Globalization is not a new term or concept in any sense, but it is probably one that is met with a lot of political and even negative connotations. But when it comes to the expansion and strategy of your business, globalization should not be viewed negatively. For your shareholders, it has the power to unlock vast amounts of potential in your company and for your employees, customers, and vendors, such global exposure can help them succeed on a worldwide scale.
In its most basic definition, globalization is the interconnect of people in trade or business; a common language for most of us in the world. It encompasses citizens doing business across borders in a wide variety of markets. Think of purchasing an item online from a store that is based in Italy and having it delivered to your home in Canada from a facility in China- that would be a result of growing globalization of business. This term applies to more than just the subject of global trade; it applies to the art of doing business with citizens around the world in an effort to increase revenue and maintain a global customer base.
Let’s discuss the various categories of benefits that globalization can have on our society. These benefits fall into three categories: economic, technological, and cultural.
One of the economic benefits of globalization is the stimulation of growth within various economies. With large companies being able to lower the cost of manufacturing, they are able to contribute to this stimulation. With more and more global activities, more and more specialization within a business is encouraged. This leads to further competition and in turn better products for the customer base.
Heighten competition in the business sector leads to more advanced research and development and the constant introduction of more improved and state-of-the-art technology. This competition can lead to more efficient processes as well. Furthermore, the development of technology has been one of the main drivers of globalization in the first place, by breaking down barriers and providing a place where multiple cultures have the ability to connect. We have to acknowledge the rapid speed of technological development has created greater instances of others who do not play fair and misappropriate other’s highly invested intellectual property. We all need the healthy competition, but must be on an honest playing field without the tanking of others IP.
There are many cultural benefits to be gleaned from globalizing a business. This is mostly possible due to the technological advancement that our world has seen in previous years. The increase of cultural diversity in the workplace has led to new ideas and proper representation of people from around the world in global brands.
What Makes it Difficult?
Some difficulties that can be faced through globalization include loss of jobs. This can be avoided if businesses approach globalization in a way that enhances their overall footprint and value and not as a way to cut as many costs as possible. With a constant ebb and flow in the politics of free trade, it can be hard to forecast where globalization will lead. Here are some of the challenges that businesses should prepare for as they enter the global economy.
Entering the globalized business world comes with many expenses including, but not limited to, the cost of complicated and confusing taxes and import/export duties regulations. These make it hard to comply in a foreign country; especially a country with a long, rich history of facilitation payments or payments for those who wait in lines for permits, filings, which are archaic methods to complete simple government filings, but such are now considered by many to be bribes, so such old ways no longer work requiring new methods, research, infrastructure, and highly regulated and taxed workforces in certain countries leave land mines given the numerous regimes with which to comply and report. Effective and consistent planning can help to circumvent any unforeseen costs and prepare you for this shift.
An expanded business footprint will equal an expanded customer service footprint. It is essential that you are prepared to service and interact with the expanded customer base that you will be interacting with. This means providing the same quality of service for your international clients as you do for your domestic ones. If you are bringing your customer, be prepared to educate them. If your customer is glad that you have arrived, perhaps they will be willing to share the traps for unknown.
The amalgamation of new cultures is often a pro of the globalization effort, but it can become a con if not approached with care and intention. Culture barriers can become pretty big hurdles if you let them. One way that can help circumvent this would be by being intentional with the localization of your business operations and engaging the local economy, workforce, and suppliers. There is nothing wrong with bringing people unaffiliated with the business, but expert in both cultures. To be clear this is not a language translator, but a cultural ambassador for both cultures who know where the common misperceptions occur for both sides.
Why is Globalization Necessary?
Due to the ever-rising level of technology which leads to a more connected global economy, globalization has become an almost necessary aspect of business development. Globalization creates far greater markets for new revenue opportunities. Not only can it help you cut costs through higher scaling and level a competitive business playing field, but it can lead to better innovation and new ideas. It can also lead to better business practices and products due to competition and necessary specialization.
Business globalization is not something to fear but rather, something to embrace. With the proper planning and intentionality, globalization can help your business thrive in a world-centric economy.