Ecommerce Globalization and Its Negative Effects on Small Businesses

Per IEEE Xplore, “With the advent of E-commerce, many in the world are able to compete in global markets regardless of language, and cultural barriers, physical distance and national boundaries since products, services, and transaction processes can be re-engineered to adjust to changing business environments.” The key word here is “many.” That means not all. For us – Ecommerce Site Designers – that is the question. Why not all?

After all, with the rising cost of fuel and not enough time in the day, many have resorted to the Web for searching and purchasing products, goods, and services. In addition, many businesses have found it advantageous to use the Web where they can reach more people at a lower cost. Although this has resulted in lost jobs, the reduction in expenses for advertising and man power has more than cost justified any expense. Value chains have enabled the reduction of floor space and stocking, reduced need for customer service and telephone charges to take orders, and lower utilities. The list of plus and advantages for moving a business or adding a Web Presence to a company is boundless. The Web offers translation of pages and even shopping carts which will convert monies. Competition keeps prices relatively low, and as a result, inflation is less likely to occur, etc.

So why not “all” companies or markets? What are the negatives that are not being widely discussed? There is some mention of the concerns such as privacy and security – but these are technical issues for which solutions are being sought and constantly developed.

And what about the “small” businesses that want to enter this arena and capitalize on the benefits like the big boys? What should be their concern – if any? Will there be problems with the Internet users of their products? Who will handle the shipping, etc.? What about deregulation or monopolies?

Your mission is to accomplish goal number 1 on the syllabus “The student will demonstrate knowledge of issues surrounding the development of an e-commerce Web site.” You will accomplish this by researching and editorializing information on the “(Ecommerce) Negative Effects of Globalization on Small Businesses.” After reading several articles on the Pros and Cons, Advantages and Disadvantages, create an essay posting on your findings and your opinion of what the negative effects could be on small businesses.

References:

Going Global
Is it Insanity?

Globalization is what makes small business thrive

Buyers and sellers that engage in e-commerce retail trade are no longer restricted by store hours, geographic marketing areas, or catalog mailing lists. With a few simple clicks they can gain access to a variety of goods 24 hours a day, seven days a week. Studies show that the “US ranks 3^rd in annual per capita online spending at $355 per person, behind the U.K. ($578) and Denmark ($466). And when it comes to e-commerce growth, China, Brazil, and Mexico are all expecting to see increases of up to 30 percent a year for the next five years, excluding inflation.” With numbers like this it is impossible for any e-commerce site with a long-term growth strategy, to ignore the global market demands for American goods & services.

The challenge to small business centers around how to best service the needs of their global customers. Globalization is paving the way for new businesses that handle specific challenges discovered by e-commerce. International logistics is one area that can present significant obstacles for even the largest websites. Companies founded to specifically manage the details of international shipping, taxes & customs allow companies of all sizes to expand their business opportunities globally. Other companies handle site translation including currency conversion so the user experience can be seamless no matter where your customer wants to shop. Other options for consumers are third party services like MyUs.com or Borderfree.com who will provide international customers with a domestic address even a credit card issued by a domestic bank so that they can place US orders and have them shipped internationally for additional fees. Michael DeSimone, CEO of FiftyOne, the market leader in international e-commerce, says “it's a mistake to assume that customers overseas wouldn't be willing to pay higher shipping costs”.

How can the small business compete with Walmart’s low prices in an environment where price is so transparent online. Traditional business values are still very important to all customers – customer service differentiates companies where price is equal. Zappos.com, was founded in 1999 by Nick Swinmurn after he was unable to locate a specific pair of shoes in a local mall. People were skeptical at first about buying shoes, a product that was considered a must try before you buy, online but that did not deter him because he knew it was a 40 billion dollar market in the US. The company instead focused their business model on service rather than price, building free shipping and return postage into their prices. They are so famous for their customer service and company culture that the Zappos Way has become an inspiration for many companies world-wide. Even though many believe that e-commerce creates more price transparency allowing well informed customers to buy solely on price, but Zappos is proof that consumers haven’t completely forgotten what good old fashioned customer service is worth. There will always be room for small business to create a niche in the market and out perform their bigger competitors. When a small business becomes so successful that the larger company can no longer compete, they buy it – Zappos was eventually acquired by Amazon after they launched their own footwear site, endless.com but failed to attract the loyal customer base away.

