If you are not growing, you are dying
Budapest Business Journal, 27 March 2015 – The following article was written by Roland Keller, Business Optimisation Expert
I recently needed to buy a new food cooler for a camping trip I was about to go on. As a big supporter to local industry, I happily went to the local shop to purchase a cooler. What I found was something that shocked me.
The price of the cooler was well above what I anticipated. I decided to drive the 300 meters to the big chain store and check their pricing before I purchased the cooler at the local “Mom & Pop” shop. What I found was the same exact cooler was third the price. My dilemma was do I support local business at a price of 2/3 more, or do I save the resources for my family? Well, I bought the cheaper cooler.
Globalization is the norm these days. We don’t think about it much in our daily lives but every now and then a headline related to news will paint an ugly picture of some company that is operating as an “offshore” company. But really what is an offshore company? It’s not what we think. We envision an “offshore” company being one that is hiding billions of dollars in accounts so that they do not have to pay taxes on that. But this is the exception and far not the rule. “Offshore” is also a typical byproduct of globalization meaning that it’s simply adjusting to a new environment to remain competitive and find the needed resources to achieve goals and objectives.
Business is about making a profit. But this also does not happen in a vacuum. Companies simply do not become rogue and hide billions offshore, but rather governments make deals with them to have tax savings to bring jobs locally. For example in Washington State Boeing and Microsoft are capable of making billions per year. The agreement between the state government and the corporation is about job creation, local investment, stability, and reputation to draw other companies to the region. It is not a “drug deal” behind the scene but rather a “business decision” by the state. Companies must do the same thing to remain competitive, make decisions every day.
We as citizens, our elected officials, and policies they support must think bigger than simply complaining about lost revenue in taxes from companies who move abroad to become more competitive. Taxes do not solve budget shortfalls. Investment and jobs do. And small business no matter what country you live in hires the most people ever. Case in point in Eduardo Da Costas book Global E-Commerce Strategies for Small Businesses he quotes in Europe alone small business “employ 66 percent of the workforce” (2001). This 66 percent equals millions of employees that are our neighbors, friends, and family. And the money this workforce makes from a local international subsidiary (think small business) turns over numerous times in a community creating value that also increases tax revenue for the government.
Is it fair to criticize a company who grows and to remain competitive decides to move to a different area? There is a saying in business “If you’re not growing, your dying.” Globalization has changed the landscape for business and these rings true. Decisions must be made in minutes, hours, and days. Not weeks or months. Decision-making is about observing the market, orientating to a better position of dominance, making the decision, and acting upon that decision. Survival goes to the one who can cycle through the decision-making process fastest. And that loop is increasing ever faster and faster. Companies must make informed decision as fast as possible, embrace risk, and be visionary.
Globalization is a great and powerful phenomenon. It has allowed small startup companies to reach globally showing success almost everywhere. It has though also proved that the local all-inclusive approach to communities and business is a thing of the past. We chose to buy items made cheaper than more expensive to stretch our hard earned dollars further. This does affect local communities of the small “Mom & Pop” shops, but also allows us to have more safety and security in our everyday lives. And in the hierarch chart of priorities we need this first and foremost. It’s not to say we should avoid local small business at all costs. To the contrary it allows them a further reach. One example is a television series based off a family business in upstate New York. The series is based on a once unknown motorcycle manufacture that is now known worldwide which has allowed the local small company to expand, higher numerous employees, increase tourism, and tax revenue for a small town that was once a place bypassed by any who knew about it.
Globalization has created great wealth around the world. That wealth trickles down to our local communities that benefit from it. It is easy to attack companies in the news and political grandstanding, yet the benefits of operating “offshore” legally are greater than the few companies that operate illegally. Though it is easy to label that tax optimization as a negative thing, yet we all do it yearly when we have to submit our tax returns. We search for ways to write off costs to optimize our individual taxes.
Also let’s look at this a different way. Switzerland is considered a big “offshore” state in which companies go there for tax optimization. Though Switzerland offers reasonable corporate tax rates at 17.92% it is really not much more different than say the Netherlands at 25%. Yes when we are talking about billions there is a difference but it’s just simply a unique selling point of the given country to attract business.
But also there is another part of these equation- resources.
Where is the hub of my industry? Where can I start a new office for my company to have my “finger on the pulse” of the industry, where I can cut my decision making cyclic time? Also, where can I find people with the skills, knowledge, and abilities that meet my company’s goals? It may not be locally but in one of the major hubs of the world. New York, London, Zurich, Munich, etc., are all places that companies that wish to grow must move to so to be competitive. To strengthen their market position, while still be rooted in their local beliefs, customs, and traditions. This is what makes globalization so strong. The transfer of knowledge and experience in new ways and places. It also provides new, rewarding opportunities for funding; funding that transfers to working capital and local investments. To grow companies must adapt, and adaptation is about moving forward. And with moving forward money is what allows companies to be innovative. Switzerland for example not only provides companies with access to global experts but also investment opportunities, predictable regulatory environment that locally are not necessarily available. This transfer to you and me through increased jobs, local taxes, and investment.
Don’t hate companies because they are trying to grow and become better. Millions of us do it every day by going to a gym, watching our diet and changing our life styles. We embrace globalization when a foreign company invests locally bringing jobs. Why should we not support our local companies who grow and expand? We should support them like we support our Olympic athletes- as a nation proud of what we have contributed to the world.
Source: Budapest Business Journal