How do we go global? What are the benefits?
Discussions About Entrepreneurs Going Global
Strategic motives must drive the decisions to conduct business globally. But what is your action plan? Where do you begin? How do you begin? Which markets should be entered first? What would be the optimal mode of entry? How rapidly should you expand globally?
We are living in a world where all the major business functions in the value chain are highly globalized and deeply integrated. According to McKinsey and Company, 80 percent of the world’s GDP will be sold across international borders by 2027, compared to about 20 percent in 2001. Multinational business activity will grow from approximately $5 trillion to $70 trillion by 2027.
To understand how this is happening consider your laptop computer:
– It might have been assembled in Mexico with Chinese components
– it uses chips designed in the United States
– it might have been manufactured in Malaysia
– preinstalled with software applications that were jointly developed in India and Ireland
According to a United Nations World Investment Report, there are about 40,000 multinational corporations in the world with nearly 300,00 foreign affiliates. A global business is a multinational venture incorporated in one country that has operations in one or more other countries.
Do you have a global mindset?
A global mindset is a way of being rather than a set of skills. It is an orientation and a state of mind able to understand a product, a business, an industry sector, or a particular market, on a global basis. The executive with a global mindset has the ability to see across multiple territories, focusing on “commonalties across many markets.” Having a global mindset means the ability to scan the world from a broad perspective; “always looking for unexpected trends and opportunities that may constitute a threat or an opportunity to achieve personal, professional or organizational objectives.”
Global expansion favors smaller, entrepreneurial companies. It gives them access to capital, technology, talent, and markets that previously only big firms could reach. In fact, over 63,000 or 77 percent of all the companies involved in exporting from the United States had fewer than 100 employees. A global entrepreneur seeks out and conducts new and innovative business activities across national borders. These activities may consist of exporting, licensing, opening a new sales office, or acquiring another venture.
Benefits For Entrepreneurs Going Global
There are many benefits for entrepreneurs participating in global business activities. We group them in three categories: strategic, financial, and production related.
Strategic benefits to going global:
– enhancing domestic competitiveness
– reduction of dependence on existing markets
– capitalizing on the growth potential of the new country market and neighboring countries
– protecting foreign markets
– stretching and building marketing capability
– global brand building and awareness
– finding new talent
– transferring competitive information and new product ideas from those markets to other markets, or what we call “learning local and share global” activities.
Financial benefits to going global:
– finding new customers
– increasing profits and sales
– earning a greater return from set of core competencies
– increasing the universe of potential investors
– capitalizing on tax advantages
– minimizing impact of seasonalities in local markets
Production-related benefits to going global:
– guaranteeing supply of raw materials
– acquiring technology and R&D capabilities
– cutting costs through global outsourcing
– improving purchasing power for customers buying locally
– realizing greater experience curve economies in production
– extending lifecycle for current products or services
– selling excess production capacity