Five years back, Joe Zawacki noted the Asian points of production on the gifts being unwrapped that Christmas. Zawacki lived near Tacoma, a West Coast port deep in the land of Internet startups. He considered the circumstance and decided: why not me?

With a partner, Zawacki launched a garage-based gift item importing business on eBay; then relocated to a storage unit. Drawing on resources available through the Port of Tacoma and World Trade Center/Tacoma for advice, Zawacki traveled to China. Today, he is in charge of a million-dollar import business.

This turn of events was surprising to Zawacki. Becoming an importer, he said, “wasn’t even on the radar. I never would have believed that I would hop on a plane and go to China.”

Surprising as it may have been to Zawacki, his story is a common one in this age of a globalized economy: ‘Have entrepreneurship, will travel.’

Indeed, in The Globalization of the Small Enterprise, Jeffrey Graham argues that while major corporations carried the freight early in economic globalization, the future belongs to the small: “the globalization of the small enterprise will most likely be the most important development in international business as we begin the new millennium.”

With globalization the strongest tide in the world economy, one tends to hear reports of those who, like Tacoma’s Zawacki, have chosen to go with the flow. But conversations around different sectors reveal a different, somewhat submerged truth-the number of firms that have their eyes fixed not, say, on the Pacific Rim, but on familiar markets close to home. Rather than go with the flow, these smaller firms see globalization as a ‘big boy’ game being played by the Fortune 500, but one in which they are themselves safe to remain on the sidelines, doing things more or less the way they always have.

Rather than consider themselves ‘global’ players, they define themselves as entirely domestic. But are they right? Is ‘opting out’ of the global market an option anymore for anyone, regardless of size or sector?

What has changed? Technology breakthroughs undergird today’s global market and have made it ubiquitous. At one time, a company that wished to engage in international trade needed a trained teletype operator on its staff; today, the Internet and email make international communication all but transparent. Second, the language barrier has been broken-UPC coding has become, in effect, the international language of business. Finally, container shipping-particularly when tied to intermodal rail and trucking-has brought huge reductions in the cost of moving things from one place to another.

With the elimination of these barriers to entry, virtually any company can afford the ante required to be an international player.

Globalization, several point out, affects the smaller and medium-sized enterprises whether they know it or not.

Jeffrey Heller, Norfolk Southern railroad’s assistant vice president for marketing and international, points to three trends in the flow of trade that are having huge impacts-narrowly, on local and regional trucking firms; broadly, on everybody else.

First, freight is entering differently. For years, Heller says, 70 percent of the freight reaching Norfolk Southern did so through a West Coast port. During the first quarter of 2008-and for the first time-more freight entered the system through the East Coast, much of it container traffic from Asia moving through the Panama Canal.

Second, freight is being moved differently. At one time, freight moving inland from East Coast ports was primarily carried by short-haul trucking firms. Now, with rising diesel costs, railroads like Norfolk Southern are moving it closer to its final destination. In consequence, he says, large trucking firms are increasingly looking to intermodal rather than short-haul movement.

Third, the flow of freight has reversed direction. With the weaker U.S. dollar, importing is down; exports are up. Indeed, even though the nation’s bill for imported oil has risen greatly, the overall U.S. trade deficit has remained little changed. In consequence, Heller says, there is more moving out; less moving in-a fact that is re-orienting the patterns of shipping.

All these, he notes, have a huge impact on the trucking and drayage industries. The big companies, Heller says, “are adjusting their models for the increase in fuel costs.” Regional companies, however, “are challenged, because of fuel costs; because the highways aren’t getting any bigger and they’re congested; plus emissions issues. All these support rail intermodal. They are structural issues that make it very difficult for them to evolve.” But, he notes, these matters-rooted in the new international economy-affect everyone with a product to get to market or with supplies to obtain.

Some observers are frankly startled that there are companies, which still don’t see themselves participating in the global economy. Theodore Prince, senior vice president for marketing and sales at the Austin-based Optimization Alternatives, asks rhetorically, “What do they make? Buggy whips?”

The fact is, Prince adds, “if you’re a small manufacturer, then your own supply chain may well not be global. But, your tier two and tier three suppliers probably are, as you go downstream.” He cites, as an example, a small company in Tennessee: If it supplies to Toyota in Georgetown, Tennessee, then it knows it is part of the world system. But it is still part of that system if it supplies to that supplier, or that supplier’s supplier. The fact, he adds, “is that the demand is created by foreign direct investment.”

Many people, he notes, do not equate supply chain and foreign direct investment, but “both are representatives of globalization.” There is, in the world, one big pool of potential investment capital. “If you borrow money, that money probably came from globalization somewhere.” Overall, Prince says, people who regard themselves as outside the globalized economy are “looking very provincially at their supply chain and they are not looking at the larger supply chain.”

Heller presses this point. Hypothetically, he says, imagine a firm with all its suppliers and customers within 200 miles. How is globalization affecting them? In the business world, he notes, the small fish gets eaten by the bigger fish, and up the line. “So you’ve got this small fish that has learned to rely on products and services from a network that’s within a 200 miles radius. But that network isn’t freestanding; it’s tied to all the larger and global networks. Whether that business is aware of that supply chain or not, it exists.”

Perhaps the key matter is executive mindset. At CEVA Logistics, Chris Monica, executive vice president for sales and marketing, has met with dozens of small- and medium-sized U.S.-based firms hoping to improve their supply chain arrangements. Monica says, “I have a sense for their level of sophistication. Some smaller owners have an entrepreneurial sense about them; the reason they embark on this business opportunity is because of globalization and what they think they can leverage. Then there are some who have been established longer and they are most parochial in their line of thinking.”

