Impact of Globalization on Small Businesses

Multinational companies: Impossible to compete against?

March 03, 2015  |  By Francesca Ferdes, Romania

Impact of Globalization on Small Businesses

Photo : Wiki Media Commons / Herder3

Globalization is defined as a tendency of investment funds and businesses to move beyond the national markets to other markets around the globe; it also encourages cultural exchange. The advantages and disadvantages have been heavily discussed recently; the process helps developing nations much faster but it weakens the national identity and allows rich nations to lead certain jobs overseas where labour force is much cheaper. Year by year, globalization is taking control over the local economies. The main quetion is: what are the impacts of globalization on the small business owners, and how can they deal with it?

First of all, this whole process affects all local businesses by stealing their clients. For example, the grocer may have an established customer in the community. Despite all that, he can't compete with the low prices of a supermarket. When I interviewed a local grocer I found out another aspect of this problem. "Our traditional products are not that easy to sell these days; they are more expensive than the alternative ones, that you can find in a commercial supermarket. For a person is much easier going to a big supermarket because there you buy products at a lower price and you find almost anything you need with minimal effort. Of course this whole thing with the financial crisis is making this situation worse" she admits.

Most specialists compare this situation with a plunge into an ocean, populated by a few tiny fishes which compete for food with much bigger fishes. And sometimes the small ones risk to be eaten. Another concrete example we can find by taking a walk in a big city. The urban landscape is filled with KFC's, Pizza Huts, McDonald's and Starbucks. Going to another country you'll find the same multinational brands.

Secondly, globalization afects not only the small producers, but also the culture and traditions of a country. As an example, the loss of local culture and the rise of one corporate culture which only varies only slightly from one country to another. In addition, this globalization trend hurts the smaller economies of the world and the benefits are only for those who grab most of the contracts.

All in all, solutions to this problem exist. The local producers can only survive by providing local menu items; you can't make hamburgers when a McDonald's come to town. They need to sell something different. Small business owners have to collaborate with the local branches; they need to have a strong identity or contracts with other small competitors. As a result, this will increase their chances to survive.

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