Why Has Globalization Become so Important?
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 6, 2022
Why Has Globalization Become so Important?
Although small business owners may think of globalization as something that only
affects multi-national corporations, the truth is that all companies, regardless of size, must
understand the opportunities and challenges of globalization. Over the past few decades,
information and technology have increasingly connected the world to such an extent that
economic problems in the U.S. now have a detrimental effect on financial sectors as far
away as Tokyo and Beijing. If you own a small business, learning how to leverage
globalization to expand the market for your products and services is essential to long-term
success
Globalization Opens Up International Access
With the world increasingly resembling the “global village” predicted by social scientist
Marshall McLuhan decades in the past, small businesses are no longer restricted to only
reaching customers in the U.S. The evolution of digital communication has opened up small
businesses to an international market that they can reach through social media platforms,
website content, and mobile marketing campaigns. For example, if you sell comic books to a
U.S. market, there’s nothing stopping you from promoting your products to Japanese youth
that love American superheroes.
Globalization Lowers the Costs of Customer Service
If you run an e-commerce business, chances are that you need to staff a customer
service department to handle orders and complaints. Globalization has made it possible for
you to outsource your customer service to remote staff overseas that can handle customer
inquiries 24/7, at a much lower price than if you hired a U.S.-based company. This helps you
cut expenses, and still provide outstanding customer service.
s. Globalization Levels the Competitive Playing Field
Although your business may never generate the kind of revenue of a major player in the
same industry, globalization has equalized the international playing field so that even small
companies can compete to get their slice of the global buying pie. One example is Uber,
which entered the taxi industry by changing the game with ride sharing that customers
could order on mobile devices. Uber started small, but leveraged mobile marketing and
social media to grow into a company now worth an estimated $70 billion.
Globalization Breeds More Competition
Despite the fact that globalization offers small businesses many advantages, it also
presents a major challenge, which is that the increased international opportunities also
leads to increased competition. As a result of greater access to international market,
globalization creates more businesses that want to gain a piece of these emerging markets.
This means that your business will have to find different ways to distinguish itself from the
competition, which typically means finding a unique selling proposition that expresses why
your company is worthy of being chosen by your target audience.
When your franchise is successful, your thoughts may turn towards expansion as a way
to access new markets and new financial opportunities. Expanding internationally can
sometimes be a profitable venture, but there are drawbacks. Many businesses have flopped
because they failed to take account of the financial risks involved.
Advantage: Exposure to New Markets
When you expand the franchise internationally, you can sometimes take advantage of
new markets that are unfamiliar with your business model. For example, if you own a
sandwich restaurant, you might open the first sandwich restaurant of its kind in a
developing market. When you own the first business of its kind in an international market,
you may be able to bring in substantial profits. When a new business comes into a region
and the people like it, it creates a cash cow for the owner.
Advantage: Favorable Regulations
Depending on where you decide to expand, you may be able to take advantage of
favorable government regulations. In many countries, you do not have to submit to the
same types of regulations that are required in the United States. You may also be able to
save money on taxes and the fees it takes to get started. If you pay lower taxes in that
country, it can help improve the bottom line for your business.
Disadvantage: Cultural Differences
One of the potential problems of expanding into other countries is overcoming the
cultural barriers. Just because something is popular in the United States does not necessarily
mean that it will be popular in other countries. Every country has its own culture, and you
may not be able to accurately predict what people in that culture will enjoy. Before getting
involved in another country, it makes sense to do some market research so that you can
minimize this risk.
Disadvantage: Compliance Challenges
Just as cultural differences can create issues with branding, public relations and
corporate culture, regulatory differences can also pose a significant challenge. Business laws
and regulations can vary significantly between countries, provinces, and states and you may
find that these differences affect every aspect of your business, including human resources
policies, employee rights and benefits, and even the ingredients you can use to formulate
your products. Prepare to hire separate legal and compliance teams for your international
offices.
Disadvantage: Financial Risk
When expanding into another country, you have to take into consideration the financial
risks that you are taking on as a business owner. For example, the exchange rates between
currencies could lead to an unfavorable return on your investment. You may also have a
hard time getting access to the supplies and products you need in any other country. Some
countries charge tariffs and fees to ship products in, which could make your business less
profitThe economic situation of your market impacts what you offer and how you present it
to your target customers. For international marketing, the economics of the target market
as well as the international economy affect your marketing strategy. The local economy
influences how you approach consumers, while the international economic framework
limits your ability to produce, ship and distribute your products through cost and regulatory
constraints. An effective international marketing strategy takes both local and international
economic conditions into account.
Product
1. Your international marketing of goods may be successful in western economies that
have a similar economic structure to the United States, but it will fail in developing markets
unless you make adjustments. You have to adapt your products to the local economies. A
product you market as environmentally-friendly may not be relevant in a subsistence
economy. A product that saves energy will not sell if energy is subsidized and inexpensive in
the foreign market. You may offer the same products internationally as you do in the United
States, but your global marketing has to change for your products to make economic sense
in foreign economies. Price
2. Whether an international market is accessible to your company depends on whether
you can offer your products at a competitive local price. International economic factors such
as currency exchange rates, tariffs and shipping impact your costs and the prices of your
goods. If the cost of offering your products in international markets is higher than that of
locally-produced products, you may have to target luxury goods market segments.
Sometimes mass-produced goods cost less than locally-made custom products, and your
marketing strategy can price your products to achieve wide acceptance.
3. Production
4. Carrying out production locally is one way to reduce costs and limit the influence of
international economic factors on your operations. Instead of incurring costs through duties
and transportation, you may be able to take advantage of lower production costs in the
local economy with lower labor and facility expenses. Local production can impact your
marketing by affecting both price and local acceptance. Marketing your products as locally-
produced competitively-priced options can be an effective marketing strategy.
5. Channel
6. The international and local economic environments influence your channel
marketing. If establishing a local presence is costly, you may opt for partnering with a local
or international distributor who already has experience in the target market. For some
markets, it makes economic sense to market your products via direct sales, either through
local representatives or via online sales. Alternatively, a low-cost, open local economy may
make it feasible to create your own local distribution network. The channel you choose for
your marketing initiatives depends on the economics of delivering the goods to market and
the local economic situation.
Products
1. Identify suitable international markets for your products. For some markets, you may
have to modify product specification to comply with local industry or safety regulations and
product preferences. It’s also important to check that packaging colors, product names and
graphic images on your packaging do not have any adverse cultural implications.
Localize
1. Tailor your product for the needs of the local market. Translate any text on the
product, packaging or user instructions into the local language, and use local currencies and
measurements on your packaging and sales material. Provide the product in the sizes or
quantities that local customers prefer. Your U.S. pack size or minimum order quantity, for
example, may be too large in certain markets.
Distributors
1. Appoint local distributors to market your products. Their local knowledge and
contacts can help you establish your business in new territories. Look for distributors who
can provide good geographical coverage and offer your customers a quality service. Provide
your local distributors with product training and marketing material or funds so they
promote your products effectively.
Internet
1. Use the Internet to reach territories where you do not have a local distributor.
Create a website that has product, price and company information tailored to different local
markets. Choose the most important countries for your Internet campaign and provide the
information in the appropriate local languages and currencies. If Europe is a key target, for
example, provide local pages in German, French and Spanish.
Communications
1. Ask a marketing agency with international offices for advice on marketing
communications to find the best local media to advertise your product. Marketing agents
also can help you create a brand identity that is appropriate to your target markets.
