Barriers for Globalization

Entering into an unfamiliar country involves risks. When companies relocate and become foreigners in other countries, they are different from the domestic competitors. The way business is conducted in a foreign country is completely different. The social and culture differences cause misunderstanding and lead to serious problems. Foreign countries might have different languages, attitudes, culture, and behaviors. Communication barriers and dealing with strangers will decrease the business' performance.

There are different entry barriers such as legal framework issues, political issues, and import restrictions. The foreign country's government might not want business from others country entering into their country in order to protect their own domestic business. The tariff imposed might be too high and will decrease the business profitability which will also become a disadvantage for a business. For example, China government imposes a very high tariff of 200% on imported cars to protect the domestic car industry.

More over, when domestic business enters a new foreign country, they don't have well known knowledge and experience about the external environment of the new market. They might get a wrong supplier that supplied raw material at higher price and the bargaining power of suppliers will become higher. When suppliers have more bargaining power, business cannot reduce cost and might have decrease in profitability. Besides than experiences, companies that trade at foreign market might lack of knowledge about the customer behaviors and preferences that will cause them to lose their customer and performs badly in the foreign market. Each country has their preferences or cultures which companies must have knowledge on it. If companies do not have clear understanding and knowledge about the preferences of the countries they are trading in and are unable to offer the products or services that particular target market expected, serious failure might occur.

If companies cannot adapt to the new environment and become familiar with it, it will be really hard for a business to survive. Without enough knowledge and experience in a foreign country, the efficiency and effectiveness of a business will be affected badly.