Globalisation is a term that we hear a lot these days. We continually hear about how the world is becoming more interconnected, as well as the positive and negative implications of this. Your activities in your local area of the world are no longer isolated; they are linked to events on every side of the globe.
In the business world, globalisation is now an established but continuing phenomenon. It has been impacting businesses for over two decades. Additionally, in recent years, it has begun to affect small and medium-sized businesses. As a small to medium-sized business (SME) owner, you're probably curious about how this trend could affect your company. The most significant way globalisation has influenced the world is competition levels among businesses and the technology used.
This article will focus on how does globalisation affects local businesses and what is the negative impact of globalisation on small businesses.
What is globalisation?
Before we dig deeper into the impact of globalisation, let us know what it exactly means.
The word "globalisation" refers to the opening of borders and the strengthening of mutually beneficial relationships between countries, allowing for the free flow of goods and services. This paints a picture of peaceful alliances following a stronger global economy, and dare we say, global peace. There are many advantages to increased globalisation for small business owners, but there are also several drawbacks.
Impacts of globalisation
While discussing how does globalisation affects small businesses, we need to understand how the market scenario has changed after this process. Globalisation in India was a part of the LPG reforms in 1991. Ever after that, we are now benefiting as consumers when it comes to the availability of a variety of goods and services.
There are many advantages when the doors are opened for small businesses, but we can witness a negative impact of globalisation on small businesses also. Let us have a look at the effects of globalisation. Let us start with the advantages.
Advantages of Globalisation for small businesses:
1. Scope of market increases
Although not every company can sell a commodity to the far reaches of the globe, there is something to be said about investing in and operating in markets where the disadvantages of local business no longer spell doom for the individual proprietor. As local markets undergo a slowdown, there's always the possibility that international markets are running without being aware of the local issues and you can enter the overseas market as well.
2. Expansion of business
Certain companies need the opportunity to appeal to a large audience. It may be as easy as becoming a big fish in a small pond, or as complex as filling a niche that literally cannot exist in a static position for long without going under; but globalisation and sufficient attempts to open up trade lines have resulted in business networks that could not have sustained themselves even a century ago.
Businesses of all sizes can target international markets with similar preferences to those they already serve, resulting in new revenue streams, without the substantial investment required to open a global branch of an established business.
3. Easy and budgeted marketing
Being unable to finance global marketing in the past was both anticipated and a natural limitation of the environment we lived in. Nowadays, due to the internet and the relative simplicity of marketing that comes with social media and global ad targeting, there's little to no reason for not having a company's name out in the open. Even the smallest business will benefit from data collection tools and methods.
4. Employing personnel all across the world
Globalisation has also impacted the availability of remote workers in other parts of the world. Whereas it used to be that small companies could only have physical workers, they can now have employees employed in offices on the other side of the globe. Alternatively, they can hire an entire digital marketing firm to handle their marketing campaign remotely. This is a good example. Small companies now have the versatility they need to cut costs and increase sales as a result of this.
5. Equalising businesses
Everything has become fairer as a result of globalisation. Every business now has access to marketing resources, business knowledge, and everything else they need to compete with larger, more developed companies; thanks to the Internet. That's one of the reasons Uber and other tech companies grew so quickly. The corporate world has become much more equal in recent years, allowing small businesses to thrive.
6. Boosting the travel and tourism industry
Finally, the rise of the travel and tourism industry has had a big impact on small businesses. Due to the availability of low-cost flights, an increasing number of people are travelling around the world. This means that if your company is in any way connected to tourism, you are likely to see a significant increase in sales as a result of these visitors. This also implies that more companies are joining this market.
Disadvantages of globalisation
It is important to know that though there are many benefits of globalisation for small businesses, it becomes equally important to be aware of how globalisation affects local businesses. Here are the few major limitations of globalisation and the negative impact of globalisation on small businesses.
1. Forced reduction in prices
One of the most commonly voiced questions about big business's global reach is the trouble smaller companies have competing with large-scale consumer goods operations. Almost every country must contend with China's ability to mass export products at rates that are virtually impossible to compete with, even when shipping and repackaging costs are taken into account, making it difficult to keep local companies afloat, despite attempts to provide custom solutions, better customer service, and, in the end, lower prices.
2. Impacts of global market and trade wars
When your business is functioning globally, the global market and the trade war between countries create an impact on small businesses as well. You may import raw material from some country or export your final product to another country.
Let us assume a hypothetical situation. You are importing raw material from country X and exporting the final product to country Y. Because of tension between X and some other countries, country X has closed the international borders. You may not be able to export your products to Y because of this issue.
3. Increased competition
The competition is next on the list. When the world becomes more globalised, more companies join the market. Because of the accessibility we mentioned earlier, small businesses around the world are facing a lot more competition. There will almost certainly be ten other companies offering similar goods to the one you're trying to sell.
As a result, companies must now boost the quality of their goods, while also lowering their prices to remain competitive. Otherwise, due to the intense global competition, they risk being forced out of the market. To stay on top of this complication, keep an eye on the foreign exchange reports and other financial news sources.
How to overcome them and grow your small businesses?
Here are a few business tips for the small business owners whose firm or business has hampered as a part of the effect of globalisation. After understanding how globalisation affects local businesses, here are a few steps any small business can undertake to grow their business.
- Increase the foreign clientele reach by providing niche and quality products at fair and competitive pricing.
- Increase the supply of products and services by easily accessing the transport facilities, reaching them, staying in touch with the key customers, availability, door-step delivery of products, etc.
- To fight the competition, one needs to sell a unique product or service to enhance demand and can compete globally.
- Strengthen domestic and local demand by creating a need for your product and services. At the end of the day, the ultimate aim of any business is earning profit. So, if you cater to the local and domestic demand, you will attain your objectives.
- Provide pricing which proves as the biggest competing factor. It should be fair, and reasonable, and the quality should not suffer.
- Deliver exceptional services and customer experiences.
We may go on and on about the negative impact that globalisation has had on SMEs. However, keeping up with technical advances and using everything at your disposal is crucial to surviving and succeeding in this ongoing phase. Get started right away with everything you'll need to succeed online.
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Q. What are the three aspects of globalisation?
Ans. The three aspects of globalisation include Economic, political, and socio-cultural aspects.
Q. What are the main indicators of globalisation?
Ans. Capital movements, foreign direct investments, international trade, etc., are the main indicators of globalisation.
Q. What are the drivers of globalisation?
Ans. Market expansion, competition, exchange rates, and cost advantages are the main drivers of globalisation.