Globalization of Money

Globalization has many impacts on the small business owner, the mom and pop brick and mortar stores. We only need to drive down our city streets to be presented with the harbingers of business death that permeates our culture, the brightly colored banners and the day laborers walking with huge signs screaming “Store Closing – Huge Markdowns” and “Save 50-70% Inside”. After all who doesn’t love a deal, but at what cost? In the detective novels, the intrepid detective often utters the cliché, “Follow the money”, the same is true if we look at the global effect of money and small business failure we find a real chicken and the egg challenge.

David Robinson, in his Buffalo News article “Globalization hits home in HSBC selloff” states, “That’s why it’s so important to nurture the home-grown businesses that remain. They’re more likely to support local community events and cultural activities. They feel they have a stake here. If those top executives cut local jobs, they have to look their neighbors in the eye the next day.” More and more financial institutions are closing, merging, and moving overseas, leaving their customers and business customers which rely on their credit, and business products to facilitate the day to day running of their businesses. When there are fewer choices in a tough economy, the small businesses are often the hardest hit. They have the smallest cash flow reserves, the most sensitive reactions to increased fees and changing lending practices.

The bailouts, which were to have made available to the consumer housing market and the business owner eased access to lending has failed utterly, with banks taking the money, covering and shoring up their losses, paying themselves uncalled for bonuses and not delivering the intention of the money. The mortgage market continues to freefall, construction business financing is still bone dry, and after all that banks continue to fail and abandon us.

Access to working capital and the relationship with business friendly banking and financial institutions is vital for a thriving small business community. As there become fewer and fewer choices through sale, merger, and closing there are natural and inevitable consequences to the small business owner. As businesses continue to close and struggle it becomes less attractive for banks and lenders to extend credit and invest in that market segment, and as lending becomes tighter, and banking options close up more businesses will struggle and fail. Which came first?

Source:

Robinson, David. “Globalization hits home in HSBC selloff.” Buffalo News June 19, 2011. August 28, 2011 http://www.buffalonews.com/business/business-columns/david-robinson/article459929.ece.

Globalization & The Struggles of SMEs

Small businesses have always fought tooth and nail to make their presence be known to the markets they are trying to reach. With the rapid integration of globalization into virtually every area of business, small businesses are finding themselves backed into a corner against multinational mainstays. My father is an executive of a small frozen dessert business that does battle with companies like Nestle, Rita's and Luigi's. His company has tried to introduce two new products over the last five years that were tested for the global market and were forecasted to be excellent additions to their portfolio of products and create a tremendous amount of revenue. They had success at the domestic level but did not fare nearly as well globally. According to Abhijit Naik, globalization is the encompassing of economic, societal and cultural factors that meld together in the avenues of communication, trade and transportation. My father views some of the cultural factors and marketing limitations as to why these products did not achieve the global success like they had domestically. This lack of international acceptance caused the company to retract these products, both stateside and worldwide, due to profitability concerns. The necessity for global success in this market is the direct result of globalization and has created a harsh market for SMEs like my father's.

http://www.buzzle.com/articles/disadvantages-of-globalization.html

http://www.witiger.com/internationalbusiness/globalization.htm

Global Management Skills for Small Business

Probably like many North Americans I tend to see globalization as having a positive economic effect, although at times it is difficult to reconcile this perception with current events. For example, we all see small businesses caught in the transition to globalization without the skills to adapt. These companies and the people that they employee are often hurt by globalization. It is not enough to adapt old business practices to today’s technology; new models and processes must be created to remain competitive. Cultural diversity, training, and wage expectations are but a few of the challenges now facing small business owners. U. S. small businesses employing offshore workers will need to train their existing work force in the cultural issues that will be encountered when interacting with their foreign counterparts. Communication will take more time and will become of great importance when collaborating on joint projects. Local wage expectations need to be balanced against off-shoring a given position and profitability. In other words how many positions can be sent off-shore to support profitability and still maintain the wage level of the local workers? According to my experience this is not a common or easily mastered managerial skill. In conclusion, I believe that one of the major negative effects on small businesses are these new skill requirements to effectively manage and operate in a multinational business environment. In the long run I believe that globalization will greatly benefit the U. S. economy.

Sources:
The Effects of Globalization in the Workplace by Kate McFarlin, Demand Media
http://smallbusiness.chron.com/effects-globalization-workplace-10738.html

World Public Opinion.org
http://www.americans-world.org/digest/global_issues/globalization/general.cfm

Globalization; http://en.wikipedia.org/wiki/Globalization

Brick-and-Mortar being forced to Brick-and-Click

As I sit here, trying to determine how to post an article about something that I know very little about, it occurred to me to just go off of my own experience and what I have seen locally happening because of the booming Globalization of the e-marketplace. I only had to go as far as my resume to see the many companies that I had once worked for that have gone from brick-and-mortar, to brick-and-click, and even transitioned all the way to pure-play e-retailers. One of my first jobs that I had as a teenager was working at Kmart. I remember the Christmas rush, the black Fridays, the craziness that was the toys and electronics department, and for the most part that has all changed. I recently went into the store I used to work at, one of the few remaining in the area after Chapter 11 bankruptcy in 2003 and the closures of hundreds of stores. I was shocked to see how quiet, calm and empty it really was, especially for a Saturday afternoon.

While I was there, I ran into the Electronics department manager, who was my manager 10 years ago, and asked her why the store was so empty. She was shocked by my question and said that she was busier than she had ever been. I could see the sweat on her forehead, but did not see a single customer in her department. She then explained that Kmart had recently updated their website and added a “site-to-store” option, where customers would by the merchandise online, and they are able to come into the store mere hours later to pick up the merchandise. They used a system called mygofer which is basically an order fulfillment site.

I went home shortly after that and started researching Kmart and their bankruptcy and the reason for it, etc. and I came across an article from 2003 on www.abcnews.go.com. The article, which can be found here, was about the bankruptcy and it had a quote from Howard Nemiroff, professor of finance at Long Island University, where he stated the following in regards to how Kmart can get back on track, “Trim the fat. Try to get back on track. Try to steal some ideas from Wal-Mart or from their competitors to see how they can service the consumers better,” and that is exactly what they did. While the company eventually merged with Sears and they are doing much better than they were, they are still years behind the curve of other companies that jumped on the Globalization market much sooner.

Because of Globalization, and having to compete with brick-and-click juggernauts like Wal-Mart, thousands of people lost their jobs, and a company was changed forever.