Globalization of business is a growing concern today for many businesses across the globe. What does it mean? It means that a company, say Toyota, produces cars overseas and sells those cars in the United States, only to sell those cars back home. The company can be profitable, but why would you buy a car made in Mexico when you could buy one made in the United States? There are many opportunities to consider when thinking about globalization of business, but defining the scope is a little bit more involved.
The globalization of business has many layers. On the most simplistic level, globalization means the expansion of a product or service available anywhere in the world. For example, computers became available in the 1980’s to every single county on the planet. Globalization of business encompasses much more, including things such as transportation markets, financial markets, geographic markets, government markets, and the interactions of different cultures.
One of the biggest concerns with globalization of business, especially for smaller companies, is what impact it will have on the local market. Does a company have a local market? What about the industry they work in? How will the products and services they provide impact the local market? The impact of globalization of business extends beyond the impact of the products or services, however.
How a company defines its market is a very important consideration when considering globalization of business. A company may be too large geographically speaking, but the products and services they provide are very localized. For example, a company that makes shoes in Canada but sells those shoes all around the world, or that makes clothes for children around the world but doesn’t sell their clothing products to anyone in the United States, is actually doing business in a localized manner. This type of business can be very profitable, but because of the international scope, there is always the potential that it will lose a portion of its market share to a competitor from a different country or even from another part of the world.
The other concern that many companies have is not only globalization of a business but also the impact it has on employees and the company itself. Globalization has been known to cause companies to outsource jobs that used to be held locally or even in other countries to other countries where cheaper labor is available. While outsourcing is often considered a good thing for companies that need the labor force of an entire country, it has also been known to cause resentment among local workers when jobs are lost or relocated.
Many companies take the stance that globalization does not directly affect them or their local market. However, if a company truly understands how the global economy works, they should be able to see where the problems lie. For example, when a manufacturer produces goods for export to the United States and then ships those same products back to China, it makes more sense for that manufacturer to make those items in the local market. If it were more profitable to make those items in China, then they would. The globalized markets that we live in allow manufacturers the ability to do that. Then they should be happy to sell those items back to their customer base once they realize that they can make more money by doing so.
When a company truly understands the concept of globalization of business, they should be happy to accept the changes globalization has brought on. They should be able to learn to embrace new technology, which will make the manufacturing process cheaper and more efficient. Then they should be able to hire local people who can work on the assembly line and understand the tools that make that happen. They should also invest in training programs, train their production workers on local skills, and then offer to retrain and re-training programs when circumstances arise that require it. These are all things that a company can do well without having to worry about the impact of globalization on its bottom line.
Globalization of business is indeed a positive thing for many companies. It has enabled many companies to provide products and services that would never have been offered if the company had not made those investments in the globalization of business. However, there are pitfalls to globalization of business as well, and those pitfalls can hold a company back and prevent it from making those investments into other markets. Companies need to be careful to note the differences between what is good for the company and what is bad for them, especially if the globalization of business idea is new or if it is a reaction to something that has already happened.