The World is Becoming More Global

This ironic quip was overheard recently in an elevator. It struck me that not only Thomas Friedman, author of “The World is Flat,” is thinking about the world differently now, but also so are many others. Americans are finally beginning to understand that there are both opportunities and pitfalls outside our own borders, a fact Europeans and Asians have understood and exploited for decades.

Business owners and managers of all companies – large or small, domestic-centric or multi-national – need to be aware of global trends and the changing business, economic and politic climate in which they operate.

There are four main trends impacting today’s global milieu. First, the increasing globalization of consumers around the world who are becoming more similar. Children in Japan, Germany and the U.S. enjoy “Game Boy” games, Russian and Australian business people dine on Italian pasta and Japanese teriyaki. Ethnic restaurants are becoming more popular in the U.S. and abroad, as a harmonization of taste profiles spreads around the world. A changing customer base affected by demographics in your area could impact traffic at your restaurant or café, and dictate consumer selling prices.

There are now huge new international markets with newly minted middle class consumers demanding innovative, high quality products (such as those “Made in the U.S.A”).

Second, the escalating struggle between democracy and autocracy is a cause for concern. We see authoritarianism increasing in countries like Russia and some South American countries. Radical fundamentalism and populism is on the rise. The need to address poverty, education, health care and income disparities is greater than ever. This an area where business can take the lead by selling more products, increasing local job opportunities, donating resources, providing educational opportunities, and contributing to the creation of new “middle class consumers” overseas.

Third, the world is able to withstand financial crises better than in the past. Monetary calamities such as the Great Depression, Latin American debt crises, or the Asian meltdown of 1997 will not have such a devastating effect on the global economy in the future. Several country’s have subsequently reformed their banking institutions, reduced public debt as a percentage of GDP, and reduced foreign currency borrowing. The volatility and risk now of expanding your business overseas has been reduced.

Finally, and most importantly to Americans in the long term, is widespread disillusionment with the U.S. Although we are the leading military superpower, we have failed to capture “the hearts and minds” of those we aim to lead and free from tyranny. We have lost our ability to influence world opinion. More countries are thinking and acting independently and often disregards the wishes of the U.S. government. We are witnessing widespread anti-Americanism abroad. This sentiment makes expanding our businesses overseas more difficult.

Despite being “difficult,” expanding internationally is not impossible. In fact, geographical expansion minimizes the risk of U.S. businesses. For example, in a U.S. economic downturn with mass layoffs, increasing unemployment, and falling personal income, fewer Americans would trudge to Starbucks to buy their daily venti soy latte with skim milk. They would probably stay home and brew coffee in their kitchens. Starbucks would still continue to grow because the chain has over 200 stores in China, which grew 11.3% in the 2nd quarter of 2006 vs. 2005. Starbucks is geographically dispersed and has stores in multiple growing markets with new consumers. The company continues to expand despite the U.S. or other countries experiencing recession.

As the price of oil rises, and consumers in the U.S. and Europe have less disposable income, Middle East countries are awash in liquidity. Many countries are diversifying their economies, and others have increasing foreign investment to drive their financial systems.

All of this put together signals an unprecedented opportunity for businesses around the world, both large and small. John K. Walsh, Vice President and Manager, Overseas Banking Division, U.S. Bank, believes that global growth in the next four years will far exceed the average of the past 20 years. In the past 10 years exports have accounted for 30% of U.S. growth. A significant portion of U.S. exports are consumables such as food, agriculture and beverage products.

With opportunity, however, comes competition and other threats. The world is also becoming more global for everyone else, too. We will see more foreign companies entering our own markets, lower consumer prices, and specialty and niche products. Other threats to expanding internationally may include sustained high energy costs, terrorism, flu epidemics, and rising trade protectionism.

Are you prepared for the global challenge? You will be if you are aware of current global trends and consumer expectations, and you seize the opportunities being presented to you.

–Peter M. Guyer

Peter M. Guyer is the Founder and President of ATHENA MARKETING INTERNATIONAL (athenaintl.com), an international marketing, consulting and business development firm serving food and beverage manufacturers. Tel. (206) 749-9255.