The Dual Impact of Globalization on Local Businesses In This Era

Can you believe it? There are approximately 33.3 million small businesses in the U.S., making up 99.9% of all U.S. businesses. That’s not just a number – it’s the backbone of our economy.

Globalization has completely transformed how local businesses operate. Before, a small business mainly competed with other shops in town. You made products locally, bought supplies locally, and sold to local customers. Simple. Now, even the smallest business owner has to think globally. You’re competing with products from China, services from India, and digital offerings from anywhere.

Take a small furniture maker in North Carolina. Twenty years ago, they competed with other local craftspeople and maybe some bigger American manufacturers. Now they’re up against mass-produced imports that cost a fraction to make. But it’s not all bad – that same furniture maker can now sell their pieces online to customers in California, Canada, or even Europe without needing a physical store there.

Employment Impact of Small Businesses

Small businesses employ about 61.6 million people, which is 45.9% of the U.S. workforce. This massive employment share shows why we need to understand how globalization affects these businesses – when they hurt, nearly half the country’s workers feel it. The shift toward global supply chains has both created opportunities for small businesses to specialize in niche areas and threatened others who can’t compete with international labor costs.

• Remote Work Surge: By January 2024, 29% of U.S. workdays were remote, up from 7% in 2019, enabled by globalization and technology (WFH Research). Local businesses now hire talent globally, reducing costs but also facing competition for skilled workers.
• Low-Wage Competition: In developing nations like Bangladesh, garment workers earn less than $100/month, compared to a U.S. worker’s daily wage of ~$120, pressuring local businesses in high-wage regions to outsource (National Geographic, 2023).
• Job Creation: Small businesses in the U.S. generated 12.9 million new jobs over the past 25 years, about two-thirds of total job growth, showing resilience amid globalization (Small Business Administration, 2023).

Trade Imbalance and Local Business Challenges

Trade Deficit: The U.S. trade deficit was approximately $1 trillion in 2022, reflecting the impact of globalization on trade balances.

This massive trade deficit directly connects to our main topic – it’s concrete proof of how globalization has shifted the business landscape. When we import more than we export by such a huge margin, it means foreign products are dominating many markets where local businesses once thrived. This creates intense price competition that many small businesses struggle to match, especially in manufacturing. At the same time, it’s created opportunities for small businesses that can find their place in global supply chains or that provide services that can’t be outsourced.

Increased Competition

Globalization has cranked up the competition for local businesses to levels we’ve never seen before. It’s not just about competing with the shop across town anymore – you’re up against players from across the planet. This intensified competition hits different industries in different ways, but nobody’s immune to it.

One of the most prominent consequences of globalization is the increase in competition that local businesses experience from multinational corporations. Such global behemoths frequently take advantage of economies of scale that make it possible to offer lower prices and a broader range of products than smaller local companies can match. Take e-commerce sites, for instance, where Amazon has stolen the limelight from local and chain stores, which now either have to boost their online presence or cater to a particular niche. This will enable local businesses to become more competitive and drug out of the market. 

Take the textile industry in small-town America. A family-owned textile mill that’s been operating for generations now competes directly with manufacturers from Bangladesh, Vietnam, and China. Their labor costs are a fraction of what U.S. workers earn. Even with shipping factored in, these overseas competitors can often deliver finished products at prices below what the American mill pays just for raw materials. This has forced many local textile businesses to either close shop or dramatically reinvent themselves.

The owner of that family mill might’ve once worried about competition from the next county. Now they’re checking currency exchange rates and international trade policies just to understand their competitive landscape. They’ve had to invest in automation they couldn’t previously afford, specialize in high-end fabrics that overseas competitors can’t match, or pivot to custom, small-batch production where their proximity to customers becomes an advantage.

This pattern repeats across countless industries – local bookstores competing with Amazon, independent hardware stores against Home Depot’s global supply chain, family restaurants against international chains. The competition isn’t just about price either – it’s about access to global talent, technology, and capital. A small software company in Missouri isn’t just competing with other local developers but with teams from Eastern Europe and India who can often deliver similar work at lower costs.

• Cost Reduction: Global sourcing has reduced material costs for small businesses by 10-20% in industries like manufacturing and retail, though it increases vulnerability to disruptions (McKinsey Global Institute, 2023).
• Disruption Risks: The 2021-2022 supply chain crisis increased shipping costs by 400% (e.g., from $2,000 to $10,000 per container), hitting small businesses harder than large firms with diversified suppliers (World Economic Forum, 2024).
• Adoption of Technology: 60% of small businesses globally adopted cloud computing or automation by 2023 to compete in globalized supply chains (ResearchGate, 2024 study).

Opportunities for Expansion

• Direct access to international customers without needing physical presence – a craft brewery in Colorado can now ship specialty beers to beer enthusiasts in Japan, something unimaginable 20 years ago.
• Cheaper sourcing of materials and components – a furniture maker can now buy specialized hardware from Germany at prices that used to only be available to the biggest manufacturers, leveling the playing field.
• Access to global talent pools – small design firms can now hire specialized freelancers from around the world for specific projects, rather than being limited to local talent or expensive full-time hires.
• Niche market potential – businesses can now find enough customers for super-specialized products by tapping into global demand rather than just local interest, making previously unviable business models profitable.
• Digital marketplace visibility – even tiny retailers can list products on global platforms like Etsy or eBay, gaining exposure that previously required massive advertising budgets to achieve.
• Knowledge and innovation transfer – small businesses can now learn best practices and innovations from across the globe, not just from their local business community.

One example of how globalization can help local companies is Lottoland. The Gibraltar-based company has been able to spread from its existing national base thanks to its strategic global marketing. Nowadays, it has several websites that offer online bingo along with other games of chance. This case shows how globalization can become an opportunity for a local business to expand its market and increase revenue while systematically dealing with various regulatory issues. 

Do you know:: The trade volume of world trade in goods reached 10% above pre-pandemic levels by mid-2022

Complications of Globalization

• Cultural and language barriers that create misunderstandings – a small electronics company trying to negotiate with Chinese suppliers finds itself lost in translation, costing time and money that larger competitors can more easily absorb.
• Complex international shipping logistics – a family-owned cosmetics business faces a maze of customs regulations, carrier restrictions, and shipping costs that vary wildly by destination, creating headaches their local-only competitors don’t have.
• Currency fluctuation risks – a small importer of Italian olive oil sees profits vanish overnight when the Euro strengthens against the dollar, without having the financial instruments larger companies use to hedge against these changes.
• Intellectual property vulnerabilities – a boutique jewelry designer discovers unauthorized copies of their designs being mass-produced overseas with no practical legal recourse, unlike in domestic markets where protection is more straightforward.
• Ethical sourcing dilemmas – a small clothing brand struggles to verify factory conditions for their overseas production, lacking the resources to conduct proper inspections that larger brands can afford.
• Regulatory compliance across multiple jurisdictions – a small software company must somehow navigate GDPR in Europe, CCPA in California, and various other data protection laws without the legal team that their multinational competitors maintain.

Conclusion

Globalization is both a threat and an opportunity for local businesses. Although it increases competition from foreign firms, it also provides never-before-seen growth and development prospects. As the landscape shifts, local businesses have to be nimble and ready to embrace change. This allows them to pursue niches in the broader marketplace while adding diversity to the local economy by utilizing their distinctive strengths and taking advantage of global trends.