Smaller companies also have an advantage in their size because they are able to react to the changes market needs quicker than the larger corporations. Small businesses have a shorter value chain which is one reason they can adapt to market changes quicker than larger companies. Since many small business are run by entrepreneurs that recognized a need and created a business plan, it is in their nature to continue to innovate their market and product. That is the nature of capitalism.

While market globalization does have its challenges, I do not believe that it cannot all be viewed as negative. The positives outweigh the negatives as long as small businesses continue to think outside the box and respond to their customer’s needs, they can succeed in any market.

http://www.supplychainquarterly.com/print/scq201102monetarymatters/

http://www.ecommercetimes.com/story/69105.html

http://www.supplychainquarterly.com/print/scq201102monetarymatters/

http://tutor2u.net/economics/revision-notes/a2-micro-growth-of-firms.html

http://geospace.co.uk/files/compass.pdf

http://www.inc.com/magazine/20101201/how-to-support-global-online-sales.html

http://www.economist.com/node/16478931

The Cost of Technology

Any one who has bought a computer or other tech gadget with all the latest features knows their device will not be cutting edge for long. The world of technology is constantly changing, frequent updates to software programs and sleeker more efficient designs to hardware make it financially difficult for the average individual to keep up with to keep up with the latest tech devices. How do all these changes in technology effect small business in the global market place?

Traditionally small businesses are the late adapters of technology. As the digital infrastructure matures and becomes widespread, small busi­nesses will need to aggressively use new technologies to create, build, and market their products and services. Small businesses that fail to embrace technology will be under increasing competitive pressure from more technologically savvy firms. In other words lager business that can afford to deploy this new technology will be gaining in the market. (WSJ)

According to Intuit there are a few emerging technologies that small business should keep in mind when attempting to create an online presence. The first is to keep in mind that their audience most likely will not be viewing the web site from a desktop instead it may be a mobile device like a tablet, netbook, or smart phone. This is a valid point but is it feasible to assume that a small business budget could keep up web technology that complies to every platform? Secondly Intuit advises small business to utilize inexpensive web services for building web sites. By that they mean outsourcing. This doesn’t necessarily hurt the small business because it is a less expensive option than having an in house developer but it does hurt the economy in the long run. Another recommendation is mobile marketing through text and e-mail alerts sent to a cellular phone. Cellular phone minute and data plans vary widely it can not be assumed that everyone has unlimited text and data allowances, those who don’t will most likely trash the message.

A small business is small because it usually does not have the capital resources that a large company would have. At this time the global economy may not be as accessible to every small business but there also may not be a need for certain types of businesses to participate in the globalization of their company. For example if a local grocery store offers online shopping and delivery with in a 25mile radius, their target audience is their immediate surrounding area not halfway across the world.

Sources

http://www.intuit.com/

http://premsingh.hubpages.com/hub/ImpactofglobalizationonIndianculture

http://online.wsj.com/public/page/news-small-business-technology.html

Negative Effects of the Internet on Small Businesses

The internet has proved many new and better ways for companies to advertise and sell goods globally. But there are also negative issues that effect small businesses. Some of these issues are advertising and website ranking.

Since small businesses have lower site traffic, their sites are not ranked as high. Because larger businesses have hundreds of links floating about, they usually have better search engine placement. Also, they have the budget to artificially pump their rankings by buying paid text links on other high ranking sites. Most search engines detect hight traffic volume as up votes, which helps with rankings. Google uses a "PageRank formula" to help determine

rankings of links in the search engine. In the end, small businesses cannot compete and big business stay at the top of the Internet market.

