The Perils of Global Business Yet Local Markets
By Dr. Marcus Goncalves
It would appear that all along we have been given mixed messages about how global markets are constructed.
Scholars and gurus alike have been telling international students and virtually anyone who will listen that the world is flat, while others insist it's grumpy at best.
While some politicians and commentators claim that the world is becoming a global village, cultures and values are converging, and naysayers are quick to point out huge gaps in cultural divergencesthat they believe are the cause of most of the world's conflicts.
As globalization is praised and encouraged by some, its dangers are portrayed in the news by financial analysts and by international organizations aplenty such as the United Nations, the International Monetary Fund, and the World Trade Organization. Amidst this haze of misinformation, competing trends are pulling multinational firms and brave small business ownersin every direction.
Within the context of this global geopolitical backdrop, it often begs the question, “do the ideas and trends espoused in the mainstream media really dominate, and if so, which ones matter most to American corporations and global marketers?”
Should entrepreneurs be focusing on international markets instead of local ones? Could the right answer be that there is no single right answer? We must be poised to engage with a world in which all positions and opinions may be right, depending on the political and economic context of each region in any given time.
We must consider as well, marketing purpose and business models. Certainly, the marketplace does matter; doing business in Central Mass is still as significant as expanding business abroad. Moreover, it means that Caterpillar (NYSE: CAT) can be successful abroad, hiring more than 7,500 employees overseas, because it provides "earth-moving solutions for today's global challenges." Santander in the United States attracts both customers and American professionals, including two of our own Nichols recent graduates,by providing "value from ideas." Unquestionably, it is a two-way venue that, as professionals, we must be aware of.
The main idea to grasp is that we now live in an interdependent global economy, where local and global markets, like it or not, must coexist. Starbucks (NASDAQ: SBUX), for example, cannot be a great American icon and global brand without being a dominant local brand. It wouldn't be possible for Starbucks to expand abroad and penetrate markets without expanding beyond its global core products and cultivating authentic local appeal. Steve Jobs tried that with Next Computer, to no avail.
Google (NASDAQ: GOOG) is another example of a global interdependent company that is both local yet global. Google is fundamentally a“virtual” firm, delivering all of its services and products to consumers around the world via a “cloud.” Thus, it matters not where Google's management and Internet infrastructure are housed since all users care about is that products and services are ever available, without borders.
Nonetheless, clouds are forever hovering over some local place, some country around the world, and thus, subject to its laws and idiosyncrasies. Let's not forget that where a cloud exists, there must be others. In Google's case, it was the Chinese government's preferred red cloud, Baidu, Google's Chinese major competitor.
Despite being a “placeless” company, some Chinese hackers found a way to hack into Google's vaporous services; primarily, email accounts of Chinese political dissidents. Google quickly surmised that despite being borderless, and placing its products in a cloud, international clouds can be much murkier than their local counterparts. Ultimately, Google had to comply with Chinese government censorship of search requests on its Chinese-language Web site.
In this scenario, Google's cloud in China turned dark quickly. Moreover, in Germany, Google's cloud underwent heavy winds and was stormed by an invasion of privacy lawsuits after it photographed streetscapes featuring private homes for its Street View mapping product. While German users caused Google's cloud to darken into a rain of protests and thundering lawsuits, this same cloud in the U.S. is free to float oversunny skies - permitting users to glide overmost streets and view commercial and private buildings at ease. All this from the privacy of their homes and smartphones, with sunglasses on.
Not even the ubiquitous Internet, and the global e-commerce that relies on it, are exempt from conventional geographical boundaries, be it brick-and-mortar or virtual. Though the whole notion of e-commerce presupposes no borders and global digital market places, in practice, geography still matters and its effects are felt locally.
E-commerce rarely traverses political boundaries and its associated grounded local laws, regulations, taxes, and trade agreements, which still govern buyers and sellers,as well as the digital or physical products being commercialized. It is a myth to think that e-commerce is a global phenomenon. In fact, relatively few online transactions cross international borders.
That is one explanation as to why international management and marketing has increasingly become a much sought-after discipline. Despite the expansion of global markets, the geographical location features embedded in communication technologies, from iPads to BlackBerrys (NASDAQ: RIMM), are further increasing the importance of “place” in the marketing mix.
Geolocation technologies are enabling international marketers to identify the location of a prospective mobile device and report it not only to the consumer, but also to service providers and third parties, enabling companies to offer international and local consumer ads based on physical location. These services are able to inform vendors about the do's and don'ts of doing business in those places. A good example of such a service is Yelp, which enables consumers to submit geotagged reviews and photos that increasingly influence the chances of success or failure of a product.
Still, the challenge of doing business internationally, especially over the Internet, and the ability to predict what is profitable, legal, ethical, and to know where to draw the line, is no easy feat. By now, most of us have incorporated the Internet into our quotidian lives, and even those of us who don't, are aware of Megaupload's Kim Dotcom's arrest, who was in the business of facilitating Internet downloads. According to the U.S. Justice Department and the FBI, Megaupload allowed users to traffic in "stolen" – copyrighted – entertainment on which no royalties had been paid.
Was it legal? Not so fast. The trouble, and this is an ever increasing problem, is that history shows us that copyright and even patent laws are clumsy instruments with which to combat truth telling of a particular information facility, or cloud. Generally, people tend to use a technology to its fullest extent.
This fact, in itself, makes doing business internationally, especially over a cloud, a dangerous enigma, where notions of legal and illegal, ethical and unethical are at best, elusive; and at worst, ominous and foreboding. The U.S. Foreign Corrupt Practices Act ('FCPA') among the OECD countries interpretations offers a good example of it.
Dr. Marcus Goncalves Assistant Professor of Management International Business Program Chair Director of Academic Programs at GPS Nichols College
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