No business is immune to global forces, no matter what sector they are in or how localised their customer base. Whether it’s the butterfly effect of demand and supply shocks elsewhere, or the introduction of new methods and technologies, the world is smaller than ever. This reality was best evidenced by the global financial crisis, as poor lending practices and a housing crisis in one country reverberated around the world. But it is also seen in daily life, where smartphone apps and online services from all corners of the world are available to the entire marketplace from the day they are launched.
Finance is a worldwide game, the decisions of actors from the US to China have flow on effects elsewhere, affecting our dollar, lending practices, capacity and more. The tax and trade policies of numerous governments, for instance, impact the supply chains you rely on for everything from coffee to oil. The decisions of big multinationals like Apple to borrow or invest in our domestic market impacts our capacity to borrow or invest. In short, the global economy is connected; one action affects another.
But perhaps even more an issue for small businesses than the macroeconomic environment is the capacity for so many businesses to go global fast, competing across borders. In a sense, unless your business does something that can only be done standing in a specific location, like a barber, your competition is every similar business on the planet. Cloud computing and ubiquitous smartphones have given so many businesses worldwide distribution at the press of a button – many online services face no barriers to entry except a green light from the relevant app store.
For many other businesses, the rapid advances in computing power, and the accompanying B2B services like drop-shipping, have rationalised the cost for physical businesses competing across borders, opening up even more competition. This trend will likely continue, as technological progress and consumer preferences break down ever more barriers.
The end result of these two factors is that the outside world is ever more important to every businessperson. To fully appreciate your business environment requires more than understanding your local economy, delighting your direct customers.
You also need to pay attention to the big trends that underlie the entire economy, and for a small, open economy like Australia, that means paying attention to the entire world. But even as the consolidation of the global economy brings more competition to our shores, it also opens up opportunities for Australian small businesses. The key is to be aware of what’s going on so you can react.
This is an excerpt from Australia’s Business Challenges, a free e-book from Business Insider. Get your own copy below:
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