes that
those organisations undermine the possibility of meaningful self-determination for
the majority of people in the South.
In contrast of the mentioned in the paragraph above, Kohler (2000) points out that
world organisations such as the IMF are offering the opportunity for countries to
have more stable economies, promoting economic growth and prosperity worldwide. He claims that the growth of world output will increase from 3 percent in the
year 2000, to 4 percent for this year (2001). He acknowledges that there is in fact
a problem of global inequality, however he affirms that poverty reduction is a main
concern for the IMF.
16
Economic blocks have also influenced the nation-state role. Today we have
several economic regions such as NAFTA, EU, ANCOM and MERCOSUR, which
shape national economies and governments policies.
Supporting this view,
Washington (1996:2) states governments are organising regionally to achieve

global influence. He points out that this development of groupings has inference
for national governance. Parker (1996) supports Washington (1996) affirmations,
by suggesting that bilateral, multilateral and unilateral agreements reduce national
autonomy.
Washington (1996) draws attention to the fact that although, regionalism and
multilateralism appear to be in contradiction, there is complementary trends. He
states Regional groupings may be one way for countries, particularly small,
peripheral economies, to maximise their influence in global or multilateral fore.
Dicken (1999) drives attention to the fact that the position of the nation-state is
clearly being redefined today. However he refuses the idea that nation-states do
not have participation in todays globalise world. Even more, he claims that the
nation-state is an important factor in shaping the world economy. Similarly, Porter
(1990) finds that nation-states in fact are becoming more important, rather than
less. He argues that the national environment is the one that provides the
business competitive advantages. These advantages are diverse in each country
since their culture, idiosyncrasy, and resources are as well different. According to
Parker (1996) the role of governments will not disappear completely, however
there are evidence to affirm that globalisation is transforming it.
Finally Axford (1996) finds that insecurity may force countries to find co-operation
among them. However this latter may bring dependence between each country,
and therefore lose of autonomy. He suggests that advantages of doing the latter
have to be balanced with its disadvantages.
2.5 Impacts of Globalisation on the Third World Countries; micro and small
Business
17
This section will analyse the implications of globalisation on the Third World small
and micro businesses. For this purpose we are going to analyse the factors of the
process of globalisation described earlier, however related to the small and micro
business, in that way we would focus on the critical and more important issues.
However, first we are going to explore briefly and widely how globalisation is
affecting the Third World Countries, and the importance of the small and micro
firms in those countries.
As mentioned in the introduction of this dissertation, over four billion people, three
quarter of all humanity live in The Third World. (Roy 1999). Forecast for the
century affirms that by the turn of the century, out of the 6 billion people on the
planet, 2 billion each will be poor and desperately poor. Nearly fourth-fifths of the
population will be living in The Third World. (Manfred Woechlcke of the Institute for
Politics and Economics at Ebenhausen, Germany 1997)
According to Roy (1999:7) Third World Countries assumed importance in the 60s
and 70s. They provide enormous natural and human resources. They produce
most of the worlds oil and other raw materials. Without them, the industrial
economies would collapse. However, poverty, malnutrition and disease surround
them, which bring political turmoil. Kurian, (1982: preface) wrote that the most
significant political and social upheavals of modern time have occurred in the
Third WorldIn many countries the political cost of development have been
staggering and have led, in some cases, to the loss of freedom, repression,
anarchy and civil war
It is important to mention that there are enormous disparities within the developing
countries. Table 2 shows how the World Bank has classified developing countries
in accordance to their income, life expectancy and infant mortality rate.
Country Group
Low Income
(51 countries)
Lower-middle income
(40 countries)
Per Capita
Income (USD $)
Life expectancy at
birth (yrs)
Mean - 380
Range
80 - 720
Mean - 1, 590
Range
770 2,820
Mean - 56
Range
38 - 73
Mean - 67
Range
57 77
Infant mortality rate

(per 1,000 live
births)
Mean - 58
Range
25 163
Mean - 36
Range
14 71
18
Upper-middle income
(17 countries)
High-income
(25 countries)
Mean 4, 640
Range
2,970 8,260
Mean 23, 420
Range
9,320 37, 930
Mean - 69
Range
54 78
Mean - 77
Range
75 - 79
Mean - 36
Range
6 89
Mean - 7
Range
4 - 11
Table 2: Source: Dicken 1999 Global Shift (1996 World Bank Data)
Although Latin American countries are classified as Third World Countries, there
are significant differences between them and other poor countries in Africa or Asia.
In this respect, Roy (1999:111) writes:
The regions (Latin America) peculiar history, colonial legacy, its distinctive
trade and investment patterns and, above all, the overbearing presence of the
United States kept Latin America somewhat aloof from the rest of the Third
World nations
Figure 1 shows the distribution of GDP per capita in the world. Source: World Bank 1997
Under the conjuncture mentioned above, globalisation appears, to bring within

shifts that are changing the Third World Countries environment. Those shifts are
modifying, as described earlier, countries politics, economies, and social aspects
such as culture and peoples idiosyncrasy. However, there have being much
discussions and disagreements in how globalisation is affecting countries in the
Third World. Dohlman et al (1997:1) draw attention to the fact that:
19
Many of the developing countries are a world apart from globalisation. Global
trade and investment flows largely pass them by, despite the often-considerable
progress they have achieved in liberalising and deregulating their economies
and opening their borders to international trade and investment.
Dohlman et al (1997) claim that developing countries have no human, institutional

and industrial capacities for dealing with global-market demands.
According to Dicken (1999), Third World Countries are linked to what happen in
developed countries economies. If the latter countries mentioned are growing in
economic terms, they will demand more primary and manufactured products,
therefore helping developing countries. We partly agree with Dicken (1999)
affirmation, however we believe that regional blocks such as MERCOSUR,
ANCOM, CARICOM and so on, help trade, -without barriers- among country
members.
Dohlman et al (1997) has found several obstacles that developing countries are
facing when trying to integrate the process of globalisation. Dohlman et al affirm
that most of the developing countries are characterised by an undiversified export
base limited to commodities. They do not have efficient industrial capacity. Their
infrastructure (transport, telecommunications and energy) is inadequate or
dysfunctional. Their entrepreneurial are emerging or weak. They do not have good
professionals such as managers, engineers and technicians. Usually their
institutions are weak and human capital is purely developed.
However, Dohlman et al (1997) have found several positive issues that most
developing countries have in managing globalisation. Those countries are well
advanced in implementing structural adjustments and economic reforms geared to
strengthening market forces through liberalisation and deregulation. Information
and technologies are creating new services and products with lower barriers to
entry. Coinciding with Dickens 1999 view of regional integration, Dohlman et al
(1997) argue that integration among developing countries will help to strength their
reforms, create larger markets that a low economies of scale and assure them to
be highly competitive in global markets. Finally he affirms that encouraging local
20
entrepreneurs particularly small and medium size businesses can market high
quality and attractive goods marketed in domestic and international markets.
Srinivas (1995:2) when racing the question how are the Third World Countries
fitting into globalisation? Found that the answer was not very well. He observes
that the majority of the developing countries seem to be left behind and spiralling
rapidly towards the world outer periphery of development. He argues that most of
the Third World Countries are loaded by huge levels of debt, ignored by
transnational companies investments, They seem doomed to be captive of
consumer goods they can ill afford. According to VanDijk (1993), the big
challenge for developing countries is to participate fully in the global economy, but
on equal terms.
When analysing the context of small and micro business in the Third World, we
have to stress the importance of them. As mentioned in the introduction of this
dissertation, small and micro enterprises play an imperative role in Third World
Countries. They provide much of the work force, alleviating in a way the poverty
that surrounds developing countries.
Supporting the latter affirmation, Halvorson-Quevedo (1991:2) state:
On social welfare ground, micro-enterprises are widely perceived to be
beneficial: they provide employment and income to the poor and they effectively
integrate marginal elements into society. They constitute a huge reservoir of
human initiative and ingenuity, and their existence is central to the cultivation of a
seedbed of incipient entrepreneurs.
They argue that in economics terms, small and micro firms have considerable
economic value. They generate income and output, contributing with their
countries gross domestic product (GDP).
Bromley (1985) stresses that although transnational firms are important in the
economy activity of a country. However he finds that for some particularly
activities, small firms provide local management, local money and local labour,
21
which are imperative factors in the process of development of a country. He

