The pros of globalization for business and ways to exploit it
The movement of people and goods across borders and regions is nothing new to humanity. It has manifested in many ways in different epochs of civilization, from legendary armies marching down to conquer the world to the age of exploration and discovery to today’s highly interconnected, high-speed, tech-driven world.
Although it has been labeled a pitfall on many occasions for various reasons, globalization is increasingly becoming a force for good, thanks to centuries of technological advancement and improvements in how we organize society. As per a recent business report, a massive 80% of small and mid-sized business owners who engaged in some international trade of sorts have witnessed a significant increase in profits over the past years, and 76% are upbeat about their business forecasts over the next five years.
This post will examine why you should prioritize globalization and international trade as a business owner or executive. We will also explore the most viable tips and tricks for joining the global fray.
What is globalization?
To assess the impact of globalization on business today, let’s first examine what globalization means in today’s world.
Globalization today is markedly different from what it used to be before the advent of modern human records. Today, it is marked by multilateral trade agreements between nations, high-speed travel, and near-instant communication between different parts of the globe. This has paved the way for many small local businesses looking to expand to new markets and gain a global footing — something that was once exclusive to large corporations with a massive capital base.
The modern markers of globalization are also opening up access to resources, creating possibilities for businesses to diversify their products, services, customer base, and workforce. The nearly instantaneous flow of information means enterprises are open to more ideas. A seemingly small idea in one part of the world can turn into a vast business empire on the other side.
Why join the bandwagon of globalization?
If your business doesn’t already have branches in multiple countries or employees spread across the globe, globalization can be pretty intimidating when you begin considering it.
However, here are some important reasons why global trade should form a crucial part of your growth and innovation strategy:
Access to a more diverse pool of talent
Thanks to globalization, businesses from areas and regions with talent shortages can easily explore talent pools in other regions.
Companies that adopt remote work and outsourcing can gain access to a vast range of candidates for vacant positions, with a high possibility of finding the right candidate with the right competencies, character, and pay rates.
Also, businesses looking to expand to other regions can find talent with local experience to help them hit the ground running in their new location.
A wider job pool
Globalization also opens businesses to a broader pool of jobs and contracts. When companies outsource their production and organizational operations, it translates to more business for businesses in other parts of the world. This could mean increased supply contracts, projects, or customers.
More ideas for developing products and revenue streams
Businesses looking to diversify their products and revenue can take advantage of economic openings in other parts of the world. They can enter new markets, target new demographics, and find ideas for new lines of products and services.
To take on a new region or location, businesses often need to redesign their products and services to fit local needs, encouraging businesses to diversify.
More efficient production
With easier access to talents and resources in other parts of the world, businesses can take advantage of the lower cost of labor and supplies to reduce their overhead cost without hampering quality assurance or economic growth.
With more cost-efficient operations, businesses can increase their competitiveness while offering high-quality products and services.
Leveraging opportunities for international cooperation
Globalization means less conflict and more cooperation between countries. It brings businesses from different regions together to cooperate on many things, from standardizing the quality of products and services to fighting common threats like cybercrimes and piracy. Other important benefits include:
Increased economic stability
Trade and cooperation between countries minimize the likelihood of wars and conflicts, leading to a more stable business trade environment. The flow of goods, services, knowledge, and capital between borders compels nations to set aside their differences and work together toward their shared prosperity. This means fewer geopolitical conflicts that could disrupt business operations.
Exchange of knowledge and technology
With increased collaboration between countries, businesses can have greater access to tools and technologies from other parts of the world. New ideas and technologies in one part of the world can spawn new industries in another part of the world.
Businesses can also learn new business practices, cultural traits, and technological knowledge that can help them enhance productivity and other aspects of their business operations.
Adopting universal standards
Countries can also collaborate on unifying their standards and regulations to guarantee a certain level of quality of goods and services for customers across the globe. This helps level barriers to entry in many regions, eliminating the need to alter business models and products to fit into a new location.
Developing an inclusive workplace culture
Companies with a diversified workforce often enjoy a more vibrant, lively, and supportive workplace culture. Businesses can tap into various experiences and expertise, significantly improving their adaptability and competitiveness.
Increased access to resources
Cross-border cooperation opens businesses to a wider pool of resources. This includes:
Access to international funding
Businesses can raise capital from other regions, and investors can find more high-growth, high-yield environments. Macroeconomic differences in other parts of the world can mean a higher-growth investment environment for investors. Businesses in regions with weak investment climes can find investors from booming economies to fund their high-yield projects.
Access to more natural resources
With increasing international cooperation, businesses can get easier access to cheaper supplies. They have more options for sourcing their raw materials, which can help them reduce overhead costs while also ramping up the quality of production.
Ways to leverage international trade for business growth
Businesses can explore cross-border trade in a multitude of ways. They can export their products to increase their profit margins or import cheaper supplies to sell at greater profit margins, reduce operational costs through contract manufacturing, gain quick access to new markets through licensing and franchise deals or joint ventures, and explore the rise of e-commerce.
