While many people think we live in a globalized world, their actions state the opposite
Globalization is not global, really. “Globaloney”
Globaloney
People severely misjudge [overstate] the globalization numbers (social connection, GDP % export, immigration, phone calls, etc.)
Peer pressure to become global from day one à many businesses are better off being #1 in their market (country, continent) than being a global nobody. But such companies never make it to the press. (example: Aviasales)
Techno-trances: exaggerated conceptions that technology is going to overpower in the very immediate term all cultural, political and economic barriers.
Why global?
Economies of scale and returns to scale the larger the business becomes.
Many successful tech companies are intangible (asset-light), so it’s logical to scale globally
Even super-huge domestic businesses (Amazon, Uber, Alibaba) seem to be global as they are well known outside their key market.
Global world != same apps everywhere. Different market leaders everywhere
However, tech adoption is overrated: Uber, etc. are not as ubiquitous as it looks as there are company cars and contracted limo services.
Also, it’s believed that technology can erase borders, but this hasn’t been proven.
Thoughts
Consumer markets are driving the growth of tech companies
o Don’t use yourself as an example if you’re not the target of a service
o Consumption varies between countries, and there’s no one-size-fits-all
A tech business is rarely more global than the users it is able to attract © Seth Godin
o There’s nothing wrong about a domestic market where all your users are
A framework to reflect on the fragmented world
o Returns: more competition in a regulated space à smaller returns
o Divergence: local incumbents can beat multinationals locally
o Dynamics: the rise of the local players attracts funding for the market [MK: I don’t exactly believe this if one looks at Russia]
Software eating the world: startups are being launched in areas where it’s hard to generate increasing returns to scale.
o The more progress with the startups à the lower the returns
o Diversification is essential, and EU startups with lower returns may be a safe haven for investors (not 100% of the portfolio, of course)
Divergence
o Some founders prefer a global type company (media, advertising, music) as there’s little regulation (which would make scaling harder) and few assets;
o Some founders prefer a bottom-up approach with their locally challenged businesses and penetrate local markets based on their vast expertise.
Growth via economies of scope [a broader value proposition]