How Globalization Affects Small Businesses

In the age of the World Wide Web, everything is interconnected, integrated, and interdependent. The astounding technological advancements of the recent years have managed to shrink the world. Travel has never been quicker, real-time communications are commonplace, and commerce is global.

Today, even small businesses can easily go global. The wide use of the internet enabled the globalization of even small family-run businesses. It is now inexpensive and easy to sell, showcase a business, pay for services, and send money online. The international market is not limited to goods and products. Intellectual properties, services, and talents are also marketed and exchanged worldwide.

How is Globalization Affecting Small Businesses?

Access to the Global Market – The internet allows everyone to buy a trinket, book a hotel, or buy music from sellers all over the world. They’re buying from the comforts of their homes or by using their mobile phones during their lunch break or while on commute. Buyers are afforded convenience and wider choices. From the point of view of the sellers, this means unlimited market reach. It also means unlimited suppliers, workers, and business possibilities!

The Remote Staffing – The internet and globalization opened the outsourcing option to businesses. With real-time communications and cloud computing in place, an international team is not far behind. Businesses can collaborate with the best talents and freelancers around the world, enjoy lower overhead costs, and more efficient staffing.

Worldwide Competition – The global market offers are more viable business competition. With more players in the market, buyers have better options, thus sellers are forced to improve the quality of their products or lower their prices. To compensate, sellers have a wider market base. More transactions can only mean more business deals and more opportunities. It’s a win-win situation.

The Business Equalizer – Globalization through the internet is ultimately the great business equalizer. Small and big businesses around the world have equal opportunities in the global market. They are afforded the same market reach, suppliers, and staffing. No longer a small manufacturer is limited to its local market. Through an online business website, they can reach buyers, hire workers, and buy materials from all over the world.

Increase in tourism and travel businesses – The globalization trend has markedly increased travel and tourism-related businesses like accommodations, entertainment, tours, and services. The world thirsty for experiences, wanderings, and memories also help stimulate international money transfers, expenditures, and cultural exchanges.

Challenges of Globalization to the Small Business

To every rule, there’s an exemption. Although the global market is open to everyone and is advantageous to most, not all businesses are fit for the global market. Going global can pose additional challenges to businesses. Thus, extra caution and thorough study of the enterprise, as well as the market are prerequisites before launching a global campaign. Here are four of the most common challenges global businesses have to deal with;

Tariff and Taxes

Tariff and other charges apply to most imported and exported goods. Sellers might be required to pay taxes of both origin and destination country. Rates depend on the location and on the type of product or material shipped. These costs all add up to the cost of goods sold and can sometimes overwhelm the intrinsic value of the product.

Shipping, Logistics and Costs

Logistics is a major consideration for global businesses. With the entire world as your market, you must hatch a plan to how efficiently store and deliver the goods to your buyers. A lot of businesses invest in setting up factories, warehouses, and remote workers in key locations, especially those selling heavy and bulky objects which will likely cost more to ship. Others rely on couriers and delivery services. The speed of delivery and costs are major factors when deciding on your logistics system.

Constricted Flow of Resources

It can be harder to streamline resource allocation when running an international company. Few days of holding period are common when you send money directly to bank account. Payments and remittances can be held up by banks, deliveries could take longer, and asset transfers might not go as smoothly as when the business is only concentrated to local operations. There is also the foreign economic state of relevant countries to consider when setting up international operations for your business. A sudden economic upheaval could jeopardize your investments abroad.

Forex and Fund Transfer

Running a business worldwide will need a lot of wiring, transmitting, and sending money internationally. Businesses with offshore offices and freelancers will need to transfer money for their salaries and operating expenditures. Manufacturers importing raw materials and retailers importing goods will need to wire payments. While, travel, accommodations, and entertainment providers will need a system that will enable them to accept payments from anywhere in the world. Money transfers cost a significant amount in terms of fees and FOREX. When doing a great deal of repetitive transactions, costs can add up.

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