Let’s explore some of the most viable options for international trade for businesses today.
E-commerce is a distinctive offshoot of international trade borne recently out of the rise of digital marketing and highly interconnected global trading networks.
Businesses can set up a website that serves as their business front in various locations and sell directly to customers there. They can use many distribution methods to reach their online clients, from warehousing services to drop-shipping and licensing.
Import and export
The good, old-fashioned international trade of imports and exports still exists today and is one of the most viable ways for companies to break new ground internationally. Imports and exports are the mainstays of most countries’ gross domestic product (GDP), and companies today can trade in a well-regulated, well-interconnected global landscape.
Companies can export their goods and services to foreign markets, where they can sell at higher prices compared to domestic markets, or they can import goods that are more expensive to produce domestically.
Licensing, franchising, and strategic alliances
With licensing and franchising deals, companies can bypass many hurdles to establish their business in new locations quickly. Franchising allows businesses to avoid logistical nightmares, the overwhelming patchwork of regulations, and operational challenges by simply selling their trade licenses to established businesses at the new locations. With this, the franchise partners can use the brand’s logo, sell original or localized versions of the brand’s products, and represent the brand in every regard at the new location.
Businesses can also enter into strategic alliances and partnership deals with their counterparts in other parts of the world. This can help serve a number of benefits, including:
- Expanding the brand’s reach
- Expediting production and distribution
- Securing shares in new markets
- Enhancing products and services
- Accessing new knowledge and technology
• Contracting and outsourcing
Since the advent of fast travel and fast communication, companies in developed countries have always sought ways to reduce their operational cost by outsourcing their labor to lower-income regions. With international contract manufacturing or outsourcing, businesses can outsource the production of goods and services to entities in other parts of the world at much cheaper rates while maintaining full control over the production process and the product itself. They can outsource not just the processes involved in manufacturing products but a host of other types of tasks, from customer care to business analytics, marketing, and managerial tasks.
Finding foreign investors
Thanks to globalization, businesses can access a wider pool of investment funds. A highly advanced global financial network makes it easier for businesses to find financial partners from around the globe. Many high-growth regions in the world are witnessing an influx of foreign investments, from foreign direct investments by companies looking to scale their influence abroad to MOUs between governments and multinational corporations to international funding programs run by global financial institutions and businesses that can tap into this massive pool of funding.
Tips and tricks for taking your business global
Expanding to new territories is an exciting but also daunting ambition. But with the right strategy, you can strike the right partnerships and quickly get everything in place for operations at your new locations.
Here are some expedient tips and strategies to consider:
Get proactive with learning
The first limitation you need to overcome is that of your mind. To expand your physical boundaries, you need to expand the horizons of your mind by educating yourself about the key intricacies of globalization.
A program like the online distance learning MBA from Aston University prepares students to navigate the complexities of global trade. It enables them to analyze a global business environment and the processes and systems involved in managing complex organizations. It also delves deep into the intricacies of financial management, inclusiveness, and diversity, and delivering customer value in different sociocultural contexts.
Get expert help
It’s also advisable to consult with global trade experts, especially those specializing in your target locations. There are many online forums and marketplaces where you can find generous professionals who are eager to offer their advice.
Begin your expansion from neighboring countries
Over four out of ten businesses told American Express in a recent survey that their international business operations are based mainly in Canada and Mexico. Starting your global expansion from a neighboring country can give you a softer landing. You’ll be in a familiar environment with many similarities to your home country, from the culture to the language, geography, climate, and business terrain.
Research your target market extensively
Do your homework thoroughly to avoid surprises when entering a new market.
Provide highly attractive offers
When researching, consider ways to stand out, including introducing irresistible offerings, clear brand markers, quality improvements, etc.
Build a robust team
Your success in foreign markets depends heavily on the team and partners you work with.
- Hire talent who are well-versed in your new location.
- Build a local network of professionals and suppliers that you can lean on for advice and steady supplies.
- Do your due diligence when choosing foreign partners.
- Do a thorough background check and ensure the standards and principles of any new talent align with your company’s.
• Stay abreast with trends in international trade
Finally, keeping tabs on developments in your trade locations is crucial. Stay updated on local laws and international trade laws. Stay informed on trends in politics and business best practices in your trade locations.
Unlock unlimited growth potentials with international trade
Thanks to today’s forces of globalization, businesses of all shapes and sizes can expand their trade beyond national borders, tapping into new opportunities for growth and expansion.
There are many different ways that businesses can participate in profitable global trade, from e-commerce to importing and exporting, contracting and outsourcing, licensing, franchising, and finding partners for supplies and financing.
With global trade strategies, businesses can leverage lower labor costs elsewhere to drive down their overhead costs, buy cheaper through imports to sell more expensive goods to produce locally at more profitable prices, and gain access to more funding, knowledge, and technologies for driving innovation and growth.