Globalization Challenges: How These Affect Your Business?

Globalization brought many opportunities and challenges to businesses throughout history. All of the industries have experienced either one of its pros or worked to overcome one of its cons.

As an example, your company can now hire people globally with ease. But, managing their payroll and being compliant with local regulations is a challenge for many companies.

Let’s explore the topic of globalization further. Let’s also cover its impact on businesses worldwide. This way, you’ll know what you will be facing if you decide to turn your local business into a global one.

What is globalization?

Globalization is typically used to describe the interconnectedness between countries. It also refers to the flow of information, goods, technology, capital, and cargo across borders.

It is not a new concept, even though it seems that recent technological advances made it possible. Rather, it only sped up the process of globalization.

People have been traveling to, trading with, and learning from other countries throughout human history.

Effects of globalization on society

Globalization has been credited with some of the most important advancements in history. However, it has also had a detrimental effect on some other aspects of society.

It is cited as a cause for the rapid development of some countries. It’s also the cause of economic growth and significant poverty reduction on a global scale. The advancement of technology also happened on a global level. Sharing these advances has helped many underdeveloped countries grow. It helped improve their economies and lift their people out of poverty.

Thanks to globalization, it’s also much easier for people to move and travel. People share ideas and culture more easily. It had a significant impact on cultural diversity in countries across the globe.

Globalization places a higher importance on the cooperation between countries. Countries depend more on one another rather than on producing everything locally. This is a benefit for smaller countries that aren’t rich in resources. However, it also makes countries dependent on political climate.

Today, it’s also simple to move abroad for work or hire people abroad. However, there have been worries about exploiting poorer countries. Analysts say that the inequalities have only gotten worse with the globalization. Globalization is also said to have many negative effects on the environment.

What are the pros and cons of globalization for companies?

Globalization has had a great impact on many industries, but also on companies as individual entities. Many countries went global, establishing their products and brands in every corner of the world.

With the advancement of the internet, communication across borders has become much faster and easier. Businesses could expand to other countries more easily, and hire people globally.

Here's what you should know about both the advantages and disadvantages of globalization in business.

Benefits of Globalism for Businesses

Many businesses will benefit from going global, as it opens up new opportunities and possibilities. The biggest benefit of globalism for any business is that it allows them to recruit globally and offer their products to a wider market.

Availability of new markets

Diversifying your market is one of the best ways to grow your business. Switching from “local” to “global” is often a complex, but also advantageous process.

Entering a new market, especially one in a country where the need for your product or service is not met, can be very lucrative. New markets open up new revenue streams and introduce your product or service to a new set of customers.

Apart from new customers, going global also provides companies with a better variety of vendors and suppliers. It helps companies outsource their workload to freelancers, agencies, and independent contractors.

Global Recruitment

Globalization also brought the opportunity to hire anyone globally. This allows companies to get the best talent on their team, regardless of where the talent lives. It provides companies with a competitive edge. Plus, it allows them to hire different expertise that may not be available locally.

With the right EOR service, companies can also hire talent globally, without having to establish a presence in that country. Establishing a presence is often a very costly aspect of turning your business into a global one. Having the right EOR on your side to hire talent can be beneficial.

Global recruitment also comes with the benefit of having a diversified workforce. It fosters open-mindedness and creates a globally oriented workplace culture.

A new employee from another country will bring a new perspective and expertise to your company. It will also nurture openness, cultural diversity, and exchange of ideas.

Developing Universal Standards

Globalization helps companies to collaborate, exchange ideas, and create universal standards. These standards will benefit the industry as a whole. These may apply to procedures or salaries. Or, these can create standards for operations across the industry.

Challenges of Globalisation for Businesses

Globalization is not without challenges. Companies looking to explore the benefits of globalization should familiarize themselves with these. Having a plan to overcome the challenges of globalization upfront could be the key to a successful operation.

Payroll Complications

When operating globally, one of the main challenges companies have to face is payroll complications. There are many complexities of global payroll to navigate. These complexities include different regulations, currencies, and employee classifications.

Large companies choose to hire a large HR team to handle these complexities. But, it is a significant expense for smaller companies looking to go global. Smaller companies typically overcome these complexities by choosing the right global payroll provider.

