What Are the Pros and Cons of Globalization?

Have you ever wondered about the advantages and disadvantages of globalization for your business? Explore the impact of economic growth, international trade, and increased globalization to best expand your business.

What Are the Pros and Cons of Globalization?
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Globalization provides incredible rewards for businesses today. The benefits of globalization for businesses include expanded customer bases, more revenue streams, and a diverse workforce.

But globalization also poses some daunting challenges like environmental degradation, legal compliance issues, and worker exploitation. The important thing to remember, though, is that the challenges of globalization can be overcome. 

When considering whether globalization and expansion are right for your business, you’ll need to ask: what are the benefits of globalization for people and businesses everywhere, how does globalization affect your life as a business specifically, and how can you overcome the challenges of globalization?

In this article, we provide some guidelines for how to make the most of globalization and build an effective strategy for your business.

What Is Globalization?

Globalization is a unique and diverse process that involves the interaction and interconnection of people, governments, and companies around the world. Businesses expand internationally with the help of trade agreements created by partnering governments while local brands become internationally recognized, and people move across continents to build or join new companies.

Globalization allows people, goods, services, ideas, languages, information, and commodities to flow across national borders constantly making the world increasingly smaller and more connected.

What Are The Benefits of Globalization for Multinational Corporations?

Globalization can be extremely rewarding for growing businesses. But it’s also hugely beneficial for the general development of the global economy. By tapping into the global market and expanding your customer base, you bring people and products closer together. Discover some of the immediate benefits of modern globalization for your organization.

Access to New Markets

One of the major advantages of globalization is that it provides access to new or different markets for international business. With bi- and multilateral trade agreements, multinational corporations can operate in multiple countries and jurisdictions. This means reaching more customers, gaining more and better market insights, and building your brand on a global scale.

Product Development and New Revenue Streams

By accessing the global market, you develop your products and services in new ways. When branching out to a different country, businesses are often required to adapt their offerings to meet local demand. While this may seem like more work, it is a great opportunity for innovation. By building successful products and services, and a solid customer base, you can increase your revenue streams beyond national or state borders.


Sharing Knowledge, Technology, and Culture

Another one of the brilliant effects of globalization is that sharing has become the norm. Knowledge, information, technological advancements, and cultural values are being shared across the globe – and business practices are no exception. While we are far from a multicultural utopia of global businesses, sharing and creating global partnerships has never been easier.

Developing Universal Standards

While this may sound like whitewashing a complex issue, globalization has had the effect of helping set some universal standards. Through knowledge sharing, basic industry standards have been set and other international bodies are working to set standards for labour and employment law, as well as tax regulation. The Organisation for Economic Cooperation and Development (OECD), for example, drafted the Model Tax Convention in 2017 to help authorities and businesses understand when they are liable to pay corporate taxes and how they can prepare when expanding internationally.

Access to a Diverse Talent Pool

Taking your pick of job candidates from an incredibly diverse talent pool is a benefit of globalization with immediate rewards. If your company is hiring remotely, you can offer employment opportunities according to skillset or behaviours like adaptability, regardless of background or where candidates are based. Companies looking to hire for their offices or foreign subsidiaries are also able to find talent that will help them develop, change, and grow as a company more broadly. Each new diverse employee brings a wealth of new perspectives and possibilities to a business.

A Diversified Workforce and Workplace Culture

A diverse talent pool not only leads to a diverse workforce, but also has significantly positive effects on workplace culture. While some employers are concerned about cultural differences affecting productivity, internal communication, and collaboration, a solid hiring strategy and inclusive company culture can do the trick. Focus on building an open company culture, where different perspectives are championed and inclusive behaviours are rewarded.

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What Are the Challenges of Globalization?

With a variety of benefits, you may still encounter some challenges of globalization. The disadvantages of globalization generally refer to wider socio-political issues that all governments and companies have to face. You will need to be aware of these in order to build an effective global expansion strategy for your business.

Worker Exploitation

‍Many companies in developed countries have outsourced their production or services to developing countries, seeking to cut costs through the creation of cheaper goods. While this has generally been beneficial for developing economies, local workers are still exposed to high degrees of exploitation. The International Labour Organization (ILO) – an agency under the United Nations –  has been working to set international standards to protect workers everywhere, but this is hard to enforce. In developing countries, companies have also been able to make increasingly exploitative demands of their workers as they are able to source cheaper labour elsewhere.

On the other hand, more and more consumers are demanding organizations to create products and services that are ethical, sustainable, and affordable. This is one of the most notable cons of modern globalization affecting businesses today.