There are many Internet advertisers out there. A popular one is Google Adwords. This system is based on a "bid per click" basis. This means the more competition there is out there, the more businesses are encouraged to fork over money for Google Adwords. As a result, Google then ups the "price per click." A small business entering this competition upon starting up would be hard pressed to find the budget to compete with large businesses.

As you can see, the ability of tapping into the global market is not based upon the size of a business, but rather their budget. Small businesses that do not have the capital to put into site ranking and advertising will always be overshadowed by the large businesses that have the cash to put into these traffic-inducing necessities.

Google Ranking Formula

Google Adwords

Small Business Mojo: Avoiding The Pitfalls Of Globalization

Is your small business ready for the global economy?

According to the GEI small business owners around the world are very optimistic in their global economic outlook. Out of the 7,500 entrepreneurs in 38 countries surveyed, 62% have seen a significant improvement in profits over last year and 72% of these same respondents expect greater returns over the next 6 months.

While this survey paints an optimistic view, it is wise for business owners to consider the potential downfalls of globalization and to think ahead about what they can do to thrive over the next decade. 

Failure to know your product or to adapt to your customers needs. 

This may seem like a simple and redundant step, but some business owners work years and years to build a company around a product or idea that is simply no longer viable.  Step back and consider if you are truly meeting a need and offering a value to your customer .  Don’t be afraid to make changes to your product line and emphasize the innovation you are sharing.  When you are bold and educate your customers about why your product is superior, you set yourself apart as a respected expert and gain lifelong customers. I think the days of finding a reliable niche are over....companies must be prepared to adapt and change more than ever before.

Failure to respond to the needs of online shoppers.

 E-Commerce is important, and it's not just for the big box stores anymore!  Goldman Sachs Group Inc. reports that E-retail will grow at five times the rate of traditional retail and will overtake offline retail in profits by 2020.  If you are not yet offering your services or products online, then you are missing a huge piece of the market.   It is imperative that you provide a professional, fast, and safe shopping experience for your customers. Invest in whatever technology it is going to take to update your website and market yourself online. Costco and Target are making lots of money online and have massive amounts of resources to throw at marketing, but even the 'big boys' have issues with website organization and keeping their online shoppers satisfied. Learn from their mistakes, optimize your sites for maximum efficiency and resist the temptation to bombard your customers with irrelevant advertising. A happy customer is a repeat customer!

Failure to think outside the box and to expand internationally.

It may be outside your comfort zone to think about it, but now is the time to consider expanding your reach across international borders.  Once your business is working for customers in the US, you owe it to yourself to see what the needs of international customers may be. There are some logistical challenges to shipping internationally and even expanding production overseas, but there is a wealth of information available to help you navigate this process.  Find similar companies you respect that have made the transition and partner with them if you can. Research the steps you can take right now to position yourself to expand when the time is right and you won't get left behind. 

REFERENCES:

Internet Retailer

Going Global

PowerHomeBiz

Global Entrepreneur Indicator 

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

There are many good things and unfortunately bad things that come from Globilazation of small business. As a entrepeneur or small business owner there are many things to be aware of including the issues with accesibility, overhhead costs, visibility, and advertising when you plan on competing online against other companies.

Small business owners that have mom and pop type shops will find it more difficult to compete with business that deal in e-commerce if they dont have a online store of their own. With consumers having the ability to buy and sell online they well be far less likely to drive from store to store to compare products and prices. In the world that we live in today gas is too expensive and time is too precious to find the best bargain in your local store.

Brick and Mortar businesses will also have a hard time keeping their overhead down if they primarily operate within the walls of their building and not online. It can take up to 10 people to run a small store that doesn't participate in e-commerce. Now give that business a website and the 10 employees can probably be reduced to 5-7 people. Now imagine a business that operates primarily online, you might only need 2-4 people to operate that business successfully.

Visibility is also a problem for small businesses. With the monster businesses across the world like Wal-Mart, Dell, Amazon etc. small businesses wil have a tough time obtaining a decent ranking on search engines which is what most consumers check first. This is partially because big businesses have big websites which could have hundreds or thousands of incoming and outgoing links to their site.

