Globalization can be defined as the process by which a regional economy, society, culture or business becomes integrated through a global network of business ideas through communication and trade (Waters, 2001, p. 45). It is the propensity of a business, technology, or philosophy to spread beyond regional boundaries. Through globalization, a business can create value by leveraging its resources and capabilities across borders through the coordination of cross-border manufacturing as well as marketing strategies (Bchel & Probst, 1998, p. 156).
Globalization requires a firm to rethink its strategic policies, global architecture, major competitions, and its collective product and service mixture. This can result in considerable changes in the way the firm does business, with who, why and how. Therefore, there are some factors that every firm needs to consider when going global. These are;Total Landed Cost. Going global is costly. Apart from unit cost, the total cost equation includes transportation costs, customs and duties, brokerage costs, banking fees, financing, and insurance among others (Scholte, 2000, p. 220). Furthermore, there could be additional, unforeseen costs. For instance, any delays a firm's supply chain can result in additional freight charges so as to meet the target delivery date. Although such incidents may not occur, it is advisable to plan for the worst, and expect the best. Product/Service Quality. The quality of a firm's product(s) or service(s) has implications besides the unit cost. It is important to define quality so that the supplier as well as the buyer understand and are in accord. Any issues concerning the quality of a product are more difficult to address with vendors through diverse cultures, geographies, and time zones, than with local suppliers. Poor quality of products and/or services negatively affects many aspects including the rate of returns by unsatisfied customers (Johansson, 2008, p. 97). Products that are defective may have to be sold at a lower price or written off as a loss, hence affecting the returns. An efficient supply chain must have quality products throughout the chain. Logistics Capability. It is pointless to have great products with outstanding quality if a firm is not able to get the products to market. It is crucial to consider the type of transportation that is available, both locally and internationally. When going global, a firm needs to assess whether there is a dependable transportation infrastructure in the country (Walvoord, 1982, p. 5-12). For instance, is there a reliable transportation system linking the sourcing/manufacturing origin point and the major port? It is also important to consider seasonal fluctuations and weather. Flexibility with service providers is crucial to promptly implement alternative plans in case primary plans or transportation lanes become unavailable. Location. This is an important factor to consider. Close proximity of a country has advantages such as doing business in a similar, or close, time zone. Additionally, common cultural diversities and similarity, including language, may be known, as many of the populations may have their origins in the neighboring countries (Campbell, Stonehouse, & Houston, 2002, p. 184). Regional groupings such as NAFTA and COMESA have done a lot to minimize restrictions on trade between countries within certain regions. Governmental regulations. These can either enhance or detract the ease of doing business within a given country. For instance, until January 2005, China had quota restrictions to importing textile products. After the restriction was removed, China now tends toward sourcing up to 50% of the global market share of textile products. It is important to careful evaluate all trade incentives or restrictions before any sourcing decisions are made. It is also necessary to be conversant with documentation requirements for customs clearance. Prospective importers can obtain such`information from government sponsored publications or consulting firms. Finances. Before going global, any firm should evaluat% the financial aspect over and above the actual cost of goods and services. The management should discuss the terms that can be negotiated, the risks with a particular manufacturer and whether additional insurance is required to source from a given supplier as compared to another. Other issues to consider include the cash flow effect of the increased transport time that results in tied up inventory.