What is the Impact of Globalisation on Small Businesses?

Wide lens shot of Rotterdam port at night

Although the roots of globalisation were firmly planted in the 20th century, the 21st has undoubtedly been its blossoming, as nations become increasingly more connected than ever before. International business arrangements; multilateral trade agreements; global supply chains; eCommerce; these are all the hallmarks of the world's push to globalisation. Enabled by the fast-paced technological acceleration of the last decade, we are living in a world where bigger markets and bigger opportunities are created through mobile technologies, high-speed internet connections and ever-expanding communications networks. 

Not everybody has been on board with the concept, though. For instance, a 2019 study by the World Economic Forum highlighted a growing scepticism of interconnected economies, particularly from respondents in North America and Europe. Perhaps unsurprisingly, the feeling was not mutual in Asia, with respondents there feeling far more ebullient over the system's benefits for developing markets. 

Indeed, it seems that the biggest winners of globalisation are the large multinational corporations (MNCs) that have taken full advantage of significant increases in their consumer base. Whether it is Apple's efforts to penetrate the Asian market or Lidl grocery stores driving into the United States, large-scale businesses are extending their tentacles to new markets all over the world.

What, then, about smaller, localised enterprises? On Main Street, the consensus is that the impact of globalisation on business – small and medium-sized – has been more harmful than beneficial. Yet, while it may be hard to imagine a mom-and-pop shop exploiting the global marketplace, smaller enterprises are still finding success – directly and indirectly – in today's economy.  

So, how has small business fared in the decades-old globalisation experiment? We've explored the impact – negative and positive – for the average startup on the street. 

The Positives

Shallow depth of field image (selective focus) with the Zoom video conference app/siteMoiraM - stock.adobe.comVideo conferencing tools such as Zoom have enabled small business owners to build remote global teams

Affordable Technology 

In practical terms, globalisation has enabled the day-to-day processes of many small organisations. This is because most of the technology we consume has been manufactured in regions where labour costs are low, meaning that B2C and B2B tech prices have flatlined or even fallen in the last 20 years. Since software, hardware, and other electronic goods are so critical for the modern enterprise to survive, small businesses have undoubtedly benefitted from the market conditions that enable them to leverage such affordable and reliable technology.

Lower Labour Costs 

Arguably, this is the same narrative behind the previous point, but it's pertinent in today's business environment to note that technology has also facilitated the growth of remote staffing. 

Depending on your industry, it is now possible to have an entire team of employees scattered all over the world, and maintain regular contact with them through video conferencing applications, project management systems and mobile communications software. As a result, you can now outsource pretty much anything, including HR, accounting or IT duties; you can also cast the net wider for more pivotal roles, with the COVID-19 pandemic only increasing the popularity and viability of working remotely.

Because you are not confined to local employment laws, you can also save on labour. Instead of paying someone in your town a full-time salary with benefits, you can take on a part-time worker in a foreign market and pay them less than you would someone in your city's talent pool. Some may question the moral and ethical element of such a practice, and some governments are keen to reverse this trend through incentives and restrictions, but, either way, globalisation has undoubtedly enabled small businesses to cut costs and pad their bottom line. 

Increased Market Access 

Picture, for a second, an artisan coffee roasting business that has been involved in its local community for 25 years. It can be hard to envision such a venture selling their wares in markets as diverse as Australia, Italy or Japan. Yet globalisation has made it easier for any business in the world to do just this, especially for companies that understand the potential of digital marketing and targeted geographic segments.

The coffee roasting example also highlights potential opportunities in your company's supply chain. You can easily make contact with potential suppliers from all over the world, cherry-picking the best and most cost-effective materials, ingredients or parts for the best possible product.

Not every small business owner wishes to conquer the world, of course, but it is undoubtedly a step in the right direction that entrepreneurs are no longer confined to their neighbourhoods. With globalisation, the world is your oyster. 

A More Level Playing Field 

The democratisation of the global marketplace might not be total, but it has undeniably shortened the gap between all-powerful MNCs and their smaller counterparts.

Of course, you may still not possess the same kind of war chest as an established global behemoth, but your company can still have a shot at succeeding in commerce thanks to the internet.

Not only does it serve as a platform in itself for attracting and conducting sales; the online world is also a treasure trove of marketing tools, business documents and encyclopedias of information. Global exchanges of ideas, trends, and products have given entrepreneurs access to a whole new world of possibilities, creating an environment where the smaller players can grow and succeed.

The Negatives

Exterior of an Amazon warehouse in Northampton, UKjevanto / Deposit PhotosMNCs such as Amazon have been accused of consolidating power and influencing government bodies

Increased Competition 

If you thought it was difficult to establish yourself among your local rivals, then beware: the competition in the global economy is fierce. To stand out, your company would need to employ a wide variety of brand outreach strategies and likely scale your operations to satisfy consumer demand in international markets. 

You are essentially a small fish swimming in the ocean, waiting to be eaten by a larger rival. The only way to survive is to outswim the sharks and the whales by front-running the marketplace and noticing patterns and trends that others do not.

Consolidation of Power 

One of the prominent arguments of anti-globalisation is that it has led to the consolidation of power for a handful of MNCs. Instead of many unique companies scattered around the world, we have titans of industry – a trend which has only increased amid the ballooning popularity of mergers and acquisitions. 

Moreover, these multinational corporations can lobby governments and trade organisations for preferential treatment. In some cases, this can then threaten the autonomy of states and prevent citizens from holding their elected officials accountable.  

This was one of the reasons why the Trans-Pacific Partnership (TPP) was such an unpopular pact, despite the establishment declaring it as "the gold standard" of trade agreements. 

Shipping Difficulties

Even for a juggernaut like Amazon, shipping can be a headache – both financially and logistically. From language barriers to customs and fees, sending packages to foreign destinations presents its own host of problems – and that's without getting into the quagmire of returns and refunds.   

Indeed, American Express argues that, in many cases, it is more cost-effective for businesses to refund purchases without the product being returned, as shipping expenditure is too high. Consider that for a second: automatically refunding a customer because the alternative is too pricy. Only you can be the judge of whether the revenue earned on overseas sales outweighs the burden of additional costs such as these.

Intellectual Property Theft 

If you have seen your product widely distributed all over the world, then this is undoubtedly a sign of success. However, the more your goods or service penetrates cross-country borders, the greater the risk your brand has of falling victim to intellectual property theft.

This is a tough subject to grapple with, and many officials are stumped as to how best handle the issue. Things are made increasingly difficult by the fact that countries often have separate copyright and trademark laws, while international intellectual protection treaties can fail to adapt to changing times. 

---

In the aftermath of the COVID-19 pandemic, the future of globalisation is not as seemingly clear as it once was. Many reports are suggesting that more countries will now look towards regional supply chains, with even larger corporations shifting their operations and repatriating their facilities. It remains to be seen whether this is a wider trend towards the abandonment of globalisation or a temporary solution to an extraordinary situation, but what is evident is that the crisis has changed things if not permanently, then certainly indefinitely.

For small businesses that have either felt left behind in this brave new world, or prospered in the global economy, this may be a good time to recalibrate and redefine your business model accordingly.

Was this article helpful? Let us know your thoughts in the comment section below.