Our world is a global one.
Think about the items you use every day, like a computer, car, or clothing. Even if you make your own clothes, the fabric you purchase was likely manufactured in one country and packaged in another. The computer or a mobile device you are using to read this article might have over 12 different parts. The chances are, each part came from a different factory in a different country and then assembled somewhere else before arriving at your local store. Apple, for example, posts a 33-page list of all of its suppliers from countries like China, the Philippines, Germany, and Brazil.
That’s what globalization looks like in action.
So, what does that mean for your business? Regardless of whether you choose to expand your operations to other countries or to stay local, you’re part of a global network of suppliers and consumers. As you build a global strategy, you need to understand the macroeconomic forces of globalization at work — and what globalization looks like on a business level.
What is Globalization?
You’ve probably heard the term “globalization” used in all kinds of political, social, and economic contexts, managed through international organizations like the World Trade Organization (WTO), the World Bank, the International Monetary Fund, and the United Nations.
But globalization impacts all of us, not just those in positions of power debating fiscal policies or free trade agreements.
At a high level, globalization simply refers to the increased interdependence of people and goods today. Think of it as the big picture surrounding your business strategy: it encompasses every aspect of your global strategy, from how you plan to scale your manufacturing operations to office locations to your localization and translation efforts.
While the term “globalization” has only existed since the rise of industrial capitalism post-World War II, the history of globalization begins even before ancient international trading networks, such as those along the Silk Road. Spices, silks, lumber, and gold all made their way around the world — and with it, new languages, philosophies, and foods traveled, too.
From a microeconomic perspective, globalization refers to the framework businesses use to go from a single-country product or service to a multinational one.
How Does Globalization Work?
Anytime you do business with customers in another country, you’re engaging in globalization.
To illustrate what globalization looks like at scale, let’s take a look at one of the most common expensive purchases Americans make: cars. In the past, automakers targeted different models to different locations depending on the needs or desires of those markets. Cars in the United States, for example, tend to be bigger and seat more people, compared with more compact models in Europe or Asia.
More recently, however, brands like Ford have begun to expand a unified design language and brand identity across other parts of the world. Just look at the Ford Mustang — previously, this used to be a U.S.-only offering. Now, they’re releasing brand-new models for the European Union like the Mach 1, recalling the iconic American mustangs of the 1960s.
This Mustang follows a new global design language that dictates the styling and architecture of Ford’s cars for all markets.
But that doesn’t mean it was easy. Design-wise, Ford removed stylistic vents on the hood of the Mustang for a more sophisticated look with the European model to localize the experience. The Mustang also had to be localized for sale in Europe, replacing the red tail lights we’re familiar with in America with clear tail lights and adding larger side mirrors to accommodate legal regulations.
Most companies choose from one of four strategies as they expand internationally, ranging from very highly targeted toward each individual market (such as a trans-national strategy) to building a globally unified brand with minimal changes based on the different countries (global strategy).
For multinational corporations, globalization means considering:
- Market entry strategy: There are many ways to enter a foreign market, from exports, licensing, franchising, partnering, mergers and acquisitions, greenfield investments, and more.
- Global branding and localization: Determine how (if at all) you want your brand and products to shift in different markets. What is your global market value proposition, and how does it change for international audiences? Companies must balance local responsiveness with global integration within each market they enter if they’re looking for economic growth.
- Supply chains: As you expand to multiple markets, you need to guarantee you can provide the same level of service. What shipping models will you use, and how is that impacted by global trade regulations, labor markets, tariffs and trade barriers, and other international factors?
- Regulations: As you enter new markets, you’re also entering a new set of legal frameworks and trade policies that manage everything from your hiring process and benefits to what information you can collect and how. For example, in France, GDPR changes your email marketing process for customers, and their right to disconnect law impacts when you can email your employees.
- Translation: What markets matter, and how will you reach those customers? Understanding which languages they speak and what nuances you need to capture will help you determine what kind of approach to take overall.
Benefits of Globalization for Businesses
The effects of globalization are wide-ranging. On a high level, globalization brings people and goods closer together, moving people and products from one place to another quickly and easily. Proponents of globalization point to higher living standards for developing countries, stronger GDP, and deeper global ties through international trade.
