November 3, 2015
Family Business Growth Means Expanding Your Business Horizons Globally
Expanding a business globally is no easy task. But, if you can pull it off, it can help you survive the challenges of today’s tough economy. Here’s why some businesses decide to “level up” their brand.
What Is Globalization?
Globalization is the process of moving outside of domestic markets and embracing foreign ones. It doesn’t necessarily mean that a company abandons the domestic market. Rather, the business expands into overseas trade.
It’s entirely likely that a global business will develop significant properties in foreign countries, and end up generating significant revenue from them. Sometimes, a domestic operation ends up shifting a significant portion of its resources overseas to meet a growing demand.
Most often, globalization means generating business in multiple countries.
The Implications Of Going Global
There are two overarching categories one must consider when discussing the impact of globalization. First, there’s market globalization. Second, there’s production globalization.
Small family companies tend to start out by globalizing their marketing platform – offering products and services in other countries. An example of this would be Midlake. You can learn more about Midlake products on their website.
Basically, by expanding marketing efforts into other countries, the company has been able to export a significant number of its goods overseas, generating revenue from all over the world. Not only has this created a stable foundation for the company, it’s opened up opportunities for the second kind of globalization: production globalization.
Production globalization refers to actually producing products, or at least accessing resources, outside of the “home” country. For example, many companies in the U.S. find that outsourcing production to another country, like Vietnam, China, or India, may result in a dramatic reduction in production cost.
This translates into higher profit margins without changing the basic pricing structure for existing products.
Why It’s Important To Think Big
Companies that globalize part or all of their operation benefit in numerous ways:
- They gain access to a larger marketplace.
- They create more “anchor points” in the world, which helps create long-term stability in their business.
- They are able to optimize costs and return a greater portion of the profits to the company for further R&D.
- They attract, and keep, more customers.
Family enterprises seem to benefit the most, with 74 percent of Canadian family companies planning to expand to new geographies in the next 5 years, according to a survey by PricewaterhouseCoopers (PwC).
And, in Germany, Austria, and Switzerland, family-owned businesses already enjoy strong positions in foreign markets. In fact, globalization represents 19 percent of total exports by German firms.
In just the Atlanta region, there are more than 250 companies that use the U.S. as a major base of operations.
What allows these operations to persist, and succeed over their public counterparts is the fact that family-owned businesses often treat business income as family income. Because of this, they tend to structure the business finances much more conservatively than a public company. This allows them to operate near-100 percent debt-free.
They use existing cash to expand, actively build up cash reserves, and expand into countries where the risk is outweighed by the potential for increased profits.
In family-owned enterprises, decision-making is also centralized, instead of spread out among a board of directors. Globalization, for many of these companies, is the new normal. It seems to have moved beyond fashionable to necessary as a business strategy.
Julie Shrum is the sales manager at Midlake. Working there for nearly 20 years has taught her a lot about metal fabrication and business in general. She works with her sales team to create a comfortable atmosphere for customers. Wearing many hats at Midlake has helped Julie find out about the many new uses for sheet metal.