Businesses Going Global
Written by Clayton Reeves for Gaebler Ventures
Going global is a great option if your small company needs to reach more customers, or if your product is more attractive to a foreign market. Of course, there are positives and negatives to expanding overseas.
Going global is the new thing to do.
Most of the major corporations in the United States actually do a considerable amount of business overseas.
Some companies have famously outsourced a considerable portion of their workforce to cheap labor countries such as Vietnam. While the backlash from this sort of move is considerable, the cost-saving benefits keep companies from bucking the trend.
There are numerous reasons for businesses based in the States to diversity their operations by expanding overseas.
Just a few of those reasons are the weak dollar, cheap overseas labor, and flat domestic growth in certain industries.
There are basically two main causes for the weakening dollar: a huge and perpetual trade deficit and the budget deficit.
The United States has had a sizeable trade deficit for a long time now. The more dollars that America pumps out into the global marketplace, the less those dollars will be worth. It used to be that those dollars would flow straight back into the country in the form of investment. With the weakening economy, however, that has changed course.
Now, people are less happy to take dollars for their products and invest them in the States. This has resulted in a surplus of dollars and a drop in value. The other reason for the weak dollar is an enormous budget deficit that causes the government to borrow and print more money. The war has certainly played a part in this, but the deficit has been there for the last eight years.
Of course there are a couple benefits to a cheaper dollar. The weak dollar has made exports increasingly attractive for overseas buyers.
Foreign buyers, especially in Europe, can buy more and more with their money. This makes things appear cheap in the United States.
Of course, eventually this should reverse the massive trade deficit and right the plight of the dollar. These things take time, and the high price of oil is undoing any of the progress being made by the increase in exports. In the grand scheme of things, it looks as though the dollar will continue to hover around its current level until the US economy heats back up.
Cheap overseas labor has been making global manufacturing the way to go. China used to be a great source of cheap labor, but now Vietnam and some of the less developed countries are providing the world's cheap labor.
Of course there are horror stories about sweat shops and under aged workers, but the simple economic facts are that money coming into a country raises the standard of living. It has worked for many of the world's emerging markets and should continue to do so. Companies will continue to expand overseas if there is an economic benefit.
Finally, in certain industries there has been flat growth in the United States. Take, for instance, the beer industry in the US. The United States market is hypercompetitive with little to no growth over the last ten years.
As a result, brewers like Anheuser and SABMiller have been forced to expand into markets like China and India. Even though there isn't a developed beer market in India especially, they need to find more customers to stimulate growth. China is becoming a bigger fish in the pond and shows why expanding overseas can benefit a company.
Overall, globalization offers diversification for a company and an opportunity to grow a customer base. Companies of all sizes face similar struggles when going global, but the benefits are certainly there.
When he's not playing racquetball or studying for a class, Clayton Reeves enjoys writing articles about entrepreneurship. He is currently an MBA student at the University of Missouri with a concentration in Economics and Finance.
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