This post is the last part of our blog series on the Advantages of Going Global. If you’d like to read more, see the earlier posts about ‘How Going Global Can Help A Business Grow Faster’ and ‘The Financial Advantage of Going Global’.
From a competitive standpoint, going global enables a company to:
- Diversify its sources of revenue,
- Generate a stronger balance sheet,
- Leverage a larger and deeper talent pool, and
- Gain access to more innovative ideas faster.
I will now explore each of these concepts in a bit more detail and explain how they can help companies gain a competitive advantage.
By increasing the number of markets where it operates, a global company reduces the impact of any specific country or market on its ability to generate revenue. As a result, a global company is less affected by country-specific downturns or turmoil and can potentially generate significant revenue even when its home country is in recession. Additionally, as we have seen in the first post in this series, a global company can target countries that not only diversify its revenue mix but also increase the company’s overall revenue growth rate. Taken together, these advantages enable a global company to be more financially resilient than its less global competitors.
In a similar way, by diversifying the channels by which it obtains revenue on a global basis and including a mix of direct sales, channel sales, and Web-based selling, a global company is able to more rapidly build and protect its brand, sell to a larger customer base, and outpace its competitors.
A Stronger Balance Sheet
By increasing and diversifying revenues across multiple countries and regions, a global company is able to build a larger and stronger top line than it otherwise could in a single market. By making use of lower cost global sourcing, global web sites, and offshoring, a global company is able to shrink the costs associated with its workforce and fixed expenses while maintaining or increasing quality. Putting these two points together, a global company’s balance sheet will show higher gross margins, higher quarterly revenues, more profit, and faster growth than its less global competitors.
Companies with stronger balance sheets are rewarded financially in the both the public and private marketplaces, which creates a financial competitive advantage. Astute companies can turn this financial competitive advantage into a way to dominate the marketplace and become the market leader in their segment.
Leverage A Larger and Deeper Talent Pool
By sourcing talent worldwide, a global company is not restricted by the talent availability, costs, and skill sets in a single country. Instead, the global company can gain access to both a larger talent pool and a deeper talent pool than may be available to its competition. This larger and deeper talent pool can then be leveraged to build products faster, to build better products, and to provide higher quality offerings at lower cost than the competition.
In essence, the global company can provide ‘better, faster, cheaper’ on a consistent basis and become the defacto brand adopted ahead of the competition.
Accessing Innovation Worldwide
Companies dependent on a single marketplace are not only restricted by the economic climate, talent pool, and costs of that marketplace but also they are restricted by the intellectual capital and use cases in that marketplace. By opening themselves up to the ideas and use cases found around the world, global companies might find that an idea in China or Japan can be leveraged to save millions of dollars in the US or that a marginal product in the US might become a blockbuster success in South America.
As is now well known, the world is flattening out, and no country now has a lock on top talent, intellectual capital, innovation, and good ideas. Those companies that explore the global marketplace can reap the benefits from leveraging the best the world has to offer.
The Multinational Advantage
A recent McKinsey study has shown that though US multinationals account for less than 1% of all US companies, they earned 25% of total US gross profits, accounted for 41% of all gains in labor productivity since 1990, and were responsible for 74% of all US private sector R&D spending.
Clearly the upside from going global is tremendous and can positively impact all aspects of company operations – be it significantly increasing revenues, reducing fixed costs, or creating strategic competitive advantage.