argues that small and micro firms employ five, ten or more times as many people
for each unit of output. Berger et al (1996:4) state: there is a change going in the
way microenterprises are viewed. She argues that today small and micro
enterprises are important and integral part of the economy. They provide jobs
(from one-third in Argentina to nearly 80 percent in Peru) and contribute with the
economic growth (45 percent of the Peruvian GDP).
In spite of the difficulties they are facing such as lack of technology, management
skills and access to capital, small and micro firms do have an important role in the
process of globalisation. (Berger et al 1996). Many of them have crossed their
national boundaries and are participating in international markets; they are
exporting and importing goods.
The use of Internet is assisting in accessing
foreign markets in a cheaper way than before.

As we have mentioned earlier, the process of globalisation is driven by certain
elements such as technology, transnational corporation, the role of nation-state,
globalised economy, social trends and so on. These factors have definitively
impacted on small and micro business. Those are the ones that we are going to
analyse in the following lines.
When referring to technology, we have affirmed that it is playing a fundamental
role in business in general. However, when relating it to small and micro business,
the reality shows that just a few small and micro firms have access to it. In general
Third World Countries do not create technology. The main manner in which they
receive technology is through the more power and developed countries. However,
this passing of technology is not free. Small and micro firms in the Third World do
not have the economic capacity to buy technology. Therefore, it is extremely
difficult for them to compete in the world-globalised-market under these conditions.
Most of the times the nation-state intervene in buying technology and passing it to
small and micro firms. It is here when the government appears. (Van Dijk 1993)
More importantly, as the e-commerce and use of Internet expands, traditional
spatial and market boundaries are being minimised as barriers. Networked
22
systems are making it easier for technology to cross-traditional national and

organisational boundaries allowing even small and new firms, and firms in
developing countries and regions, to leapfrog and pose competitive challenges
and threats to establish firms in the industrially advanced countries. As early
indicators, increasingly larger numbers of firms from South Korea, Taiwan, Israel,
Brazil, India, and other developing countries, are now becoming global competitors
in many industries, and competing successfully with firms from the developed
countries.
In most of the Third World Countries, the nation-state plays an important role in
supporting and fomenting the development of small and micro firms. We have
mentioned before how the role of the government is changing and how many
views about it exist. However, we have not mentioned that much of the positions
assumed by governments will impact directly on the small business sector.
According to Van Dijk (1993), the democratisation process experimented during
the last years in many countries of Africa and Latin America may contribute in a
positive way, particularly in the attitude towards small and micro business.
Most of the Third World Countries governments have programmes for supporting
and developing small business. However it depends on the manner they applied
those programmes for their success. And here appeared again the issue of
government autonomy, which has being discussed in many occasions through this
chapter. Nation-state with autonomy and well advice by more industrialised
countries will implement those programmes more efficiently that countries that do
not have the enough autonomy and support. This issue is imperative because
globalisation affects countries autonomy in creating policies and crucial decisions.
A clear example of the latter mentioned could be crystallised in the following
example: terrestrial communication is imperative in linking, geographically, towns
and cities in countries around the world. In most of the Third World Countries,
many cities and towns are unable to communicate with each other due to the fact
that there are no roads among them. Therefore, trade in among them do not exist.
Small firms have to commercialise their product in the boundaries of their cities,
thus eliminating the possibility of expansion and growth.
In this case, the

23
government should, in order to foment the trade (Van Dijk 1993), build roads and
access among those cities. For this purpose the government has to invest. This
investment could come from more debt or government resources. The latter is
unusual in poor countries due to the fact that they do not have financial resources.
Therefore if they want to build roads, they have to borrow money.
Borrowing money means changing and adjusting the governments economic
policy. However, todays globalisation, as we have discussed before, is making
international organisations and economic-powerful countries to establish those
policies. Therefore there is no space of manoeuvred for the governments interest
in building those roads. It has to match and fulfil the requirements of those
international organisations. (Chossudovsky 1997)
Transnational corporations and international organisations interact with small and
micro business. Not always, but usually in the Third World Countries, many small
businesses
are
suppliers
(outsourcing
is
an
example)
of
transnational
corporations. (Van Dijk 1993), (Dicken 1999) Therefore depend on much of the
stability and economic performance of their buyers. According to Dicken
(1999:232):
Small business may well benefit substantially from their subcontracting role:
They will gained access to particular markets via brand names which would
otherwise would be unattainable, continuity of orders (in some cases over a long
period) is assured, injection of capital in form of equipment and access to
technology
Dicken (1999) stresses the importance that have been outsourcing in small and
micro firms, particularly because many firms actually start their lives as
subcontractors to larger firms.
However on the other hand, many other small businesses compete with their big
counterparts, -who have much better technology and management knowledge- for
accessing to a share of the market. (Barnett 1995), (Dicken 1999) This latter could
be illustrated in a way by the biblical myth of David and Goliath. However in this
24
case Goliath (transnational corporations) are much more prepared, with better
management skills and economical capacity for competing, than David (small
firms), who do not have access to technology, management skills, and capital.
When referring to the International Organisations, there is one institution that
particularly has been supporting the small and micro business development. The
Inter-American Bank (IDB), according to Berger et al (1996) has leadered the field
in supporting them by financing non-governmental micro enterprise programmes.
Its support began in 1979, with the creation of small project programmes, since
then, many small and micro firms have being benefited with such programmes.
The World Trade organisation also plays an imperative role in the small and micro
business environment in the Third Word Countries. According to Van Dijk (1993),
developing countries argue in favour of world-wide liberalisation. However he
expresses concern that only a limited number of those countries will benefit from
trade liberalisation. He argues that regional blocks will be the first step towards a
full participation in the global economy, and that in that way, they will have more
power to negotiate in the World Trade Organisation. (WTO)
2.6
Conclusions
This chapter has attempted to present a general overview of the impact that
globalisation is having on small and micro firms in the Third World Countries. We
have first defined what globalisation means, and the different perspective under it
is conceptualised. We have shown that there is no universal agreement about the
definition of globalisation, however, as Dicken (1999) has pointed out, it is a fact
that something is happening out there, and its is shaping todays countries and
societies.
We have suggested that the process of globalisation is integrated by certain
factors. Certainly, we have found that the literature about globalisation emphasised
in factors such as the role of nation-states, transnational corporations and
international organisations, and technology. We have focused on the factors
mentioned above and their implications, when exploring the impact that
globalisation is having in Third World Countries. We have found out that Third
25
World Countries are finding difficulties in coping with globalisation, and therefore
joining todays globalised world.
Finally, we have attempted to understand the consequences of globalisation on
the small and micro firms on Third World Countries. We have reviewed the
literature about this particularly, and main objective of this chapter, however we
have found that there is no much of it. The literature suggests that small and
micro firms in Third World Countries are having problems when trying to be part of
globalisation. It is difficult for them to compete and to access to foreign markets
due to the fact that they do not posses adequate resources. However, we have
found, in less proportion, that in spite of the difficulties they are having, there are
benefits as well. Some small and micro firms are absorbing new technology and
skills from developed countries as well as for international organisations, and
consequently are improving their competitiveness, and participating in foreign
markets.
Considering all the information presented in this chapter, we could conclude it by
saying that the phenomenon of globalisation is a fact. There are new rules for
managing todays world. Small and micro firms in Third World Countries are being
affected in a positive and negative manner, depending on the perspective that they
are analysed as well as the spectrum of time. (Short-term, medium-term and/or
long-term) However, we believe that, until now, there has been more negative
impact than benefits.
26
Chapter 3
The Peruvian context and micro - small business
3.1
Introduction
The objective of this chapter is to present a clear understanding of the Peruvian

