How Does Globalization Affect an Organization's Business Approach?

Globalization refers to the ways in which economies throughout the world have become more integrated and reliant on each other. In the past, countries were more focused on building up markets within their own borders, but as trade barriers have loosened, industrialized powers are increasingly seeking foreign markets to bolster their profits. One example is the way in which American auto makers have built manufacturing plants in countries such as Mexico and Japan, taking advantage of emerging markets and beneficial tax breaks to create jobs, produce goods cheaply, and reap the financial rewards. However, globalization has consequences that can impact how businesses operate.

As more countries seek to invest in foreign markets, competition becomes fiercer. This can create conflict that arises out of resentment when these companies operating in foreign countries lower price points and produce goods that are superior to native-made products. That was the case when Japanese auto makers began opening large plants in the U.S. in the 1980s, and produced cars that were more compact, better made, and more affordable than traditional U.S. cars made by Ford and Chrysler. Customers now had more options when it came to buying cars, and many chose the gas-efficient, less costly Japanese vehicles, which triggered intense competition with American auto manufacturers.

Globalization has made it much easier for companies to share, buy and sell technological developments that once used to be proprietary. For example, the development of the personal computer in the 1980s, was, at first, an American innovation. However, technological companies in Japan and Taiwan were soon making the microchips that were necessary to run these computers. This was due to the fact that these countries were able to improve upon the basic design of these microchips and produce them at a cost that was attractive to companies such as IBM and Apple. In the current business climate that’s increasingly driven by digital transformation, the ability to transfer technology among foreign countries has been a primary reason that technological innovations have become so commonplace.

There’s an old saying that “all politics are local,” but in today’s globalized business landscape, the mantra should be, “all small business is international.” Regardless of whether you’re selling skateboards or comic books, globalization will force you to think in terms of the global audience. There’s a freedom in understanding that your target audience isn’t just living somewhere in the U.S., but also overseas. After all, if you own an online comic book business, you need to understand that kids in London, Paris, Tokyo, and Johannesburg love to read comic books as much as kids in New York and Los Angles. Right? You can’t reach a global audience if you don’t find ways to connect to those prospects in the same way you target your domestic customers. In an increasingly connected world, everyone has a mobile device and everyone is a potential customer. As a business owner, shifting your mindset from a local to an international perspective, can open up new revenue streams.