On a business level, globalization enables brands to engage customers and users across the world, expanding their footprint and revenue. Many of these same benefits come from localization, which is a subset of globalization. Localization is the process of adapting product offerings and both digital and in-person experiences to resonate with a local audience, which is an essential part of international expansion.
Think about one of the most successful global companies on the planet: Amazon. One of the largest companies in the world, Amazon operates in 58 countries and reaches more than a billion people online every day. The leading e-commerce company in every country except China (where Alibaba is #1), you can see Amazon’s ever-present “smile” on trucks and packages — and enjoy same-day shipping — pretty much everywhere.
See how they’re gearing up for the holiday season:
Language is only the beginning of how they’ve localized this page. They’ve built a homepage with such detailed personalization that every customer sees what they’re looking for, when they’re looking for it.
Benefits of applying globalization to your business include:
- Potential for additional sources of revenue
- Access to different economic systems and ways of doing business
- Ability to reach a foreign culture in a meaningful way
- Build trust between company and customer/client across national borders
- Accelerate creativity and innovation
- Opportunity to lead within industry
Challenges of Globalization
That’s not to say globalization is easy.
Technological advances make globalization work even faster — so fast that sometimes, it can spin out of control, creating negative effects like volatile financial markets, climate change, and income inequality. As the world grapples with a rise in protectionism and populist ideology, the ripple effects of decisions like Brexit, the 2008 financial crisis, and handling the pandemic affect everyone, not just individual citizens.
On a business level, it’s naturally more challenging to manage a bigger, global operation than it is to run a small local business. The more moving pieces, trade routes, staff, offices, and policies to juggle, the more likely you’ll run into trouble.
Some common challenges include:
- Building enough global brand recognition and awareness
- Managing changing regulations and rules for different countries
- Supply chain logistics and customer service across countries and time zones
- Competing against local brands with established market share
- Understanding customer preferences in foreign markets
- Localization and translation (don’t worry, we can help with that!)
Best Practices for Globalization
There are a number of best methods that brands can employ to incorporate globalization into their product strategy. These include:
Creating content with evergreen messaging
Incorporate the essence of living as a human on earth for your messaging: emotions, common worries, and hopes. This is exactly what Coca-Cola does with their online content. Even though they operate in more than 200 countries, they take a localization approach that means you can order a “Coke,” a “Cola,” or a “Coca,” depending on the global market. Every local market has slightly different messaging and formula, but they use simplified, universal messaging that works no matter the market: happiness, enjoyment, and sharing. Combining this standardization with variations in local flavors and packaging is what makes them successful.
Managing the company value chain
Make sure your company values align with top goals and protect your competitive advantage. That’s what Unilever has done with their transnational strategy. As the parent company for over 400 brands like Klondike, Lipton Tea, Dove, Axe, and Vaseline, Unilever embodies the idea of “thinking globally, acting locally” across more than 190 countries. They hire local managers to run their in-country operations and manufacturing facilities and divide the company based on the product offering. Their network of brands puts them in a strong position in nearly every market, focusing on the products that play best in that particular sphere (such as Vegemite in Australia and mayonnaise in the United States.)
Create a globally recognizable brand that defines its own concepts
Like international fan-favorite McDonald’s, Starbucks has built a menu that’s a “must-order” in any country by changing it to adapt to the local taste preferences of every country they enter. They set up partnerships with local coffee companies, so each blend truly does match what the local market expects. Take Japan, for example — a country not known for its coffee drinking. They hired local designers and employed traditional craftsmanship to build a store that fits the local culture, offering Japanese customers a chance to try the famous coffee chain their way. In 2019, their latest store opening in Meguro was so popular Starbucks had to create a lottery system for admission.
Build a globalized business with Smartling
There will always be alluring shortcuts in business, but putting a globalization strategy into place is an advantageous move that can curtail major international mistakes. When your reputation is on the table, trusted industry leaders like Smartling can help set you up for international success.
Consider a trial run — all you have to do is identify 1,000 words, choose three languages, and provide some guidelines. And we will show you how Smartling can get your globalization strategy started. Set up a meeting here!