Thursday, August 25, 2011

Globalizing Small Business and Its Negative Effects


Globalization, economically speaking, is not new. It has been going on for hundreds of years. As new countries were discovered, trade of goods transpired between them. However, a new form of globalization has moved on to the block in the form of ecommerce. No longer do people need to interact to trade or purchase products or services. Many times the only interaction for ecommerce to take place is the click of a mouse and the stroke of a few keys.

Although ecommerce has a positive effect on business, such as allowing the world to be borderless, when it comes to selling goods and services, it has a quite a few more negative effects, also. Ecommerce’s negative effects on globalization on small business have to compete with big businesses, along with a world wide web of other small businesses and the loss of jobs created by ecommerce.

Small businesses when competing in ecommerce have a difficult time competing with big business. Big business, for one, has the ability to buy in large quantities, reducing the cost of goods. In order for the small business to compete they must lower their profit margin.

According to ehow.com, big business also has the advantage of controlling search engines’ page rank. The big companies have the capital to purchase paid text links. Since search engines use a page rank formula involving the number of inbound links as an individual “vote” for the site. This allows the big business’ web site to receive top ranking, monopolizing the “internet market”, while the small business has little to no visibility within a search engine.

Small businesses are also competing with other small businesses. This has always occurred within a community, but the scale in ecommerce is on a global level. The Small Business Administration (sba.org) states “It has enhanced the efficiencies the market area from which dealers can draw customers and by increasing the number of potential competitors for each dealer.” They made this statement about auto dealers who were going to ecommerce to increase their sales.

With small business going more towards ecommerce to help increase their sales, many are closing their brick and mortar stores. This allows for lower overhead. All of this impacts job loss and the economy. About.com economics shows small business accounts for 52% of all US workers. With small businesses hurting from the poor economy and leaning towards ecommerce and big business outsourcing jobs, the American worker is also suffering (www.oecd.org).

There are several things that can be done for small business to get off on the right foot when moving to ecommerce. They should develop a business plan solely for their ecommerce venture. Create a web presence which brands their web site/business and make sure it is consistent throughout the entire web site. Find sources such as social media to promote their business. As in a brick and mortar store, word of mouth is the best form of business promotion. Since, social media is a global phenomenon; the small business can reach the world at a low cost.

Resources:

http://economics.about.com/od/smallbigbusiness/a/us_business.htm

http://www.ehow.com/list_6541289_negative-effects-internet-small-businesses.html

http://archive.sba.gov/advo/research/rs212.pdf

http://www.oecd.org/dataoecd/3/12/1944883.pdf

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