scenery related to its culture, economy, and politics, and linking those issues with
the micro and small business atmosphere. In order to achieve this purpose, this
chapter will first presents the main characteristics of the Peruvian micro and small
business. Second, an environmental analysis, PEST, under four perspectives:
Political, Economical, Societal and Technological will be presented. It is here that
the small and micro business environmental forces will be examined in detail.
Third, a S.W.O.T. analysis will be presented. Finally, we will draw some
conclusions.
3.2
Main characteristics of the Peruvian small and micro business
We have addressed in chapter two as well as in the introduction of this dissertation

the importance of small and micro firms in Third World Countries. We have
mentioned that they generate workplaces, alleviate poverty and contribute with the
national economy. Peru is an example of a country where the small and micro
sector plays an imperative role in its economy as well as socially.
The Peruvian government affirms that companies with less than ten employees
are considered in the small and micro business sector. This sector employs 74
percent of all the economic active population (PEA), which are 4 million of people.
Approximately 3 million one hundred fifty small and micro firms exist in Peru,
which represent 99 percent of all the economic units that produce goods and
service. (MITINCI 1996)
There are many reasons for investing and promoting the small and micro firms in
Peru. However, in Peru the main reason is for alleviating poverty. In Peru, 48.4 per
cent of the population lives in poverty, and 13.5 per cent of them live in extreme
poverty. That is why the small and micro firms are imperative. They can provide
27
jobs for many people and therefore reducing those levels of poverty. (Data:
MITINCI)
The small and micro firms are concentrated in Lima, capital of Peru. However, an
important number of small firms have been establishing in the countryside during
the last years. In the north coast of the country, a place called Trujillo, has a vast
number of small and micro firms concentrated in the production of leather, and
shoes. Other groups of firms are in the agriculture sector, cultivating asparagus.
Similarly, an important number of small and micro firms, particularly in the
agriculture-industry sector, have established in cities such as Cuzco and Arequipa,
situated in the Andes region, east of Lima.
Importance of the Small and Micro

businesses
26%
Contribution of the GDP by Firms' size
42%
0%
74%
Less than
10 people
Micro
and
Sm all
Firm s
More than
10 People
Rest of
Firm s
58%
Figures 2 shows the importance of small and micro firms in Peru. Data: MITINCI 1997
Although it is not completely fulfilled, and much has to be done, the Peruvian
government plays an important role in the small and micro firms environment. It
has a supporting and training programme called: Programa para la Pequea y
Micro Empresa, in English will stand for Small and Micro Business Programme.
This programme is orientated to create a favourable environment for the
development of the small and micro firms, by creating adequate policies in taxes,
access to credit and legislation. The programme is as well focused in training
small and micro entrepreneurs in areas related to management, finance, and
technology.
28
3.3
PEST Analysis
The PEST analysis is useful for considering what environmental influences have
been particularly important in the past, and the extend to which there are changes
occurring which may make any of these more or less significant in the future for
the organisation and its competitors. (Johnson and Scholes 1997:93) This analysis
focuses on the political, economical, societal and technological factors. For the
purpose of this work, our PEST analysis will determine the environmental factors
that influence the small and micro business in Peru.
3.3.1 Political/Legal
Government Stability
After ten years of autocratic government lead by former President Mr. Alberto
Fujimori, (who resigned last November by sending a letter from a Tokyo hotel
room) last July 28th, Dr. Alejandro Toledo took office. The last ten years have left
Peru in a critical situation. Corruption, extortion, lies, threats, and human right
abuses surrounded Fujimoris government. (The Economist, 2001)
During his electoral campaign, President Toledo created many expectations
among the Peruvian population, therefore he has several challenges that will have
to face and accomplish, before loosing popularity and support. The tasks that
President Toledo has to face are huge. The main one is to reactivate the sufferedPeruvian economy. It has been in recession since 1998. Another crucial task is to
inject credibility into his government, since during his campaign; he was
questioned by the media about some aspects of his personal life, as well as his
reputation. He has to demonstrate not only to the Peruvians but also to the rest of
the world that his government will respect international agreements, and will have
to send positive signals to investors. Thus they can trust his administration and
feel confidence about his investments. He has promised that his government will
fight poverty. This is a very important issue, since almost half of the Peruvian
population lives in poverty. (The Economist 2001)
It is too early to judge or to make any conclusions about President Toledos
government. However, it is crucial to mention that while writing this dissertation,
the country is stable. International organisations such as the WB, IMF, WTO, BID,
29
and countries such as the United States, have expressed confidence and support
to Toledos administration.
Small and Micro Business government policies
As we have mentioned before, the Peruvian government plays an important role in
the small and micro enterprises environment. The government is aware that 74
percent of the workplaces are created by the small and micro business sector.
That is the main reason why Peru has a Vice Ministry for promoting and
developing that particularly sector.
One of the main objectives of this Vice Ministry is to develop appropriated policies
in taxes, access to credit and formalisation. Another objective is to provide training
and access to technology in order to increase the small and micro firms
competitive.
When referring to access to credit, the government provides funds for small and
micro firms, for working capital, through local government municipalities called:
Federacion Nacional de Cajas Municipales de Credito del Peru. This federation
assorts twelve municipalities in different cities. They provide credits and financial
assistance.
The government also supports small and micro firms by providing them with a
special tax structure that enables them to pay taxes in accordance to the company
size and volume of sales. The Superintendencia Nacional de Tributos regulates
this tax policy. (SUNAT)
One of the main problems that surround small and micro firms is that they usually
do not become formalised. This means that those firms do not pay taxes and are
not qualified to ask for government support. To revert this situation, the
government is trying to classify those informal companies and to formalise them.
However, there is no progress in this particularly issue, and much has to be done.
(De Soto 1999)
30
The training programmes for small and micro business are attending just a small
percentage of firms in Peru. However more people are attending those each year.
These programmes are oriented to provide basic but objective knowledge in areas
related to finance, accounting, management and technology.
Support to the Micro and Small firms 1990 -1999

