Globalization is one of the defining forces of our era. As the world becomes more connected, we find our small businesses competing in a bigger arena than ten or twenty years ago. In some ways, this is thrilling. In others, it’s terrifying. No matter how you feel about globalization, it’s so big that you can’t ignore it. That’s why we plan ahead.
Globalization comes with a lot of ups and a lot of downs. We find ourselves competing with more people and scrapping for attention in loud markets. We find ourselves losing the local touch while being priced out of markets by countries where the cost of living is low. If that weren’t enough, we run into all sorts of language and culture barriers, as well as strange laws.
At the same time, though, we gain access to global markets. We have more suppliers and a larger labor market to draw from. We can compete directly with big companies and find strategic partners with a few emails. And if all else fails, a bigger world means more small niches to work our way into.
We’re going to cover all these subjects and more in this article about globalization. Here is an outline:
How Globalization Makes Small Business Harder
- Increased Competition
- The Scramble for Attention
- Loss of Local Greatness
- The Threat of Cheaper Alternatives
- Language and Cultural Barriers
- International Laws
How Globalization Makes Small Business Easier
- Access to Global Markets
- Remote Workers
- Ability to Compete with Big Companies
- Access to More Suppliers
- Easier to Find Strategic Partners
- Mass Customization and the Flourishing of Tiny Niches
How Globalization Makes Small Business Harder
Let’s start with the bad news first. In fact, let’s start with the worst of the bad news. When the whole world is in your market, then you’re competing with the whole world. You might be the best underwater basket weaver in Omaha, but are you the best in the world?
As you can imagine, this aspect of globalization is the one that causes deep insecurity for a lot of people. You cannot simply will yourself into being the best X in the world. It’s very rare that you will ever meet somebody who is the best at anything in the world. The world is huge. There are almost 8 billion people in it.
How then, does one compete when they can’t be the best? There are a few ways, and they’re not mutually exclusive. First, you can accept that people don’t generally make rational decisions. They rely on heuristics and can’t reliably tell the difference between “good” and “best.” Even for those who can, that distinction is often irrelevant.
Second, marketing is about crafting the right experiences for the right people and selling them in the right way. Every instance of the word “right” in that previous sentence means a slightly different niche. With a bigger world, there are more niches you can occupy, giving you a fighting chance to differentiate your small business from others.
Lastly, a bigger world means more potential collaborators. You can find suppliers and strategic partners more easily, letting you act like you’re running a bigger organization than you really are.
The Scramble for Attention
You have to fight for the best listing on Amazon. It’s tough to get the top result on Google. Even having a highly engaged post on Facebook seems difficult. In a world with so many choices, consumers are having to rely on mental shortcuts to make simple decisions. There are nearly 2 billion websites on the Internet right now, so getting and keeping attention is very hard. It can feel like screaming into the void!
Globalization forces us to cope with the truly enormous size of our world. You would need Carl Sagan to do a TV show to help you really understand how many websites 2 billion is. Turns out, we don’t just compete for money. We compete for attention. Sensory overload is one of the defining issues of our time. It used to be that TV, radio, print, and billboards were the primary means of advertising. It was easier to tell ads from non-ads. Now that’s not true. The internet kicked that down like the Koolaid man kicks down walls. (Oh yeah!)
Thankfully, the internet threw us one very important lifeline in this respect: targeted advertising. Instead of broadcasting to massive audiences like in the old days of advertising, we can target only customers who might like our products or services through Facebook, Twitter, etc. It’s cheaper, more effective, less annoying, and I’d argue good for society (when not being used for misdeeds).
Loss of Local Greatness
There was a time when the vast majority of businesses could either be some variation of: “the best in town”, “the fastest in town”, or “the cheapest in town.” I was born in 1993. When it comes to buying things, my town is the entire world. The percentage of sales being made online compared to brick-and-mortar retail stores has been growing steadily for years. I don’t imagine this trend reversing any time soon.
A lot of old-school marketers mourn the loss of “in town” as a valuable part of their niche. To be fair, local businesses are still needed for auto repair, haircuts, groceries, and much more. There is something deeply uncomfortable about dealing with competitors in China, India, Australia, the UK, Brazil, and so on. This doesn’t eliminate the value of a niche, nor does it negate the value of product-market fit. Rather, it simply means that location is becoming less of a selling point.
The Threat of Cheaper Alternatives
Have you noticed how our toys keep getting cheaper while food, housing, healthcare, and tuition keep going up? Foreign countries can’t compete with the essentials I just listed because they’re so location-centric. However, TVs and smartphones? China says “game on!”
Just like you can’t compete as easily on location, you can’t compete as easily on price. In my opinion, this is a more acceptable loss to traditional marketers. In small business, competing on price is not usually the best way to operate. It never really has been. It’s too easy for your big-shot competitors to come in and use economies of scale to deliver goods cheaper than you can.
What’s changed now is that a small business owner in a low cost of living country like India can compete with an American megacorporation. If anything, this is good for you because scrappy startups in foreign countries can sling rocks at domestic industry Goliaths you couldn’t otherwise take on.
Language and Cultural Barriers
As if changes to the amount of competition, pricing strategies, and the loss of location as a differentiator weren’t enough to make you uncomfortable, your new customers are speaking Spanish. Or Mandarin. Or French. If you run a small business, you’ve probably shipped to foreign countries. That means your customers might not be great English speakers, which makes your job – to provide good products and good customer service – even trickier.
