In the past two decades, a greater number of companies have found it profitable to integrate into the global economy. There are numerous reasons for this development: improved transportation technology, liberalized trade policies, international institutions to promote trade, etc. Surprisingly, it is not only large corporations taking advantage of these new opportunities, as small businesses are selling products abroad at a high rate. In fact, small businesses sell approximately 30% of the value of United States exports. Currently, less than 5% of the world’s population lives within the borders of the United States. It is no surprise that U.S. businesses of the 21st century are not content with relying heavily on domestic sales. If you are still not convinced that you should become a globally competitive business, consider these ten reasons to do so:
1. If you don’t, someone else will - All of the advantages of global competitiveness are equally true of both your company and your competitors. Keep in mind that companies that export grow faster on average than non-exporters. Also, non-exporters tend to go out of business more quickly.
2. Avoid extinction – The preferences and lifestyles of U.S. consumers today are drastically different from 10 or 20 years ago. This has led to numerous products becoming obsolete in the U.S. market. For companies not engaged in the global economy, shifting domestic consumer tastes can mean extinction; however, a globally active business has the benefit of diverse global preferences.
3. The weather is always right – If you have a seasonal product or service, the case for doing international business is especially strong. When it is winter in the Northern Hemisphere, it is summer in the Southern Hemisphere (and vice-versa). If exporting, this would allow you to sell winter products in Australia when it is 80 degrees in the U.S.
4. Foreign governments are picking up the bill- Governments will always be willing to spend money on, or encourage their citizens to spend money on, just about anything, but it may not always be your government. This should not stop you from taking advantage of a good opportunity for a subsidy or tax incentive.
5. Drive down costs – Increasing your global presence allows your company to take advantage of economies of scale. As sales increase, the per-unit cost of your product decreases. As an additional bonus, any excess capacity can be utilized with export sales.
6. Become “recession-proof” – While the recent recession essentially affected the entire globe, most recessions are less widespread. Generally, when the U.S. economy is declining, Asian and European economies are experiencing growth. A global company can thrive on its export sales during tough times, while a less globally competitive company could struggle to survive the domestic slowdown.
7. Learn from others – Companies in other countries sometimes use technologies and methods that businesses in your country have never seen before. Entering the global economy puts you in a position to learn this knowledge to improve your products.
8. It is easy – As countries realized that international trade brings tremendous benefits, free trade agreements and low barriers to trade became the norm. This occurrence has made entry into foreign markets even easier.
9. Increase your buying power – If you own a small business, you likely have little bargaining power when buying inputs for products. Selling abroad will increase your sales, making you a larger purchaser of these inputs. This may provide you that desired bargaining power.
10. Exporting is fun – Interacting with various people and different cultures across the globe may be the biggest upside to selling internationally. If you are too busy to travel for leisure, international business opportunities could be the perfect excuse t o visit new places.
Convinced yet? If not, these are only ten of the vast number of reasons why a company should become globally competitive. However, not every company is prepared or suited for this. Nevertheless, merely investigating whether or not international business makes sense for your company does no harm. Remember: small businesses are well-suited for the global economy, as over 66% of U.S. exporters employ fewer than 20 people.