Advertising can also pricey for a small business online. Some advertisers use a programs that are based around bidding per click and being a small business it might be difficult to engage in bidding wars with larger companies while trying to get more traffic to your site.

Accessibility, overhead and Advertising are just a few potential negatives small businesses might face due to globalization but I believe the pros far out number the cons.

Sources:

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

http://atlas.kennesaw.edu/~jjones10/E-commerce%20summary.htm

Negative Effects of Globalization on Small Businesses

In this technology built global economy we live in today globalization is affecting small businesses in both positive and negative ways. Positive effects include competing on international scale and you are able to do business with other countries. According to factoidz.com this is "not all rainbows and flowers". With all these changes small businesses must now lower prices to compete with the larger businesses. This can negatively affect their profit.

Outsourcing is a major negative impact on globalization today. many manufacturing and white collar jobs have been lost because of outsourcing. This is happening because workers are cheaper in places such as India and China. Accountants, programmers and other jobs have gone astray because of outsourcing. Small businesses have also been replaced by the e-businesses because it is cheaper for a company to run off a few customer service employees than many employees to keep a Brick-and-Mortar store open. Many examples of small businesses hurt by e-businesses is travel agencies, brokerages, and accountants. These have been replaced by online companies that can charge less because they have employees they can pay less and they don't have to have as many of the.

E-Business has both positive and negative effects like most everything else for buyers. The advantage or positive effect is that small businesses now have more buying power and can compete with the larger businesses. Because buying or trading with other countries is much easier than 40 years ago, small businesses can now buy cheaper products. They can compete internationally as well. The negative effect or disadvantage this has on small businesses is they have to lower prices to compete with larger companies, which means a lower profit margin.

Technology is growing faster than ever and for a small business to keep its head above water they have to grow as well. If the business keeps up with technology and tries to improve they will have no problem staying afloat.

Resources:

http://factoidz.com/the-effect-of-globalisation-on-small-business/

http://www.buzzle.com/articles/negative-effects-of-globalization.html

Brick-n-Mortar and Online Small Businesses Negatively Affected by Globalization

In this global economy and with the constant increase of information technologies that permits access to the Internet and the WWW, information has enormous value and it has great influence in how business transactions are handled. As a result, time and distance have less meaning for most business environment; buyers have more power than ever before and are enjoying greater access to markets. And at the same time, sellers are also finding remarkable advantages in doing e-business. Consequently, these facts have greatly impacted traditional businesses and mediators to the point that many have been replaced or eliminated. For example, Brick-and Mortar enterprises have been replaced by e-retailers (e-businesses). These are some good examples: travel agencies are been replaced by e-business’s travel agencies such as Expedia, Hotwire, Travel.yahoo.com, etc. For these reasons, many traditional business and retailers have combine brick-and-mortar business facilities with e-business operations called brick-and-click companies.

 

 Like for everything else, e-business has its advantages and disadvantages for both buyers and sellers. Advantages for sellers: More sales opportunities, decreased costs (overhead costs), 24/7 sales, access to narrow and global markets, increased speed, accuracy and information as well as data collection and tracking. Advantages for buyers: More product availability, customized buying options, 24/7 shopping, simple comparison shopping, access to global markets, quick delivery and information, access to description of products and services. Disadvantages for Sellers: growing competition from other e-businesses, constantly changing technologies, problems inherent in maintaining e-business systems, global market issues such as diverse languages and cultures, political environments, currency conversions, etc. Disadvantages for buyers: Differentiating online sellers, transaction security and privacy, dealing with possibly untruth-worthy sellers, inability to touch and feel products, concerns about vendor reliability, issues with state sales taxes, and difficulties with product returns.

Eventually, the trends rely upon technology driven advances in communications and organization. How an organization is structured will depend upon bottom line aspects, assisted by technology. Production sites can be in one physical area, while marketing, accounting, business development may be located in other corporate facilities. In yesterday's world, there were large office staffs, large brick and mortar locations and the higher costs associated with it.

