Sign up to access the complete lesson and track your progress!
Unlock This CourseImagine being able to buy a McDonald's burger in Tokyo, stream Netflix in Nigeria, or order trainers made in Vietnam whilst sitting in your bedroom in Birmingham. This is globalisation in action! It's the process where countries, businesses and people become more connected and interdependent through trade, technology and communication.
For businesses, globalisation has completely changed the game. Companies can now sell their products worldwide, source materials from different countries and compete with firms from across the globe. But with great opportunities come great challenges.
Key Definitions:
Several factors have accelerated globalisation: improved transport making shipping cheaper and faster, the internet connecting people instantly worldwide, international trade agreements reducing barriers and multinational corporations expanding their reach. Technology has been the biggest game-changer, allowing businesses to communicate, coordinate and compete globally like never before.
Globalisation opens up a world of possibilities for businesses willing to think beyond their home market. Let's explore the main opportunities that smart companies can grab.
The most obvious benefit is access to billions of potential customers worldwide. Instead of being limited to the UK's 67 million people, businesses can target markets like India (1.4 billion) or China (1.4 billion). This massive expansion can lead to huge increases in sales and revenue.
Companies can access markets many times larger than their home country, potentially multiplying their customer base by hundreds or thousands.
Larger markets mean more sales opportunities, leading to increased revenue and profits for successful businesses.
Selling in multiple countries reduces dependence on one market, spreading risk across different economies.
Netflix started as a US DVD rental service but recognised the global opportunity early. By 2021, it operated in over 190 countries with more than 220 million subscribers worldwide. International markets now account for the majority of Netflix's revenue, showing how globalisation can transform a business from local to global leader.
Globalisation allows businesses to find the most cost-effective ways to produce their goods and services. This might mean manufacturing in countries with lower labour costs, sourcing raw materials from the cheapest suppliers worldwide, or taking advantage of economies of scale.
Many businesses move production to countries where labour and materials are cheaper. For example, Apple designs its iPhones in California but manufactures them in China, significantly reducing production costs whilst maintaining quality.
However, globalisation isn't all sunshine and rainbows. It brings significant challenges that can threaten businesses, especially those unprepared for global competition.
When markets open up globally, local businesses suddenly face competition from companies worldwide. A small UK bakery might now compete with mass-produced goods from international food corporations, or a local taxi service faces competition from global apps like Uber.
Global competitors might offer similar products at lower prices, forcing local businesses to cut their prices and profit margins.
Companies must constantly innovate to stay ahead of global competitors who might have more resources for research and development.
Global competition means businesses must move faster, launching products and services quickly before competitors beat them to it.
Traditional UK high street retailers like Woolworths, BHS and Toys"R"Us have struggled against global e-commerce giants like Amazon. These international competitors offered lower prices, greater convenience and wider product ranges, leading to the closure of many beloved British retail chains. This shows how globalisation can threaten established local businesses.
Operating globally means dealing with different cultures, languages, laws and business practices. What works in one country might completely fail in another due to cultural differences or regulatory requirements.
McDonald's learned this lesson when it had to adapt its menu for different countries - offering rice burgers in Taiwan, vegetarian options in India and halal food in Muslim countries. Businesses must understand and respect local cultures to succeed globally.
Global businesses face risks that domestic companies don't have to worry about. These include currency fluctuations, political instability and changing international trade policies.
When businesses operate internationally, they deal with multiple currencies. If the pound strengthens against the euro, UK exports become more expensive for European customers, potentially reducing sales. Economic crises in one country can also affect global businesses operating there.
Currency fluctuations can significantly impact profits when converting foreign earnings back to the home currency.
Different countries experience economic booms and recessions at different times, affecting business performance globally.
Changes in government policies, trade wars, or political instability can disrupt international business operations.
Brexit created significant challenges for UK businesses operating in Europe. Companies like Dyson moved their headquarters to Singapore, whilst others faced increased costs and complexity when trading with EU countries. This demonstrates how political changes can create major threats for global businesses.
Smart businesses don't just react to globalisation - they develop strategies to maximise opportunities whilst minimising threats. Here are the main approaches successful companies use.
Businesses can choose from several strategies when facing globalisation. They might focus on their local market strengths, expand internationally themselves, form partnerships with global companies, or specialise in niche markets where they can compete effectively.
Some businesses choose to expand internationally to compete globally, whilst others focus on serving their local market better than global competitors can. Both strategies can work - the key is choosing the right approach for your business and executing it well.
Globalisation continues to evolve, driven by new technologies like artificial intelligence, blockchain and improved logistics. The COVID-19 pandemic showed both the benefits and risks of global interconnectedness, leading some businesses to reconsider their global strategies.
Successful businesses in the future will be those that can adapt quickly to changing global conditions, understand different markets and cultures and use technology effectively to compete worldwide. The opportunities are enormous, but so are the challenges - making it an exciting time to be in business!