Users attended by the government programmes
25000
23,191
20,503 19,862
20000
15000
12,261
10000
7,353
Thousan
ds of
users
4,860
5000
676
2,786
2,027 2,803
0
1990 1991
1992 1993
1994 1995
1996 1997
1998 1999
Figure 3 shows how more small and micro firms are attending the government programmes for
developing and supporting the small and micro sector. Data: PROMEPERU 2000
3.3.2 Economical
GDP Trends
During 1993 to 1999, the Peruvian economy has been growing at an average rate
of 5.6% a year. However, since 1998 the economy has been in a slowdown. In
1998, the economy ended with a negative growth. During the year 1999 and 2000,
it recovered. Nevertheless, the first five months of this year have shown negative
results: 1.6% and the trend is pessimistic. Forecasts do not give more that 0.9% of
growth for 2001. (Macroconsult 2001)
31
GDP Anual Variation 1990 - 2001

12.8
14
12
10
8
6
4
2
0
-2
-4
-6
8.6
6.7
4.8
3.6
2.5
2.2
1.4
-0.4
-0.4
-1.6
Annual
Variation
(%)
-5.1
1990
1992
1994
1996
1998
2000
Figure 4 shows the annual variation of the GDP. Source: INEI 2001
Inflation
Since 1990, the rate of inflation has been falling gradually, due to the fact of
restructuring the economy by having tight fiscal and monetary policies. The
forecast for the year 2001 is about 2.9%. (Apoyo 2001)
Inflation Evolution 1995 - 2001
11.8
12
10
10.2
6.5
6
3.7
3.8
2.5
Annual
Variation
(%)
0
1995
1996
1997
1998
1999
2000
2001*
Figure 5 shows the annual variation of the inflation. Source: INEI 2001
Trade Balance
The deficit of the trade balance has been decreasing since 1998. One of the main
reasons is that domestic demand has being reduced dramatically due to the
economic recession Peru is affronting; therefore there is less demand for imports.
However, an increase in the exports has contributed to reduce the deficit. The
trend for the balance of trade is positive; it is expected that exports will increase
considerable next year. (INEI, PROMPERU, BCR 2001)
32
Trade Balance 1990 - 2001

399
500
0
-189
-500
-341
-1000
-253
-616 -482
-607
-997
Million of
USD.
Dollars
-1500
-1721
-2000
-2165
-2500
1990
1992
1994
-1988
-2466
1996
1998
2000
Figure 6 shows the annual variation of the trade balance. Source: INEI 2001
Commercial exchange with main countries

Peru has, as principals client/supplier markets: UK, COLOMBIA Japan Germany
Brazil and US. The US is the most important commercial partner for Peru, followed
by Japan. Thus, Peru is closely linked with the US economy and business cycles.
Small and micro firms are exporting non-traditional goods to US. However, exports
Are
small
comparing
with
the
US
market
size
and
opportunities.
Comercial exchange w ith main countries

% of Total
30
25
20
15
10
5
0
28
28
1990
23
9
USA
1996
6 6
Japan
4 5
UK
6 4 4
Colombia Germany
5 4 4
1999
Brazil
Figure 7 shows the principal commercial exchange countries. Source: PROMPERU 2001
Balance of Payments
After seven years of surpluses in the balance of payment, in 1998 it experimented
a deficit. Since then, it has been decreasing due to a reduction in outflows on the
33
current account, because of the decrease on imports, and the increase on inflows
of capital account, from foreign investment, and an increase on exports. (BCR
2001)
Balance of Payments 1990 - 2001
3000
2500
2000
1500
1000
500
0
-500
-1000
-1500
2978
1932
176
788
716
1733
929
376
657
-1006
Million of
USD.
Dollars
-775
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Figure 8 shows the annual variation on the Balance of Payments. Source; INEI 2001
Unemployment
The unemployment rate has been decreasing since 1994, however the last figure
shows that it has increased in 1997, and in 1999. As we have been highlighting
during this dissertation, small and micro firms play a vital role in generating
workplaces, and therefore in decreasing the rate of unemployment. The
government has already understood the latter, and has been supporting, since
1993, programmes and special legislation for the small and micro sector.
(MITINCI, BCR, INEI 2001)
10
9.4
8.3
Unemployment Rate 1990 - 1999

Lima
9.9
9.2
8.8
8.2
7.9
9.1
8.1
5.9
6
4
% of the
population
2
0
1990
1991 1992
1993 1994
1995 1996
1997 1998
1999
Figure 9 shows the annual levels of unemployment rate. Source: INEI 2001
34
External Debt
The external debt reached its higher point in 1995 (USD. 33378, 000,000).
However since 1996, the external debt has been decreasing. Today it represents
51.6 percent of the GDP. (PromPeru 2001)
Total External Debt 1990 - 2000

35000
30000
25000
22850
26612
25444
20000
33378 33805
29477
30191
27460
28635
27966
27447
15000
Million of
USD.
Dollars
10000
5000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Figure 10 shows the annual amount of external debt. PROMPERU 2001
3.3.3. Societal
The total population (1997 est.) is 24.9 million, with 70% urban. The religion in
most of the country (90%) is Roman Catholic. The Official languages are Spanish
and Quechua. In some cities of the Andes people still speak Quechua, which was
the language of the ancient Incas.
Most of the Peruvians are mestizo, a term that usually refers to a mixture of
Amerindians and Peruvians from European descent. Peruvians of European
descent make up about 15%1 of the population; there are also a smaller number of
people from Africa, Japanese (been increasing since the last 10 years), and
Chinese descent. In the past decade, Peruvians of Asian legacy have made
significant advancements in business as well as politic fields; the president,
various cabinet members, several congressmen are of Japanese or China
descent.
United States Department of State
35
The World Bank has ranked Peru as a lower middle-income country, with a GNP
per capita of USD. $ 2, 350.00, and with a population growth of 1.7 percent per
year.
Distribution of Poverty
In Peru, almost half of the population lives in poverty. This is more that 12 million
people. (INEI 2001) We have mentioned before the importance that small and
micro firms have in alleviating poverty by generating workplaces.
Distribution of Poverty
2000
13.50%
No Poor
34.50%
Poor
52.00%
Extreme
Poor
Figure 11 shows the distribution of poverty. Source: INEI 2001
Illiteracy
In this aspect, there has been progress. Today only 8 percent of the population are
illiterate, and the trend is to reduce that percentage to five percent in the next five
years. (Ministerio de la Mujer, 2001)
Evolution of the Illteracy Rate

50
50
40
38
30
27
18
20
13
10
% Of the
population
11
10
1996
1997
1998
0
1940
1961
1972
1981
1993
Figure 12 shows the evolution of the illiteracy rate. Source: PROMPERU 2001
36
Life expectancy
Life expectancy has increased during the last years, particularly because of an
improvement in the quality of life, access to new technology and better hospital
resources. (Promeperu 2001)
Life expectancy in years
75
70
65
68.1
68
69
63.1 63.8 64.2
70.7 71 71.3
69.4 69.8 70.1 70.4
65.5 65.8 66.1 66.3
64 64.9 65.2
Men
60
Women
55
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Figure 13 shows the evolution of life expectancy. Source; INEI 2001
Urban population
Since 1972, emigration from rural areas of the country has increased, particularly
to the capital, Lima. One of the main reasons is the lack of jobs and opportunities
in the rural areas, and because of the fifteen years of terrorism that Peru had
confronted. However, the government is motivating people, who have fled their
towns, to return under certain benefits. It is important to mention that most of the
people, who immigrated to urban cities, had established their own business, since
there were no workplaces. That is why in the majority of small and micro
enterprises is located in the new towns created. (Promperu 2001)
Urban and Rural Population

