Globalization Challenges for Businesses

The business arena has become increasingly globalized. Governments have collaborated to work toward more mutually beneficial trade policies in many instances to promote cross-border business exchanges. The Internet has created a virtual global marketplace, which allows even small businesses to easily and affordably gain access to a global marketplace. Despite its advantages, business globalization does present some challenges.

The term "global" in business not only refers to the collaborative marketplace encompassing many countries. It also suggests uniformity in the way the market works. For American businesses, a key challenge in global business is maintaining domestic ethical standards when companies in other countries either lack the same ethics or aren't held to the same legal and ethical standards. U.S. law promotes a free enterprise system intended to maintain fairness between providers and consumers and competitive opportunities. Bribery, political corruption and monopolistic practices are examples of problems U.S. companies encounter in foreign markets.

The global marketplace also has contributed to escalating expectations that the haves in the business community support the have nots in the customer market. A U.S. company that does business in a less developed nation, for instance, may face pressure in both the foreign market and at home to support the populations it serves. This may include giving to charities and providing education and assistance to communities in each struggling country. The Internet has contributed to this challenge as information is more easily shared on a global front.

The costs of doing business naturally rise with globalization. This is true even if you reach a global audience only through the Internet. Researching each foreign marketplace, putting in building and equipment infrastructure, hiring talented local employees, using translators for internal communication, advertising globally, transporting goods and philanthropy are among the common costs associated with globalizing a business. Some of these are mitigated by companies with efficient global distribution systems and supplier collaboration as well as effective and efficient research and planning.

Cultural barriers pose a huge threat to global businesses. Populations in some countries have bitter feelings toward the United States and won't easily expect an American company. Some companies intentionally localize business units on foreign soil by hiring all local staff, using local suppliers and doing other things to downplay the home base of the business. Communicating product and service benefits and branding are challenging as well. In some cases, different cultures use products differently or won't respond to the same marketing messages. This increases costs and planning required for effective marketing.