Markets are becoming global. This can present great opportunities with extreme rewards. However, customers and entire markets can be won and lost in the blink of an eye. In order to reap the rewards and manage the risks, a business first needs to understand the global forces affecting supply and demand.
“Customers, vendors, partners and shareholders no longer live in isolated pockets and are becoming more interconnected. Physical market boundaries mean very little nowadays. This is the core of globalization,” says Paul Prabhaker, Ph.D., associate dean of Graduate Programs in the College of Business at Northern Illinois University. “Globally efficient markets relentlessly drive human resources, capital and materials. These markets do not respect national boundaries, traditions or cultures.”
Smart Business spoke with Prabhaker about how businesses can deal with these interconnected marketplaces and globally networked supply chains to stay competitive in a furiously evolving marketplace.
What are some key things business leaders need to understand about doing business globally?
Be aware of the underlying trends driving the two sides of globalization: the supply side and the demand side. You ultimately need to proactively place bets around the future you want. This means you’d better understand the fast-changing global trends well enough because the future of your business is at their mercy.
Understand and accept that these global trends affect not just large, multinational firms, but, in fact, present greater risks and rewards to small local businesses. Be intentional in adapting your business on the supply side and demand side. Do you wish to serve markets locally by leveraging the efficiencies of a global supply chain? Or do you wish to serve markets globally by leveraging the nimbleness of a local supply chain?
How can companies deal with the interconnected marketplaces and the rise of networks?
An interconnected world creates customers who are at least aware of what other markets have access to. This awareness is heightened by the proliferation of technologies that provide information on demand to the global population. People all across the world are touched by the same information — information co-generated by providers and users simultaneously. It’s then just a matter of time before behavior starts becoming similar.
For example, teenagers in Asia want to look and act like Western teenagers. They mimic television programs and movies and align their purchases and behaviors to the Western model. Awareness is everywhere now, and that’s the difference. Because people are more aware, their behavior conforms to the new global model.
Markets are also no longer respecting national boundaries. Capital increasingly flows in the direction of wherever the market returns are higher. Human and material resources also do not have much respect for national boundaries, for example, the shift of technology skills and manufacturing skills from the West to the East. Businesses now have to rethink their capital-sourcing and human resource management strategies for a global marketplace.