Job Loss

One of the most debated negative effects of globalization is the loss of jobs. This is particularly the case in developed countries, such as the United States, where many services and unskilled labor have been outsourced to developing countries. As a result, many locals have lost their jobs or been forced to accept lesser wages and poorer working conditions. Though it is the job of governments to protect the local workforce and create favourable business conditions for companies, you will still need to assess how you want your business to work around this challenge.

High Investment

Globalization and international expansion are generally very expensive endeavours. This is one of the most deterring disadvantages of globalization. It requires businesses to invest a lot of their resources into designing and implementing an effective globalization strategy. Setting up a company or presence elsewhere, paying taxes, hiring, signing contracts with new partners, scouring the customer base - all these things require mountains of research, capital, and time. Not all companies will feel comfortable doing this, especially smaller businesses or those just scaling up globally.

Environmental Degradation

Sadly, the environment also suffers as a negative effect of globalization. As great as increased flow of goods and knowledge are for people and the economy, the underlying business activities adversely affect the environment. Global trade and transportation networks, along with increased market demand, mean more use of fuels that contribute to a higher exertion of greenhouse gases. Planes, ships, and trucks transporting goods all over the world are harmful for the atmosphere and affect local ecosystems. More demand also means more production, again causing more fuel and raw materials to be used up. Interestingly, remote working can help businesses save on environmental costs, but remote working alone won’t solve the environmental challenge of globalization.

Taxes Across Borders

‍Taxes can be a nightmare both for employees and for businesses. Different countries or states have their own tax authorities and unique regulations on what taxes need to be paid, how, when, and to whom. One of the big ones to watch out for is permanent establishment risk, which makes your company liable for paying corporate taxes. Many regional and national governments or organisations are now working together to prevent companies from finding loopholes so as not to pay corporate taxes. You will need to do your research in order to stay on the right side of the law wherever your business operates.

Legal Compliance for Employers

‍Global employers must also consider how to employ people legally across all the different countries  they’re based in. All countries have their own labour law, which covers things like working hours, types and amount of paid leave, termination rights, intellectual property rights, salaries, benefits, and social security. You will need to be aware of the labour code of each jurisdiction where your employees are based so you can employ them compliantly. This is a massive administrative task that requires a thoughtful and responsive strategy.

Thankfully, there are services,  like Omnipresent, that can help you navigate the complexities of international employment and remain compliant.

How Does Globalization Affect Your Business?

‍All businesses can use globalization to their advantage, but you need is the right approach. As always, compliance is key. Running a global business with employees all over the world can be extremely rewarding, but also requires foresight and appropriate processes in place to make sure you stay compliant. When expanding globally, you may need to consider:

  1. Having a legal presence in the countries you are operating in / where your employees are based
  2. Paying corporate taxes the right way, on time, and to the right authority
  3. Who you hire (look for the right traits and watch out for your own hiring bias)
  4. Compliant employment contracts and payroll
  5. Offering progressive benefits
  6. Managing intellectual property rights compliantly
  7. Creating a smooth, standardized onboarding process
  8. Building a solid communication and collaboration strategy across your teams
  9. Creating a sustainable, inclusive, and supportive workplace culture

As a company navigating the effects of globalization, you will need to respond to all its challenges while finding the best path for your business. The first step is to find the right people – and employ them the right way – so they can get your business up and running.

Solve Your Globalization Problems with Omnipresent

Omnipresent can help you tackle the challenges of globalization head on. As a global Employer of Record (EOR), we help aspiring global businesses like yours employ the right people in the right way. As an added bonus, we can employ anyone in over 150 countries. Our global employment process is simple: you tell us who you want to hire and we take over the rest.

Our service is entirely tailored to your needs. Our team can help you with compliant employment contracts, benefits management, onboarding, and offboarding. The OmniAtlas also offers up-to-date information on employment law in your target countries so you can go in prepared.

Omnipresent’s focus is on compliance and customer delight. We are with you every step of the way, even before you start employing new hires. Our team of experts can help you understand the potential difficulties of employing in a new market and point you in the right direction. As a remote-first company operating all over the world, we believe in the positive power of globalization and employing anywhere.

Book a call with us today to learn more about global employment solutions.

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Uriel Eldan

Uriel has been working in the tech space for the past six years; first as a Tech-Regulation Lawyer and a Venture Capital Investor in Tel Aviv, then in Berlin as VP of Business Development in an AI startup. Most recently, he joined Omnipresent as Head of International Expansion. Having gained degrees in Law, Business Management, and Accounting, Uri is passionate about the interaction between technology and business, and loves learning about how different cultures approach it.

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