Small business today can decrease cost and still operate in distant localities efficiently. If employees can work remotely, aided by technology, the entire management team can as well, and be in different places and still work as a team using technology and technology based equipment. The whole strategy is that in order to maintain profitability, it could only be accomplished by controlling costs and eliminating investment in the typical and conventional outwards trappings of a corporate infrastructure.

Careful use of technology infrastructure is very important. Using IT or communications technology intelligently can cut costs, and it can be done by eliminating expensive plant and equipment expenditures, as well as human costs. It is true that many in the media express grief over the fact that jobs are going overseas. However, it's only occurring because it's wiser to operate in that fashion in order to preserve the business as a whole.

As the e-business industries around the world progresses by the day, the small business sectors will be forced to use technology wisely, struggle for profitability and pursue many of the strategies in play with the top and largest companies (the Fortune 1000 companies). The future is hardly bleak, except for those whose jobs are outsourced. The United Sates will maintain this sector in whatever form the technology of the day leads it.

Regardless of all the changes in advanced technologies, I believe that many small businesses will survive the trend. There are many businesses that we could never go without. For instance, grocery stores and pharmacies are indispensable in our daily lives. Barber shops, beauty salons, car & body repair shops, and other similar businesses must have a physical site. However, they must follow along with the advancement of information technologies in order to compete. On the other hand, brick-and mortar industries such as travel agencies have been greatly affected by e-businesses. I remember the old way when we had to go to a travel agency physical site to make our travel arrangements, but now we can get some great deals by comparing online sites. I can go to http://travel.yahoo.com/ and get the best deals for my travel plans and that includes an airplane ticket, hotel, car rental, etc.


References:
http://smallhomebusiness.suite101.com/article.cfm/technology-solving-todays-management-issues#ixzz0y1GMhhIB - Globalization Pushes Technology as Technology Pushes Globalization

http://www.smbceo.com/2009/09/07/tips-for-managing-remote-worker-programs/ - Tips for Managing Remote Worker Programs

Napier, H. Albert. "E-Business and the Global Economy." Creating a Winning E-Business. Boston: Thomson Course Technology, 2006. 8-14,17. Print.

The Threats of Globalization

Small businesses have been seeing the new trends on globalization and how they shall adapt in order to surpass the negative effects of this and their way of doing business.

With more accessibility to the Internet consumers often seek the best price available for a product that they might be looking to purchase. Since outsourcing has increased over the last few years, many small businesses are obliged to compete against bigger retailers that purchased their goods over seas. For example Walmart, that bases most of its manufacturing in China, is making American manufacturers go out of business as they can’t compete against the financial capabilities of bringing a whole lot more products for very low cost.

Moreover, the effects of outsourcing leave many Americans out of jobs as companies frequently look to lower their labor costs in order to increase their profits.

Small “Mom & Pops” neighborhood’s retailers are out of business and they’re slowly disappearing as a result of the globalization, they must adjust their business strategy to the economic changes and adapt to the new market demands; but an important point to mention is that consumer behavior needs to change as well, we “vote with our wallets” and we are the ones responsible of Walmart’s phenomenal growth. (www.probe.org)

It’s all connected in a chain of events: Asian countries like China or Taiwan, offer low-cost labor but at one cost: QUALITY of the goods is often times sacrificed by the means of time production. The focus is to make as much as they can so it can be shipped quickly, by doing so, the quality control isn’t always the most important thing in mind.

Small to Medium size businesses face many challenges as a result of the global marketplace; keeping up with the technology and the way of doing business can negatively affect these companies if they don’t embrace and implement the necessary changes to keep their business and customers.

ARTICLE SOURCES:

http://ezinearticles.com/?Surviving-in-a-Globalized-Economy---Proven-Techniques-to-Level-the-Playing-Field&id=4229576

http://www.probe.org/site/c.fdKEIMNsEoG/b.4218005/k.783A/Globalization_and_the_WalMart_Effect.htm

http://www.going-global.com/articles/globalization_of-the-small_enterprise.htm