As shipping processes improve around the world and the instant communication of the internet, a free range globalization strategy makes sense for a growing number of businesses. The ability to freely find outsourcing opportunities that can provide goods or perform tasks at lower costs can immediately improve a company’s bottom line. As Eastern Europe and India continue to grow economically, these opportunities are only going to keep increasing. Is this something your business should be considering? Here are the pros and cons of a free range globalization strategy.
Here are the Pros of a Free Range Globalization Strategy
1. It provides an opportunity to tap into a needed skill set that may not be available.
The ability to freely roam around the globe to pick up needed talent can help a business fill employment gaps with expertise instead of “warm bodies.” Certain areas of the world have skills or resources that may be needed, but not available locally. By implementing this strategy, it becomes easier to access those needs to stay competitive.
2. It forces a brand to adopt an efficient supply chain.
Free range globalization requires a supply chain that can involve a number of entities from all over the globe. In order for goods or services to be provided to each market as needed, an efficient supply chain is necessary to keep costs at an appropriate price point. This effort also helps suppliers and distributors maintain competitive pricing because of competition for the privilege of being in the supply chain.
3. Manufacturing costs will generally go down.
Some free range globalization strategies run counter to the lower cost benefits, but most brands will still look to reduce labor costs. Certain areas of the world are able to provide viable wages at a lower labor cost, allowing for cheaper goods to be produced for the rest of the world to consume. This provides economic benefits on each end of the supply chain.
4. It naturally limits the competition.
When a business is able to operate under this strategy, then it has more freedom of movement to counter the value propositions that are offered by the competition. A brand can become flexible and adaptive, solving the problems of local populations before the competition ever recognizes that there is the potential for profit. More size and movement means there may be niche competitors here and there, but nothing that is direct or dangerous.
Here Are the Cons of a Free Range Globalization Strategy
1. Communication efforts are not always efficient.
There are two components of this strategy which must be immediately addressed: language and time. When there is a severe difference in time zones, it becomes difficult for an organization to communicate with itself from throughout the world. If local resources are tapped, then there may be language barriers in place as well. If these issues are not addressed in some way, this strategy will fail.
2. There will always be financial and political risks.
Companies that incorporate a free range globalization strategy must budget for financial risks that each market may have. There may also be political risks that can interrupt the free cash flow that the organization may need. Different governments have different expectations of what “contribution” means, so a brand used to a government based on capitalism may struggle to adapt to a socialistic political atmosphere.
3. Supervision can sometimes be difficult.
Free range globalization requires a certain level of independence and confidence in each location’s administration for it to be successful. This is because direct supervision can be virtually impossible to accomplish, especially with a central structure. If the wrong people are in place, they can cause a lot of hidden financial damage to an organization before it is ever discovered.
4. Quality control is also difficult to achieve.
With multiple suppliers coming from every curve of the globe, quality control often involves remote supervision and inspection at best. Not every supplier may be willing to provide a business opportunity either because of the free range philosophy of always looking for a better deal. Suppliers and distributors also need to make money, so they may cut corners if they can get away with it and catching this can be difficult with this strategy.
The pros and cons of a free range globalization strategy show that is can be a beneficial process to adopt if the risks are carefully balanced. Going global is easier than ever before. With the right strategy in place, a business of any size has the opportunity to find the success that they envision.