% of the total population
80
70.8 71.2 71.5 71.7 71.9 72.1

65.2 70.1
59.6
52.6
47.4
40.5
40 35.4
34.8 29.9
29.2 28.8 28.5 28.3 28.1 27.9
20
60
64.6
Urban
Rural
0
1940
1972
1993
1995
1997
1999
Figure 14 shows the evolution of the migration in the rural areas. Source; INEI 2001
37
Infant Mortality
The rate of infant mortality has decreased steadily since 1990, due to advances in
technology and improvements in the national hospital. (Promperu 2001)
Rate of infant mortality for each 1000 life borns
60
57.2
52.1
50
54.5
40
48.1 46.5
45.1
49.8
43.8
42.6
39
30
20
Number
of born
10
0
1990
1991 1992
1993 1994
1995 1996
1997 1998
1999
Figure 15 shows the evolution of the infant mortality rate. Source: INEI 2001
Levels of Education
The level of access to education its perhaps one of the huge barriers that Peru has
in its process of development. Just 20 percent of the population has access to
higher or superior education. For a country to become competitive in the global
world, education is one of the keys for success. That is why the government is
transferring each year more funds from its budget to the education sector. This has
as well important impacts in the small and micro sector, since them require training
for their progress. (INEI 2001)
Peru - Levels of Education

(1981 - 1993 - 1998 - 1999) %
50
40
42.3
31.4
30
20
10
0
16.1
41.8
41.5
35.5
31.5
20.4
10.2 12.6
1981
1993
No Level
30.6
30.5
20
19.5
8.1
8
1998
Primary
Seccondary
Superior
1999
Figure 16 shows the levels of access to education. INEI 2001
38
3.3.4 Technological
As we have mentioned in chapter two, technology is an important factor in the
Third World Countries, and particularly in the small and micro firms environment.
However, it is in those countries that technology is in shortage. Peru suffers as
well a lack of technology, and its presence is less in the small and micro sector.
Nevertheless, in the last years, there has been an increase, in general terms.
Particularly in areas related to telecommunications and information systems
(Computers, Internet and access to software). These two areas are close related
with the small and micro firms, since them have been contributing to their
development.
Although there is not enough information about the presence and progress of
technology in Peru, particularly in the area related to our research, the next
graphics would give us an idea of how technology is increasing its presence in
Peru.
Homes with access to computers
There has been an increase in the use of computers in Peru. However, this
increase is even more drastic in the use of personal computers in homes.
However, the percentage of homes that have computers is still low when
comparing with developed countries. This will reflect the need to increase the
access for technology, particularly to computers. Less than ten percent of the
population in Lima has computers, although there is no figure for Peru, it is
estimated that it will be much less.
It is not in all cases, but most of small and micro firms operate their business in
their homes. The latter affirmation could give us an idea of the lack of computers in
the small and micro sector.
39
Houses that have personal computers

Lima
12
11
12
10
8
8
6
9
% of houses
w ith personal
computers
4
2
0
1991 1992 1993 1994 1995 1996 1997 1998 1999
Figure 17 shows home with access to personal computers, Source: PROMPERU 2001
Houses with telephone service

The increase during the last 6 years in this area is extremely important. However,
almost half of the population in Lima still does not have telephone service. There is
no figure for Peru; it is expected to be less. It is not in all cases, but most of the
small and micro firms operate their business in their homes. The latter has obvious
impacts in the competitiveness and development of small and micro firms
Houses w ith telephone service

Lima
60
50
50
37
40
30
20
17
22
51
42
% of houses
w ith telephone
service
28
10
0
1993
1994
1995
1996
1997
1998
1999
Figure 18 shows home with access to telephone service, Source: PROMPERU 2001
Mobile phone
The number of mobile phone users has increased dramatically during the last
three years. This new technology has in fact contributed to the development of
small and micro firms. It is common to see firms with mobile phones, in spite of not
having regular phone services. The mobile phone has become a competitive
advantage for them, since their customers can contact then without problems. The
mobile phone has overcome the lack of normal phone, plus more advantages.
40
Number of mobile phone users

1200
1,026
1000
800
736
600
400
200
0
Number of
mobile phone
users
(Thousands)
436
36
52
74
1993
1994
1995
201
1996
1997
1998
1999
Figure 19 shows the number of mobile phone users. Source; PROMPERU 2001
Homes with satellite TV

The increase of homes with satellite TV has been dramatic. This is important
because demonstrates in a way that technology is arriving into Peruvians society.
Houses w ith cable tv

Lima
20
20
18
15
10
10
5
0
% of houses
w ith cable tv
6
1
1992
1993
1994
1995
1996
1997
1998
1999
Figure 20 shows home with access satellite Tv. Source: PROMPERU 2001
3.4
S.W.O.T. Analysis
A SWOT analysis can be a useful way to summarise the relations between key
environmental influences, the strategic capability of the organisation (in our case
the sector of small and micro business) and hence the agenda for developing new
strategies. (Johnson and Scholes 1997:174) In the following analysis, we are
going to describe the S.W.O.T. forces that surround the Peruvian small and micro
business environment.
41
Strengths:
Weaknesses:
The government programme
Lack of technology
for developing small and micro
Lack of access to credit
firms
An important number of firms
The
important
number
of
businesses in the small and
Small and micro firms are not
micro sector
in equal conditions to compete
Flexibility to adapt to market
in the global arena
conditions
still are informal
The
use
of
internet
for
promoting products
Decrease of the illiteracy rate
The decrease of the inflation
International
The GDP forecasts
Low salaries
Poor conditions to work
Organisations
support
Opportunities:
Threats:
The regionalization process of
The economic recession
the
The
Americas.
(FTAA,
MERCOSUR, ADEAN)
Natural resources
Government
level
of
higher
education
policy
low
of
Exploitation
of
natural
resources
fomenting exports
Raise of poverty
Creation of new workplaces
Technology only available to
Decrease of poverty
Decrease of unemployment
medium and big firms
The increase rate of migration
Table 3 presents a SWOT analysis on the Peruvian small and micro firms.
42
3.4 Conclusions
We have explored in this chapter the Peruvian small and micro context. For
achieving this purpose we have analysed their main characteristics, followed by
exploring its environment through a PEST analysis. Finally we have determined,
through the information we have accessed, the strengths, weaknesses,
opportunities and threats that surround the small and micro firms in Peru.
When exploring the main characteristic of the Peruvian small and micro firms, we
have realised their importance in generating workplaces and participating in the
economy. However we have mentioned that although the government is fomenting
that particularly sector, much have to be done. (Canale L. 1996)
It is clear that the variables analysed in the PEST have important impacts into the
small and micro firms environment, therefore much of the development is linked
with macro factors. Forecast shows that during the next five years, Peru will reach
a better and stable economy. (BCR 2001) Therefore, small and micro firms could
become more competitive, being able to compete in foreign markets, and to
generate more workplaces.
The SWOT analysis has supported the importance of the small and micro firms,
their strengths and opportunities, as well as their weakness and threats. We have
seen that in fact this particular sector has many potential for its development, in
spite of the difficulties it affronts.
43
Chapter 4
Methodology
4.1
Introduction
The small and micro business sector could be considered as the catapult for
development in Third World Countries. We have explored in chapter 2 and in
chapter 3 the importance that this sector has in those countries. In the case of
Peru, we have observed that small and micro firms do contribute in alleviating
poverty by generating workplaces and contributing in a significance manner with
the economic activity.
The next step is to explore how globalisation is affecting this particularly Peruvian
sector. Is it contributing with the development of small and micro firms, or is it an
obstruction for its progress? In chapter two we concluded that although
globalisation is bringing some benefits to the small and micro firms in the Third
World Countries, there are negative aspects that are jeopardising their evolution,
and consequently their main objectives such as creating jobs and reducing
poverty.
Chapter 4 will recount the methodology that has used for the impact of
globalisation on the small and micro firms in Peru. For achieving this purpose a
research has been conducted. Their structure and methodology will be described
in the next section.
4.2
Literature Review
The research conducted in this dissertation was basically qualitative. Therefore it