A good deal of people overseas are fluent in English, though, so perhaps there isn’t a language barrier. Even still, there are often subtle cultural differences you need to be aware of when your customers are overseas. Depending on your line of business, it may be very useful to know that the Japanese value punctuality or that the French expect you to say “bonjour.” Every culture has different events that shaped it. We can’t understand all the context of our own culture, let alone someone else’s. Yet here we are, in the thrust of globalization, required to at least try.
Last but not least, international law can be confusing. As an example, look at this Wikipedia index page for European Union regulations alone. When we do business in foreign countries or with foreign customers, we often fall under the jurisdiction of their laws. The legal systems of the world powers right now were not conceived for the level of connectivity we enjoy today. That causes some weird effects, like marketers mistakenly tossing out perfectly well-made email lists to comply with GDPR – an email regulation that is binding when you contact residents of the European Union.
How Globalization Makes Small Business Easier
Access to Global Markets
The flip side of a more competitive world is that everybody has to deal with it. Yes, for a small business marketer, finding a competitive niche in a big world is daunting, to put it lightly. However, the same applies to your suppliers and everyone you purchase from. You can cut costs to the bone and save it for the value-adding parts of your business.
It gets even better. You don’t necessarily have to make a product for people who live in your country. You can sell to Belgium, Argentina, Egypt, or Iran. As long as they’re willing to pay shipping costs, you can spread your small business’s handiwork across the globe. You can provide online services to anyone without having to think twice about location.
Products can be shipped and services can be delivered remotely. That statement applies not just to what you sell, but also to the labor market. In a world where valuable labor can be digitized, your small business can take advantage in a number of ways. You can hire stay-at-home mothers in your own community for data entry, programmers in developing countries where the cost of living is lower, and even set up around-the-clock customer service.
Afraid of hiring people for ridiculously low wages in developing countries on moral grounds? You ought to be – that’s a very good consideration. However, don’t overlook purchasing power parity. Currencies aren’t necessarily valued relative to their power.
A US Dollar is worth 71 Indian Rupees at the time that I’m writing this article. However, it costs about 17 Rupees to buy goods in India which would cost $1 in the United States. That means your dollar goes about four times farther in India. In China, a dollar goes about twice as far. This effect goes the other way around too – a US dollar won’t go as far in Denmark or Luxembourg.
Ability to Compete with Big Companies
“On the Internet, nobody knows you’re a dog.” One of the beautiful things about being a small business in a globalized world is that you can appear to be a polished, large business without necessarily being one. Small mom-and-pop hardware stores can never look like Home Depot in physical space. Online, sharp branding, a user-friendly website, and a good selection of products goes a long way. That is to say, it’s easier to look big than it ever has been.
One might say “that’s more of a consequence of the internet than of globalization.” That may be true, but without a steady stream of affordable supplies and a wider labor market, it would be a lot harder.
Here is an example. My friend, Sean Fallon, runs Smunchy Games. He’s making a variety of tabletop games, one of which we’re working on together. Many people mistake his organization for being larger than it is. This is because he’s coordinating a team across the US and across the globe to gather great artwork, write great stories, test his games with players, and maintain an online presence. You take away the global market, and he wouldn’t be able to do all this. It would be out of his grasp.
Access to More Suppliers
You may not be able to compete on price or location as easily anymore, but you can still compete on niche and operational excellence. Strangely, a lot of organizations simply do not understand how to leverage the global marketplace. Globalization allows you to find the most skilled workers anywhere to work on specific tasks. Meanwhile, everything that’s not core to your business can be done in an incredibly cost-efficient way because of increased competition.
Easier to Find Strategic Partners
Globalization makes the world simultaneously a lot smaller and a lot bigger. As a consequence, it becomes a lot harder to compete alone. Big companies have been undergoing a lot of mergers and acquisitions. They know that by combining their resources, they have a better shot of success in the global market. Small businesses can do the same thing, but without losing their independence.
Strategic partnerships make it easier to succeed in the marketplace. Maybe a good partnership reduces shipping costs. Perhaps it allows you to acquire a material you need at a reduced cost because the supplier knows you will keep them in business. No matter how or why a strategic partnership is a good thing for your small business, the fact is that globalization makes it easier to team up.
Right now, I can go on Twitter and find businesses from all over the world. I can create communities of small business owners and creators, finding specific people I would like to work with. It’s no secret that teamwork makes the dream work. Globalization makes it easier to create an incredible team.
Mass Customization and the Flourishing of Tiny Niches
Globalization has connected more people than ever before. It has broken down the barriers to doing business across nations. As a result, there are more needs to fill than ever before. In 1980, if you wanted to make a product that only appealed to 5,000 people in the world, you were probably out of luck. The business idea was not viable. Now, however, you actually can sell that good because you can reach those 5,000 people scattered across the globe.
Naturally, no matter what you sell, it will ultimately need to fill a need. You will ultimately need to achieve product-market fit if you want to succeed. The beauty of globalization is that you can reach more markets, and therefore, more products become viable for business. As complex and frightening as competing on a global scale may be, it’s offset by opening up possibilities that wouldn’t have existed thirty years ago.
Globalization is here to stay. As small business owners, we have to prepare for the challenges and opportunities that globalization brings. We may have more competition and problems to solve, but the beauty is that we have more options too.
How is your small business dealing with globalization? Let me know in the comments below!