The Advantages of Doing Business Globally

by Julie Davoren; Updated September 26, 2017

If you want your business to remain competitive, consider the opportunities for increased production efficiency and a wider reach by doing business beyond the United States. Going global allows you to tap into a marketplace of more than 7 billion people and enjoy additional advantages that lead to business growth.

Acquire More Customers

The United States has about 4 percent of the global population, and this proportion is shrinking, according to statistics from the World Bank Group. In contrast, China is home to about 19 percent of the planet's people, India almost 18 percent and Southeast Asia roughly 25 percent. In addition to the population of these growing countries, per capita gross domestic product is also rising overseas. Although the United States currently has about one third of global purchasing power, an increasing population and GDP indicate that the purchasing power of other countries is also increasing.

Increase Production

Large profits often are driven by economies of scale, so a more widespread scale of operations can lead to larger profits. You often can achieve lower costs when you increase your scale of production through international expansion. This is because spreading fixed costs across more products reduces per-unit cost, and resulting operational efficiencies reduce variable costs. Economies of scale can work for just about any business regardless of size, and improvements in technology allows even small businesses to be more productive in areas such as purchasing, marketing and hiring, according to the Inc. website.

Tips

  • International expansion can also provide you with access to a larger pool of highly educated professionals as well as skilled and unskilled labor.

Reduce Local Market Dependence

You don’t need to accept the restrictions of your local market if your product can find an international market. If your business is prone to seasonal changes or pronounced fluctuations in demand, you can protect yourself by expanding into less volatile markets. If you take your production to the world stage, you might find markets that are countercyclical. You also might extend the life of existing products and services if you find new markets for them.

Further Competition

The ability to differentiate yourself from competitors is critical for success. If your local market is saturated, consider whether your business model can adapt to the laws, values, culture and economic structures of other countries. For example, China's growing economy might be enticing for retailers, but the country's regulations and the retail habits of its people might make entry difficult, according to TMF Group.

Understanding the business practices of the country you plan to enter will help you compete in new markets and help you recognize and select the best business practices for your industry. In this way, you’ll differentiate your company from the others and create a loyal customer base across the globe.

Gain Better Margins

If you expand globally, you'll diversify your market and you may end up with better margins, especially if exchange rates work in your favor. By expanding your business across the globe, you might experience less pressure on pricing, making it easier to maintain your margins. When you work with overseas companies you might receive payments quicker, because you and your partner companies -- in an attempt to reduce risks -- will seek the safest and most efficient ways to conduct transactions and receive payments.