The trend towards global expansion is much due to the fact that in recent years there has been a rapid technological change in global internet access transforming the way buyers and sellers conduct business. Telecommunications media has facilitated the spread of global mass culture. The change in technology has shifted supply and demand away from the core countries and their ability to dominate production of consumer goods to the rest of the world. It has created an increasing interdependence of national economies, expanding borders making geography irrelevant. In “Rush to Get to the Global Party,” Larry Harding, CEO of High Street Partners, cites the growing trend towards globalization is a result of the following:
· The dollar’s decline – The decline of the dollar has made foreign ventures much more attractive to U.S. companies, including labor in overseas markets.
· Emerging new markets — The growing middle classes in China and the Middle East are driving the demand for consumer goods and services in the construction, technology, and finance industries
· “The World is Flat” effect – From The World is Flat, by Thomas Friedman, booming changes in technology and improved transportation has leveled the playing field, opening cross-border markets. Borders have become irrelevant.
Multinational companies looking to “expand their geographical footprint” through global expansion often benefit by increasing their visibility both domestically and internationally. However, with any new opportunity always involves some risk. Common obstacles small companies may experience when venturing overseas may include:
Employment Regulations and Practices – A great example is cited in “Younger Companies Get Overseas Presence,” when a U.S. company attempts to send an offer letter to a prospective foreign employee. Without researching the employment regulations, the company overlooked the need for an official employment contract to stay in ordinance with the local regulations. The end result was time lost, increased expense, and possibly lost labor. The inability to regulate or control economic activity and practices of transnational corporations is a great disadvantage when working remotely. While perhaps looking to expand and lower costs, companies have moved production facilities overseas, outsourcing labor but unfortunately when not properly researched, it may cost corporations more in the end.
Shipping and Importation – Overseas shipping is different than in the United States and with it, comes a different set of rules about importation. Again, many U.S. corporations do not research the overseas shipping and importation regulations and costs on their products. Shipping costs could be large, sometimes 17%, according to Harding, cutting into profits.
Technology – technology is always changing. In today’s ever growing technological era, it is difficult to keep up with the newest, best technology. When a consumer is looking for the next best thing (only a click away) a company has to constantly be up-to-date even far away.
The ability to conduct business internationally is an absolute necessity for a small business to remain competitive in today’s marketplace. Globalization provides opportunities to grow however, with small businesses, global expansion requires a carefully thought out business plan, cross-border openness, cooperation, and collaboration.
References:
Campell, Anita. “Smaller and Younger Companies Get Overseas Presence.” Small Business Trends. http://smallbiztrends.com/2007/12/smaller-and-younger-companies-get-overseas-presence.html December, 7 2007.
Campell, Anita. “Rushing to Get to the Global Party.” Small Business Trends. http://smallbiztrends.com/2008/08/small-business-global-expansion.html August 2, 2008
O’Berry, Denise. “Is Now the Time To Expand to Global Markets?” All Business. http://www.allbusiness.com/company-activities-management/company-strategy/8518731-1.html August 27,2010
