Why Is Global Business Important?

The world keeps getting smaller. International trade agreements, faster and more efficient shipping and the pervasiveness of the internet across the globe are all contributing toward a global economy, and global business is at the center of it all.

Commerce has always been linked to exploration, and while there may no longer be new lands left to be explored, the hunger for exploring new markets is seldom ever satisfied. If your company isn't looking to expand in new markets, you can be certain your competition is doing so.

TL;DR (Too Long; Didn't Read)

Operating in several countries opens up opportunities for businesses to capture more customers and increase sales.

The Benefits of Global Business

The primary benefit of expanding business operations beyond your borders comes down to numbers. Operating in more countries means access to more customers, which means more revenue and profit. If you sell goods, higher volumes can reduce costs. If you're in the services sector, you have the opportunity to hire more talent, which can bring in new ideas and can open even more opportunities — opportunities you haven't even considered yet.

Operating in global markets is also a good way to reduce risks and to leverage new opportunities. If you are working in a different country with its own economy, it can serve as a buffer should there be a lag, let alone a recession, in your own country. Additionally, if there is a change in the market there, like a new product or service or a competitor pulling out, you already have a foothold there, and you can move quickly to take advantage of that change.

While there are certainly risks in opening your company to new markets with different cultures, languages and buying habits, these risks aren't too different than when your company opened its doors in your first market. You can't take foreign markets for granted any more than you could take your own market for granted when you first started. Expansion requires a lot of research and the development of new management skills.

Global Management Definition

Global management includes managing employees and operations in different countries, different time zones, different languages and different cultures. It also includes managing the risks and opportunities that arise by crossing national borders, working under different laws and working with different currencies.

Global business management also includes knowing your different markets as well as the differences and similarities in different regions. The first step in global management is ensuring that there will be a need for your product or service in a new market and knowing exactly what competition you will face there.

The Importance of Global Management

Exploring global markets can expand your potential for profit. However, there is much more to manage. Take, for example, the issue of foreign currency and exchange. Making sales in a foreign currency, shipping inventory to different countries and maintaining bank accounts in different currencies can increase or decrease profits from four different exposure risks, each of which you need to manage:

  • Transaction exposure: Converting foreign money can be a benefit or a detriment depending on exchange rates.
  • Economic exposure: Changes in the economies of different countries can cause changes in currency exchange rates.
  • Translation exposure: Depending on when you translate foreign currency to your home currency, your profits could go up as well as your tax liability.
  • Tax exposure: Tax obligations can increase due to income from foreign currencies. 

Entering one foreign market does make it easier to expand to additional countries. Once you have the experience in researching a new country and establishing networks with other companies there, that experience can shorten the learning curve for entering other markets.

References

About the Author

A published author, David Weedmark has advised businesses on technology, media and marketing for more than 20 years and used to teach computer science at Algonquin College. He is currently the owner of Mad Hat Labs, a web design and media consultancy business. David has written hundreds of articles for newspapers, magazines and websites including American Express, Samsung, Re/Max and the New York Times' About.com.