was important to develop a conceptual framework in the previous chapters. We
have found difficult to access to literature about our specific study: the implication
of globalisation on Peruvian small and micro firms, due to the fact of its scarcity.
However, when analysing the globalisation in a wide perspective, we have had
access to many sources of literature, therefore given us a sound base. We have
mainly worked with books when exploring the theory that surrounds globalisation
and journals when analysing data. We have worked as well with International
44
Organisations WebPages such as World Bank (WB), World Trade Organisation

(WTO), Peruvian National Statistic Institute (INEI), etc.
4.3
Primary Research
The main objective of our research was to identify the main impacts of
globalisation on Peruvian small and micro firms, and see whether globalisation is
enabling or obstructing the development of those businesses. Because our
research was based on subjective opinions, value judgement and perceptions,
rather than to measure them, we considered appropriate to use qualitative
research. (Dibb et al 2001) (Chartered Institute of Marketing 2001)
Our research was conducted through a questionnaire, which was given to the
companies selected, previous arrangement by telephone, personal meetings, and
contacts, compromising in that way the total responses of them. [Questionnaires]
A covering letter was enclosed with a clear explanation of the purpose of our
research, as well as instructions for completing it. After two weeks, the
questionnaire was returned to us.
Usually, when working with questionnaires, and sending them to firms by post or
email, some disadvantages are presented such as low response rate or
misleading results. (Dibb et al 2001) (Chartered Institute of Marketing 2001)
However, we have minimised those aspects by modifying the research approach,
as we have already explained in the paragraph above.
4.3.1. Questionnaire
The questionnaire was based on six open questions that enabled the responder to
explain and describe specific issues linked to globalisation and small and micro
firms. Basically we have structured the questionnaires under four factors of the
process of globalisation: Technology, Transnational Corporation, Government, and
International Organisations, which have been the roots of our conceptual
framework described earlier in chapter two.
The questions were open because we wanted to encourage the responders to
answer what they thought and perceived about particularly topics. However, these
45
questions could bring out of the scope answers. In order to avoid that, we guided
the responder, in each question, with examples and topics that we wanted them to
comment and focus, in that way we would not lose the objective of each question.
In order to receive clear and objective responses, the questionnaire was sent to
the company owner.
The questions of the questionnaire used were as follow:
How would you describe competition in your sector? (E.g. competitive market,
no so competitive, barriers to entry / exit, power on the suppliers / customers
side, etc) Does your firm have any kind of relationship (supplier, customer,
competitor) with a transnational corporation? If the answer is positive, could
you explain it?
Do you have any kind of international trade relationship? (E.g. Imports,

Exports, Joint venture, Strategic alliances, Brand representative, Franchise,
etc)
What do you think about the Peruvian governments actions for fomenting,
developing and supporting the small and micro businesses?
Do you know that there are international organisations such as the Inter
American Development Bank (BID), Andean Corporation of Fomenting (CAF),
World Bank (WB) and others, which support and develop programmes for small
and micro firms? If you answer is affirmative, do you have access to those
programmes? If you have no access, could you explain why?
Do you have access to technology? (E.g. Computers, Internet, Software,

Machinery) To what level? (E.g. Basic, medium or high)
How would you describe your employees level of education? (E.g. primary,
secondary, bachelor, postgraduate) If your firm is individually, what is your level
46
of education? Does your employees have access to training? If they have,

how frequently? If they do not have, could you explain why?
4.3.1 Sample
In order to have a wider perspective, it was important to explore different industries
within the small and micro sector, therefore we have not limited our research to
just one industry. For achieving that purpose, we chose five companies in three
different industries: trade, manufactured-industry and agriculture. The reason of
selecting those sectors was because they represented most of the national
economic activity. Therefore what happen to those sectors is extremely important
for the Peruvian economy.
Another important parameter was to select companies with more than five years in
the market. This particularly issue was important because those firms have
experimented profound changes and challenges. We have mentioned in chapter 2
how the last ten years have been surrounded by an unpredictable environment.
Finally, the firms selected have less than ten employees.
47
Chapter 5
Findings and Analysis
5.1
Introduction
Through chapter 1 to chapter 4, we have been highlighting the importance that

small and micro firms have in the Third World Countries, particularly in Peru, as
well as exploring how they have being affected by globalisation. We have reviewed
the literature that explores our dissertations main objective. Now is time to narrow
our research and find the specific and particular consequences of globalisation in
Peru. Therefore, the objective of this chapter is to identify, understand and discuss
the impact of globalisation on the Peruvian small and micro firms, and realise if
those consequences are enabling or obstructing the development of those firms.
The findings of our research will be discussed under the three main factors of
globalisation that we have analysed in chapter 2: Impact of Technology,
Transnational Corporations and International Organisations on small and micro
firms, as well as the role of the Government in the small and micro business
context.
5.2
Impact of Technology on Peruvian small and micro firms
We have analysed in chapter two the fundamental changes that technology is

bringing to countries, organisations and individuals. Technology is perhaps one of
the principal shapers of globalisation. However we have suggested in previous
chapters that technology is not reaching all countries. Most of the Third World
Countries have no access to it.
When analysing the result of our research in this particular topic, we have found
that although some companies have access to technology, the majority of them do
not have. This pattern varies through sector. The trade and service sector has
access to medium levels of technology. However the agriculture sector has a huge
lack of technology. The manufacturer industry does have some access to
technology, however in low proportion when comparing with the rest of companies
of that sector.
48
Most of the responders affirm that this general lack of technology in the small and
micro sector enormously affects the competitiveness and development of small
firms, which in simple terms means that they could not compete in equal terms
with the rest of the world. They affirm that small and micro firms from developed
countries can easily enter to the Peruvian market since they posses adequate
technology.
There was a particularly company from the textile-manufactured
industry that affirms that many Chinese firms have enter to this sector with
extremely low cost of operation which enables them to offers very low price.
The main problem for accessing to technology was the lack of financial resources
for acquiring it. Most of the firms that have access to technology affirm that it was
possible because they work for bigger clients, as suppliers, and therefore those
companies has transferred it to them. Others affirm that they bought technology
from abroad, however those firms were the minority.
After the affirmations presented above, It is clear that, in general terms, small and
micro firms in Peru do not have the necessarily access to technology, therefore we
could affirm that our conclusion, after exploring the literature, in chapter two,
reflects the Peruvian context when referring to this particular issue.
5.3
Impact of Transnational Corporations and International Organisations

