To grow your business profits and stay competitive in today’s marketplace, you might need to consider global opportunities for sourcing or selling. Many small business owners are focused on the global economy, because of the opportunities to access global supply chains and millions of new customers.
Three key factors drive the fast pace of globalization:
Access to information. In his 2006 book, The World is Flat, Thomas L. Friedman observed that the increasingly level global playing field is a result of the convergence of several key technologies: the development of the personal computer; low-cost broadband connectivity; workflow software; and the Internet, which brings it all together. This instant access to financial, market and product information has put the world economies in sync and has made it easier for you to prosper in markets you might have been afraid to enter.
Rapid growth of global markets. Economic growth in developing economics — led by the BRIC countries of Brazil, Russia, India and China — has created millions of potential new customers and supply chain partners for U.S. businesses. There are more than three billion new members of the middle class outside the U.S. These educated, motivated business customers and consumers are appearing in economics from Indonesia to South Africa to the Middle East. Simultaneously, the global economy has spawned a growing array of sourcing platforms, such as Southeast Asia, BRIC, and Eastern Europe, get more sophisticated and offer more opportunities, develop in sophistication, and breadth of offerings.
Falling trade barriers. Historically, international trade hurdles have never been lower. Communication costs have declined with satellite and broadband networks. Transportation is faster and more affordable with developments in container shipping and airfreight. From free trade agreements to the easing of joint venture requirements, barriers to trade have diminished around the world since the end of World War II. The number of U.S. businesses participating in international trade has more than doubled since the Berlin Wall fell in 1989. Tariffs on U.S. exports to China have dropped significantly in the decade, since China joined the World Trade Organization.1
The breadth of impact of global trade on the U.S. economy is not insignificant. Services are one-third of U.S. exports — making the U.S. the No. 1 services-exporting nation, with a $150 billion surplus on $562 billion of exports.2 The U.S. is now the #2 merchandise exporter.3 And more than a quarter of a million U.S. companies of all sizes are participating.4
The time has arrived to talk to your financial partners about how you can prepare for immediate or future global opportunities There are new risks to doing business overseas, such as longer cash-to-cash cycles, currency fluctuations and new possibilities for loss or non-payment. Most U.S. businesses operate domestically on open terms and don’t know how to manage these new risks.
Successful organizations take advantage of a well-established set of tools, such as export credit insurance, currency risk management — or FX — letters of credit and trade finance, to help them effectively manage these risks and compete successfully in international markets.
According to Craig Lesser, international attorney and former Georgia Commissioner of Economic Development: “The most important factor for success in international business is developing relationships. Now is the time to be working on those relationships, to be determining where your products will sell and how to develop the pipelines for them.”
If you aspire to compete globally, the U.S. Commerce Department and the U.S. Commercial Service have international offices and a U.S. Export Assistance Center that can provide a host of services to inform and guide your foray into global markets.
1 âA Decade of Success with the WTOâ, Shanghai Daily, December 9, 2011.
2 Source: NIPA Table 1.1.5, Bureau of Economic Analysis. Prepared by International Trade Administration, Office of Trade and Industry Information, 2010.
3 Source: World Trade Organization, International Trade Statistics 2010.
4 Source: U.S. Census Bureau, Foreign Trade Division Prepared by International Trade Administration, Office of Trade and Industry Information, 2009.
About SunTrust Business Owner Research: SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
This article is general in nature and does not constitute legal, tax, or investment advice. SunTrust makes no warranties as to accuracy or completeness of this information, does not endorse any non-SunTrust companies, products, or services described here, and takes no liability for your use of this information.