Monica makes his point with a football analogy. He once asked his brother, who played college ball, how big the ideal college tight end would be. Monica says he expected an answer of something like 6-foot-4 and 230 pounds. Instead, his brother said, 50 feet tall and 2,500 pounds. The point, he says, is that many remain too inclined to think in terms of their previous experience.

Monica adds, “A smaller enterprise is right to think that globalization is driving the big players. But they’re wrong if they don’t think that opportunities to capitalize on globalization to improve their business-improve their speed to market; improve their cost base; improve their supply chain-exist for smaller customers.”

If globalization is defined narrowly, one expert observes, “Then companies that don’t see an international competitor may feel they are outside that world. But if you define globalization more broadly-which most economists do-it’s not just who you compete with in your immediate space, but who may be competing against you in your space without your being aware of it.”

Others cite two fundamental shifts.

First, globalization is creating a world labor market, one to which smaller enterprises are increasingly exposed. Rob Quartel, founder and chairman of the Virginia-based FreightDesk Technologies, which markets trade-related software, says, “We would not exist without the ability to obtain local labor. Call it outsourcing if you will. But, the fact is we would not be in business if we were not able to buy IT talents from an Indian offshore source. This meant we were able to get a company off the ground with just a handful of people.”

Second, geography matters less. At one time, a company would develop its products and mature in a local market before looking further afield. But in an electronic world, that no longer holds. Quartel comments: “It’s a mindset; I think it’s because they haven’t thought about it. Think of a phenomenon like eBay, where you have all these businesspeople and entrepreneurs. If people thought about it, they would likely find that many of their customers and competitors are global, but they may not actively think about it.”

Still, those who to date have been reluctant to dip their toes into international waters may be finding some justification in their hesitation. The soaring price of fuel and the dropping U.S. dollar have combined to bring about a near-doubling of the cost [in U.S. dollars] of moving a container from Asia to a North American port. Noting this, Paul Dittmann-a University of Tennessee professor who is a supply chain advisor to numerous U.S.-based enterprises-suggests that U.S. firms may respond by reining in their supply chain commitments. He cites one toy manufacturer with whom he works, a $700 million enterprise that aggressively outsourced its production to China. Facing burgeoning long distance costs, that company is now thinking: Might Mexico be a better option?

The shift in fuel costs and the fall in the U.S. dollar have been quite sudden by the standards of trends in trade: “I’m not sure that the mindsets and the corporate strategies change that rapidly.” Dittmann anticipates that when the world of trade accepts these changes as givens, some shift will occur in the direction of keeping remaining production in or closer to the U.S. Still, he adds, “Having said that, I do think there will be something on the table for all companies to continue to look offshore.”

Companies that have not yet gone global need to address some basic questions:

•            Would cooperation with prospective international partners add value to a company’s products?

•            Would it add-or protect-profitability?

•            What are the risks of losing current market share to an offshore competitor, or through the Internet?

Paul Dittmann notes that when thinking about globalization, most firms initially think in terms of ‘offense’-that is, should they go overseas to sell their wares or source on more favorable terms? At the same time, however, such firms need to think ‘defense’-about an offshore competitor coming in and taking their business away.

There are, Dittmann reports, “example after example of this. If anything, they might want to consider globalization to protect themselves. If you’re the ‘general,’ you have to looking to opening another front on the other guy’s home turf, rather than just fighting on your own. Otherwise, you’re providing your opposition with sanctuaries elsewhere in the world.”

And, far from being a forbidding world, the globalized economy might well be an easier one for many firms. Quartel comments: “I think that small companies can find it easier to compete in a foreign than in a domestic market. In existing markets, you’re better known, it can be more difficult to change the way in which a given firm is perceived. In foreign markets, no one has established that sway.”

Acquistions are often transacted for the sake of entering new geographical markets. At Lenovo, the China-based enterprise that acquired IBM’s PC business in 2000, Reid Thompson, head of Global Provider Management for Lenovo US, says, “We look to use smaller firms in niche markets; we look at a provider’s capability regardless of their size.”

But can smaller U.S. companies handle the logistics of off-shoring? At CEVA Logistics, Chris Monica offers counsel. “For even the smallest company that leverages what exists outside of North America, there are experts like me who will take that information and at no commitment or investment on the part of the customer, offer options.”

He added some advice on transportation services to the new world trader. “If you’re a small- to medium-sized business, you’ve got choices. Parcel choices; common carrier choices; there is fierce competition all over the world. The advice I would give a small business person is: don’t feel pressured to make a decision quickly. Whatever an individual company tells you, sleep on it.”

Author Jeffrey Graham, quoted above, concurs on the importance of seeking expert advice from seasoned service providers. For more small- and medium-sized companies, the changes wrought by globalization “mean that their business environment has become more complex. In too many companies, however, it is almost impossible to assess the impact of these changes because too many business executives are still in denial about these changes and have not rethought their business strategy accordingly.”

The key, Graham emphasizes, is for individual company leadership to realize that going global means more than finding customers or suppliers in new lands, it also requires opening its capacity to learn and taking risks. Before moving outside, that is, look inside.

And, carry through. Dagmar Recklies, managing director of the Frankfurt-based Recklies Management Project, says managers need the vision and commitment “to be convinced that this is a strategically important step for the businesses long-term development. Only then, they will be able to overcome the numerous risks and problems, which accompany internationalization of a business. Without real commitment of the leadership team, the organization will probably cancel their international activities as soon as the first problems arise-long before the benefits will show up.”

And, there is one lesson that goes back to the experience of Tacoma’s Zawacki. Presents aren’t the only thing you can find under the tree; if your behavior is up to requirements, you can also find lumps of coal. wt