Investment costs

Establishing a presence in each of the countries you’d like to operate in requires a significant upfront investment. Companies looking to become global and test new markets may not have the budget to do so. This, in return, can limit their growth.

If you are looking to explore a new market without commitment, you can start small and hire a small team using an Employer of Record service. It is an easy and cost-effective solution to avoid the risks associated with tapping new markets. If your new market shows promise, establishing a presence later will be less risky. If not, your EOR service will assist you to downsize quickly.

Legal Compliance for Employers

A new market usually means new laws and regulations you need to be compliant with. If you want to expand to several markets, it may be tricky to stay in the loop. Also, these often change. It’s important to stay informed at all times to avoid breaking the law or paying fines to the government.

Companies can remedy this by depending either on a PEO or an EOR service. In countries where you’ve established a presence, hiring a PEO service can help ensure you’re legally compliant at all times.

If you have to decide to wait to open a local presence, your EOR can take on the legal responsibilities for your new employees.

Increased competition

When operating locally, your competition may be small, or even non-existent. But, you may find fierce competition once you decide to go global. You’ll have to navigate this new world where you’re always looking to outperform each other by providing the best product or service.

Finding yourself customers or clients is not the only competition you’ll have to take part in once you enter a new market. You should also expect that you’ll be competing for suppliers, hiring the best talent, and having the best marketing strategy.

The challenges of going global on day-to-day operations

While globalization has its pros and cons on the whole, it’s important to know how going global can affect your business daily. Here are some challenges of globalization that you as an employer should navigate daily.

Communication challenges

You’ll likely experience many communication challenges on a day-to-day basis as your company turns global. These challenges can stem from your employees living in countries with different time zones.

Or, the culture they come from could also have set different expectations of work ethics or communication. It’s important to pinpoint these and find solutions to minimize these challenges. Poor communication can affect productivity, job happiness, and employee retention rates.

Different job and benefits expectations

What your employees will expect from your company may differ based on the culture they come from. Not only should you meet their expectations for salary and statutory benefits, but also meet other benefit’s expectations.

For example, some of your employees may consider global health insurance a great perk. Other employees may prefer receiving the 13th month's salary, as they want to purchase many Christmas presents. Keeping your employees’ best interests in mind may be the key to having a strong global team and company culture.

Respecting cultural differences in new markets

You’ll likely have to modify your processes, brand message, or marketing strategy to support local culture, too. You should start by focusing on providing the proper support for your international customers. Being mindful of local languages and time zones is also important.

If a new market shows great success, you may consider re-evaluating your marketing efforts. Try to create new brand messages that will be more aligned with the culture in a new country of operations.

Overcoming the challenges of globalization for businesses - Is it worth the trouble?

Globalization has its set of pros and cons. For most companies, the benefits of going global heavily outweigh the cons. However, there are challenges that globalization brings that they should prepare for in advance.

Setting up proper procedures and risk-mitigation plans before going global could be the key to success. Expanding to other countries will be much easier if the infrastructure you’ve established in your local company can support it.

Ultimately, you can always start small, and test the expansion before you invest and commit to see if it makes sense for your company. By hiring an EOR service, you can employ a small team in a new country and test the expansion.

FAQs

What are the 5 positives of globalization?

Typically, the five most important benefits of globalization are those that help companies grow. Globalization helps companies by providing access to more resources and talent. It increases capital flow and provides access to international markets.

Companies also gain access to the newest technology and top-tier talent. Plus, globalization encourages open-mindedness toward different cultures. It can also help lower operational costs and help companies provide cheaper products and services to their customers.

What are the 7 disadvantages of globalization?

Most of the disadvantages of globalization revolve around increasing inequality. It also harms the environment. There are concerns about the potential exploitation of poorer countries.

Another disadvantage is the higher risk of global recession as countries depend on one another.

It may also cause job displacement. Globalization has also affected small, local businesses. These are shutting down as they cannot compete with larger, global companies.

There is also a threat of the disappearance of cultural identity for many smaller countries under the influence of the stronger ones.

What is one of the challenges of globalization for companies?

The main challenge globalization brings to companies is navigating different laws and regulations. Companies also need to plan a significant upfront investment to enter a new market.