Why Is Global Business Important?

Gone are the days when businesses would confine their operations to local or regional markets. With technology advancing so fast and international trade expanding, businesses are incentivized to sell products and services in foreign markets. As such, operating a business on a global level helps enterprises expand their market share, reduce costs and become more competitive.

Market Share

Through global business, businesses can access new markets and customers. For example, if the United States enters into a Trans-Pacific Partnership with China and other Asia-Pacific countries -- -- which was still being negotiated as of June 2015 -- U.S.-based businesses will have a greater incentive to export and sell their products in these countries. With a wider customer base and market reach, a business has a higher potential to make more sales and earn more profits, which it can then use to expand operations into other foreign markets.

Production Costs

Sure, a business needs capital to establish and run operations in other countries. In the long run, however, globalization can lead to lower business costs. According to Dr. Jean-Paul Rodrigue, a global studies professor at Hofstra University, labor intensive businesses in high-wage countries can achieve lower production costs when they shift operations to lower-wage nations. This is one of the reasons many American manufacturers are sending work offshore to countries with low wages, such as China and Vietnam.

Business Competition

Global business enhances business competition. As enterprises enter foreign markets, a face-off with local businesses is inevitable. To outperform competitors and gain a larger market share, businesses are forced to create products of higher quality and sell them at relatively cheaper prices. This is advantageous to consumers, as they are able to access a wider variety of quality products at lower prices.

Developing Nations

Developing economies also can benefit from global business. As foreign companies from industrialized nations enter new markets in developing nations -- whether it is through foreign direct investment or franchising -- new job opportunities are bound to be created for the locals. For example, the Economic Policy Institute notes that between 2001 and 2013, the U.S. created at least 2.4 million manufacturing jobs in China as a result of major companies shifting their operations there. The creation of more jobs stimulates economic development, which can make it easier for developing nations to attract more foreign investors.


About the Author

Based in New York City, Alison Green has been writing professionally on career topics for more than a decade. Her work has appeared in “U.S. News Weekly” magazine, “The Career” magazine and “Human Resources Journal.” Green holds a master's degree in finance from New York University.