Note: January 2017- This post has been updated since BREXIT and the election of Donald Trump to U.S. President in 2017. Globalization and free trade were key areas of discontent for voters, prepare for changes to and even the unraveling of free trade agreements and an increase of protectionist and nationalistic approaches to doing business around the world. Important to remember is that the globalization of digital products and services is only going to continue growing. Countries need to have a plan to address skills gaps and ways to bring their people and businesses along so they don’t get left behind.
When you think of international trade, do you envision the importing and exporting of physical products? While that certainly is a big part of going global for some companies, the fastest growing sector of global expansion is actually digital products and data flow. There is now more economic value created in global digitization and the flow of data and information than in the value of the global trade of goods. Globalization and digitization of products, processes, labor pools, communications, and services are converging.
This requires that we reconsider how we think about global expansion, what going global really means, and how to develop a strategy for your company to successfully navigate within this new paradigm. Almost every aspect of global expansion now includes multiple components of digitalization, and this ultimately lowers the costs and barriers typically associated with global expansion for individuals and small to medium sized businesses.
According to McKinsey:
“The power of digitization comes especially from its marginal cost economics that
reduce costs associated with access, discovery, and distribution of goods and
services to nearly zero. As a result, the cost of participating in flows is lowered
for individuals, small firms, and entrepreneurs. This is already leading not only to
innovations in business models but also to the emergence of micromultinationals,
microwork, and microsupply chains that are able to tap into global opportunities.
This significantly removes barriers to participating in global flows, broadening
opportunities. It also will put pressure on all companies to innovate their business
models to capture the opportunities and respond to new sources of competition,
and to counter the pressure on their existing business models from digitization’s
marginal-cost economics.”
Globalization Trends For Services
International services exports grew by 5% in 2014 and were valued at over $5 trillion. Services exports accounted for approximately 21% of total global exports according to the United Nations Conference on Trade and Development (UNCTD). Of those, 50%+ of services are already digitized, and experts estimate that another 300+ million digital services companies will expand globally in the next couple of years.
While services are able to grow globally more easily without expanding their physical footprint due to global marketplaces and platforms, the competition for services and expertise has grown exponentially and can come from anywhere in the world. Savvy business leaders are preparing their team members, product offerings, and global marketing efforts to compete on a global scale.
Globalization Trends For Physical Goods
Product exports are valued at $19 trillion and increased by 0.3% in 2014 according to UNCTD. 12% of product trade is already being done via international e-commerce, and digital commerce as a percentage of overall exporting will continue to rise rapidly.
Increasing their speed to market and simplifying complex supply chains are some of the most important initiatives for product companies to become even more competitive. Digital platforms such as Alibaba allow companies easier access to new supply chains around the world.
Another way savvy companies are reducing the complexity in their supply chains is by localizing manufacturing and producing in the countries or in regions they are selling into. According to UPS, 30% of their customers have already set up manufacturing closer to their market, which increases their speed to market, reduces costs, and lowers risks. With increasingly protectionist governments around the world, localizing manufacturing may be the hedge against these political battles.
3D Digital printing is another factor making it simpler for companies to manufacture where they are selling, and we see this trend grow rapidly.
Data, Information, And Commerce Flow Via Platforms And Marketplaces
The primary way that data, information, commerce, and communication flow online is through global platforms and marketplaces. There are many such platforms that have transformed how international business is being done and how global knowledge is being shared. Here are some examples of the types of platforms and marketplaces shaping international trade.
- Data – Communication – Marketing Platforms
Data sites that enable international trade and globalization include search engines such as Google, knowledge bases such as Wikipedia, and the many global and national social media sites such as Facebook, LinkedIn, Pinterest, Instagram, and many more.
Communication platforms making it easier and less expensive to communicate around the world include companies such as WeChat and Skype.
Digital marketing utilizes the different types of platforms and marketplaces to reach customers in new ways. Platforms such as search engines for SEO and digital advertising, social media sites, communication sites, manufacturing sites, knowledge transfer sites, and others are an important way to market products and services globally.