on Peruvian small and micro firms
In chapter 2, we explored how transnational corporations and international

organisations are main players in the globalisation context. Those organisations
are viewed as many as the principal factors of globalisation.
We have realised, after our research, that most of the firms investigated have
relationships with transnational corporations. However, the majority does not know
anything about the programmes that international organisations such as the Inter
American Bank of Development (IDB), the Andean Corporation of Fomenting
(CAF), the World Bank an so on offer to governments for supporting and
developing small and micro firms. This lack of knowledge of such organisations
demonstrates how poor informed are the small and micro sector in Peru, and how
important opportunities for developing and supporting it are not been used. Most
49
of the responsibility of the latter mentioned is in the governments side, since it is

the one that has direct relationship with those organisations, as we are going to
explain in the next section.
Most of the companies in the trade and service sector affirm that they work at least
for one big transnational corporation. Many of them work supplying them with
services such as catering, cleaning, equipment and machinery maintenance, and
proving them with goods such as stationary, cleaning utensils, office uniforms, and
so on.
However, firms in the agriculture sector affirm that they do not have any kind of
relationship with transnational corporations. They usually sell their products to
wholesalers, who are the ones that trade the products abroad, by directly
exporting them, or through an agent. The same happens with the manufacturer
industry, however in less proportion. There are some companies in the latter sector
mentioned, that are having some type of relationships with transnational
corporations by exporting their products, or providing those locally.
As we have explored before, the role of the transnational corporations has been
questioned, and many debates have been created, thus there is no common
agreement about this issue, as we have mentioned earlier. We have perceived,
after our research that small and micro firms, in general, welcome the presence of
transnational corporations due to the indirect business opportunities they
generate.
Finally, we have found that some firms have affirm that transnational corporations
represent a threat to them, since they cannot compete in equal and fair conditions.
This affirmation could be questioned, because it is difficult to believe that small and
micro firms will compete in the same market with transnational corporations,
usually they operate and target different markets as well as niches. However, in
fact we have discovered that they do by offering complement and substitute
goods, with a far cheaper price and less product quality.
50
5.4
The role of the Peruvian Government in the small and micro firms
context related to globalisation
We have found, in our literature review, that although the different and opposite
views, the role of the government is changing, or better say, adapting itself to new
times and circumstances. It is under this argument that governments are playing
an imperative role in supporting and developing small and micro firms in the Third
World Countries, giving them the adequate tools and atmosphere for their
development.
However, after analysed the results of our research, it seems that the mentioned in
the paragraph above, is not having the impact that the theory affirms. Most of our
questionnaires responders have affirmed that, if there is any government support,
it is unnoticed, since the majorities do not have access to it. They said that have
heard about those governments programmes for supporting and developing small
firms, nevertheless have not received any help.
The majority of responders claim that the fact of not having access to these
government programmes is due to the poor coverage that those have is not
representative, since just the minority of firms have found support. They affirm that
the purpose of the programmes is good, an in fact necessarily for their growth and
competitiveness.
We have found that the agriculture sector is the one that claims more for
government support. This sector is, as mentioned in the chapter 5, considerable
important for the national economy and the social pressure for alleviating poverty
In fact, Peru is an agriculture country, however never has been developed
efficiently. The responders suggest that they do not have the adequate resources,
such as technology, capital, and training, to become competitive and then compete
in the global market. They claim that the government should create, as in the past,
the Agrarian Bank. Therefore they will have access to capital in preference terms.
They draw attention to a very important aspect. In two years, the regional
economic block MERCOSUR, will join the regional economic block ANDEAN,
forming one regional block for South America, and in five years, it is possible that
51
the Free Trade of the Americas (FTAA) will be implemented, therefore, the
Peruvian agriculture will be competing with many countries in the region. If they
are not prepared for doing so, they will disappear, since countries such as Brazil,
Argentina, Chile and Venezuela are more competitive than are Peruvian small
agricultures.
Another important issue raised in our research concerning to the agriculture
sector, is that most of the responders point out that the government should assist,
by their businesses aggregates in the Peruvian embassies through the world, in
expanding their operations abroad by exporting their products. They affirm that
embassies should play that role, since they are located in those particular
countries, have the infrastructure, and know the market. We consider that the
latter is certainly true. Chile is an example of it. Their embassies have been
fomenting their exports through the world for the last twenty years, and the results
have been extraordinariness, since Chile is one of the major exports in South
America, particularly small firms.
The trade sector manifested that most of the companies cannot compete with
dumping products that came from abroad, particularly from Asia. They affirm that
the government should put in practice antidumping measures to those countries
products, and should put more efforts in fighting goods smuggling, since those
products are much cheaper, since they do not pay taxes, and therefore is
impossible to compete. The same issue was raised when referring to the informal
companies that do not pay taxes. They affirm that those companies can sell
products much below the cost, therefore distorting the market prices.
The manufacturer sector made much of the same claims the trade sector did.
They pointed out that big companies, particularly transnational corporations, with
better technology and managing skills, have damaged their sector. They asked the
government for training and technology, for becoming competitive. They suggested
that the government, in order to stimulate production, should buy from them and
not from bigger or transnational firms.
52
In general, however with some exceptions, the small and micro firms are not
asking the government for protectionism measures. They are asking for resources
that will enable them to growth and become competitive firms, therefore accessing
global markets. They are asking for more support, but covering more firms, and
not just the minority of them, they perceive that this new government will make
more efforts in supporting the small sector. They see the creation of the Vice
Ministry for small and micro firms a good signal, as well as the possibility of
creating a government bank for assisting the small and micro firms.
Finally we could affirm that in general there is a common agreement that
government support is still weak. However most of the sector is optimistic that this
government will finally give the importance of their presence in the economy as
well as socially.
In spite of not having explored to much the issue of training and education in the
former chapters, we have affirmed before that one of the main problems that small
and micro firms face was the lack of knowledge and management skills, which
unable them to compete in equal conditions. We have measured in our research
the level of education that in general small and micro firms employees as well as
owners have. The results show and confirm our earlier affirmations. The majority
of employees do not have superior education, they have just finished high school,
and there is a important percentage that have not even attended basic school.
When analysing the possibility of having training programmes by the company, the
majorities have not received any training at all, not private neither public.
This issue should concern both, firms owners and government. We believe that it
is difficult to compete in a globalised market in unequal conditions, as we have
affirmed before. Firms must emphasise in training their employees and
government should put more efforts in developing more programmes for training
and capacitating small and micro firms. This sector need to develop more skills
and knowledge about their particularly industry.
There have been progresses in tackling level of illiteracy, which is an important
step, since there are many firms that have had before illiterate employees,
53
particularly in the agriculture sector, however we have found that today, at least all
employees know how to read. However as we have shown in chapter 3, there are
huge problems in accessing to superior education, particularly the poorer ones,
who are, in average, the ones who works in small and micro firms.
5.5
Summary
Our research has shown that the panorama of the Peruvians small and micro firms
is complex, and much has to be done. We have seen that our findings in the
literature review in chapter 2, and the analysis of the small firms environment in
chapter 3 are very much the same, when comparing with our primary research.
However there are issues such as the role of international organisations and
transnational corporations that are indeed not having the expected results on this
sector. Organisations such as the IMF, BID, WTO, CAF, are unknown by Peruvian
small firms, and less their support and development programmes, which are
supposed to be assisting them. Some transnational corporations are seemed as a
threat, due to the fact that is practically impossible to compete with them, and the
fact that some of their products enter the Peruvian market with dumping,
particularly from Asia.
The role of the government has been questioned, the majority of small and micro
firms have not found any assistance, and they affirm that the government should
increase its efforts in developing this sector. An important aspect is that the small
sector is not asking for protectionism measures, as was in the past, they want
adequate access to resources for becoming efficient and competitive. There is a
positive feeling about the posture of the new government towards small and micro
firms.
Technology is imperative for their success. Peruvian small and micro firms claim
that they have low levels of it, and some cases none. They affirm that without it,
will be difficult to growth and develop. This latter is critical in the agriculture and
manufacturer industries, in which technology determines their competitive
advantages and opportunities.
Finally, the issue of education and training is
essential, however most of the small and micro firm lack of them.
54
Chapter 6
Conclusions and Recommendations
For achieving our main purpose, -exploring the impact of globalisation in the
Peruvian small and micro firms, and determine whether it has enabled or
obstructed their development and growth- we have made a literature review,
chapter 2, and focused in three main areas of the process of globalisation:
Technology, Transnational Corporations and International Organisations, and the
government. Additionally, we have analysed how those factors have been
impacting small firms on the Third World Countries.
In chapter 3, we focused in the Peruvian small and micro firms environment, by
exploring first the main characteristics of this sector. After that, we focused in
analysing some macro factors that have influenced the small sector. This latter
was conceptualised through a P.E.S.T. analysis.
Finally, we finished that
particularly chapter by investigating the opportunities, threats, strengths and