- Manufacturing and Trade Marketplaces
Manufacturing sites and the ability to identify new supply chains has never been more accessible. The leader in this space is Alibaba, but it is getting more competition from TradeKey.com, GlobalSources.com, and many others.
E-commerce and digital trade distribution leaders include Amazon, Tencent, eBay, JD.com , Alibaba, and Baidu.
- Knowledge Base Platforms
Knowledge about almost any topic is increasingly becoming available online. Key sites for knowledge include Wikipedia, Quora, Globig.co and a variety of others in different niches.
- Services Marketplaces
This is one of the more diverse categories with most services being broken into niche industries. Here you will find sites such as Lawyers.com, Realtor.com, Home Advisor, Airbnb, Uber, Globig.co and many more.
- Labor Marketplaces
Finding workers or laborers around the world to do ‘jobs’ who have specific skills is what the sites Upwork, 99Designs, Freelancer.com, and Mturk.com focus on.
- Funding Marketplaces
Even finding investors and funding for companies is available online by using crowdfunding sites like Kickstarter. For investors you can access sites such as AngelList.
Travel and Transportation Marketplaces
Digitization includes facilitating people to travel and move around. People engage in renting properties on sites such as Airbnb, and VRBO.com, travel using sites such as Expedia, and Tripadvisor, and engage transportation via Uber, Lyft, and others.
New Challenges For Global Business Leaders
“Whether you like it or not, as soon as you’re online, you are a global company.
It’s up to you to capitalize on that or not.” -Anke Corbin, CEO Globig
While there is a lot of opportunity for many companies in this increasingly digital and global economy, there are also some challenges to be aware of and prepared for.
- Data security
Probably the single biggest challenge with a digital economy is keeping data secure. Data breaches are all too common, and security is an important initiative. Many companies should expect they will be hacked and try to prepare for that eventuality. When you’re a global company, you will find that governments have different requirements around notifications and expectations for mitigation.
- Intellectual Property
Copyrights, trademarks, patents, URLs, and social media names are all important to consider from a global business context. There is no simple answer other than being prepared and diligent around registering and protecting your assets, even for smaller companies. It’s important to know that countries are not consistent in how they register, recognize, and enforce laws around any of these aspects of intellectual property. Counterfeits and IP theft is also on the rise. It’s wise to consider whom you partner with, as they may lay claim to your IP at some point.
- Competition
Even if you don’t think you’re a global company, your customers most likely are considering competitors of your product and service beyond your country’s borders. It’s time to develop your global business strategy and make sure your company and team have the skills to compete on a global level.
- Protectionism
Governments around the world recognize that people are competing globally for products, services, and talent. Each government wants to protect their people and generate new revenue by enticing others to do business in and with their country. One of the ways they entice is by making trade agreements, and they try to deter competition by developing protectionist legislations.
- Data Privacy
Each country has a different perspective on what data is private and how companies are allowed to use that data. As a global economy, companies often don’t realize that they are subject to following data privacy laws from other countries as soon as they collect data and sell to subjects from those countries. Globig can help you understand how data privacy laws apply for each country.
- Global Talent
Developing your current team and hiring the skills needed to compete globally will take some planning. Evaluate what skills you already have in house and what you’ll need in the next 3-5 years. Identify the gaps to develop and hire the skills needed, such as specific country knowledge and experience, language skills, global cultural awareness, expertise in international manufacturing and supply chain management, and international marketing and sales.
Almost every company with a digital presence is by default a global company. Being aware of and prepared for all of the business opportunities and challenges will make a difference in the long-term success of your company.
Resources:
Mckinsey Report On Digital Globalization: The New Era of Global Flows
Mckinsey Report On Globalization for the little guy
About Globig
If you have international offices with employees and business teams focused on foreign markets, the Globig platform is a must for saving valuable time and money, and for managing risk.
Want to learn more? We’re ready to help.