weaknesses that the Peruvian small and micro sector is confronting. This was
possible through a S.W.O.T. analysis.
Chapter 4 describes our method of research, explains the questionnaire and
criteria for structuring the questions. Finally, chapter 5 elucidate the primary
research findings, as well as present a discussion on each result.
After the information presented on each chapter, we are now in the position of
reaching conclusions and recommendations. Therefore we have to concentrate,
as mentioned above, on the main purpose of this dissertation. We have found that
in fact globalisation is impacting small and micro firms in Peru. The three main
factors of the process of globalisation; Technology, Transnational Corporations and
International Organisation, and the Government, discussed and analysed in
chapter 2, are influencing Peruvian small and micro firms, as we have discovered
in chapter 5.
We could affirm that, in the short term, globalisation has been damaging some
countries industries, particularly in the Third World Countries. Small and micro
55
firms in those countries are having difficulties in being part of this globalised world.
However are, in a reduce number, small and micro firms that have absorbed much
of the elements that encompass globalisation, thus those firms have been growing
and developing in the last years. This latter demonstrated that in fact small and
micro firms can benefit from globalisation, therefore this is an issue of manner, and
not of content.
In order to answer the main question of this dissertation: is globalisation enabling
or obstructing the development of Peruvian small and micro firms, one should
think in long term, and not in short-term. As we mentioned before, we recognised
that globalisation has failures, and many sectors, particularly the small one, is
having difficulties with it, however, we strongly support the idea of globalisation in
the long term.
Consequently, we consider that in general globalisation has been obstructing the
development and growth of Peruvian small and micro firms. However, we affirm
that in the long term, more small and micro firms will be benefited, as this
phenomenon will cover more countries and therefore sectors. We claim that for
achieving this success, the Peruvian government, together with international
organisations have to act as a counterbalance and distributors of power and
equality, since the main problems of globalisation roots in the disparity of wealth,
power and resources among countries and societies.
We consider that Peruvian small and micro firms should organise themselves in
organisation or societies in order to have more power when negotiating. This
association should trespass national boundaries, and raise their issues directly to
international
organisations
and
governments.
Regional
blocks
such
as
MERCOSUR, ADEAN, NAFTA and FTAA will permit the latter mentioned, and
results will be faster and greater. Finally, we have found the Peruvian small and
micro firms have many resources that have to be exploited. Those firms have
there a competitive advantage over the rest small firms in the region.
Macro
conditions seem to be favourable on the long term. Therefore, small and micro
firms will have a better atmosphere for their development, generating workplaces,
alleviating poverty and contributing with the Peruvian economic growth.
56
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TABLE OF CONTENTS

Chapter 3: The Peruvian context and small and micro businesses

Chapter 5: Findings and Analysis

Distribution of GDP per capita in the world

Importance of small and micro firms in Peru

Number of small and micro firms attended by the government

Annual variation of the GDP

Annual variation of the inflation.

Annual variation of the trade balance

Principal commercial exchange countries

Annual variation on the Balance of Payments

Annual levels of unemployment rate

Annual amount of external debt.

Evolution of the illiteracy rate

Evolution of life expectancy

Evolution of the migration in the rural areas

Evolution of the infant mortality rate

Levels of access to education

Home with access to personal computers

Home with access to telephone service

Number of mobile phone users

Home with access satellite Tv

Conceptualising globalisation: three tendencies

World Bank classification of developing countries

SWOT analysis on the Peruvian small and micro firms

concept of globalisation, however much of it is allusory. Dicken (1998:3) affirms,

Usually the term globalisation is correctly associated with economy, although is

Govindarajan V. and Gupta A. (2000:275) define globalisation as: a growing

2.3 Perspectives of Globalisation

The International Diversity Perspective

Table 1: Conceptualising globalisation: three tendencies. Source Held et al 2000

2.4 Factors of globalisation

Transnational corporations either expand national economies or exploit them;

In developing countries, as we are going to observe in detail in the last section of

different countries that have a relationship in some stage of its production

Similarly, Parker (1996) suggests that technology issues such as digital

nation-states around the globe. She argues that particularly telecommunication

Finally, it is important to mention that technological forces have become important

He argues that even domestic issues are influenced by external

organisations, and nation-states cannot have control any more. Therefore,

According to Simai (1994), in Parker (1996) globalisation has shifted influence

interdependence and interconnection among countries economies has increased

Supporting this view,

Washington (1996:2) states governments are organising regionally to achieve

Infant mortality rate

Under the conjuncture mentioned above, globalisation appears, to bring within

Dohlman et al (1997) claim that developing countries have no human, institutional

which are imperative factors in the process of development of a country. He

The use of Internet is assisting in accessing

foreign markets in a cheaper way than before.

systems are making it easier for technology to cross-traditional national and

In this case, the

The objective of this chapter is to present a clear understanding of the Peruvian

Main characteristics of the Peruvian small and micro business

We have addressed in chapter two as well as in the introduction of this dissertation

Importance of the Small and Micro

Contribution of the GDP by Firms' size

Support to the Micro and Small firms 1990 -1999

GDP Anual Variation 1990 - 2001

Trade Balance 1990 - 2001

Commercial exchange with main countries

Comercial exchange w ith main countries

Unemployment Rate 1990 - 1999