Pros & Cons of Globalization for Businesses | Omnipresent (2024)

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 Globalizationfor 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.

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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.

Pros & Cons of Globalization for Businesses | Omnipresent (1)

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.

Pros & Cons of Globalization for Businesses | Omnipresent (2024)

FAQs

Pros & Cons of Globalization for Businesses | Omnipresent? ›

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.

What are the positive and negative effects of globalization? ›

Positive effects of globalization include increased international trade and investment flow. Negative effects include economic inequality and loss of local cultural identity.

In what ways will globalization impact US businesses? ›

Market expansion and diversification

One of the primary ways globalization impacts US businesses is by providing unprecedented opportunities for market expansion. As barriers to international trade continue to diminish, businesses can tap into new consumer bases around the world.

How does globalization affect your business? ›

The primary effects of globalization include: Distributed operations: Companies may locate facilities in multiple countries. There are many reasons to spread out operations, including: Reduced labor or production costs in the country where a plant is located.

What are the disadvantages of globalization for businesses? ›

What Are the Challenges of Globalization?
  • Worker Exploitation. ...
  • Job Loss.
  • High Investment.
  • Environmental Degradation. ...
  • Taxes Across Borders. ...
  • Legal Compliance for Employers.

What are the 7 advantages of globalization? ›

What are the benefits of globalization?
  • Access to new cultures. ...
  • The spread of technology and innovation. ...
  • Lower costs for products. ...
  • Higher standards of living across the globe. ...
  • Access to new markets. ...
  • Access to new talent. ...
  • International recruiting. ...
  • Managing employee immigration.
Nov 17, 2023

Is globalization good or bad? ›

Globalization is facilitated economically by free trade agreements, which permit barrier-free imports and exports across borders. While globalization brings many advantages—including lower prices and higher standards of living to some—it also has drawbacks, including wealth concentration and cultural hom*ogeneity.

How does globalization negatively affect the economy? ›

Globalization has also made it easier for people to access foreign goods and services, and has increased cultural exchange. On the negative side, globalization can lead to job losses and displacement as businesses relocate operations abroad or outsource labor, increased inequality, and environmental degradation.

What is one major problem created by globalization? ›

Correct, since the increase in international trade led to a greater need for international shipping, which resulted in increased emissions of greenhouse gases, and air and water pollution.

What is one major drawback of globalization? ›

Increased competition: Markets have been opened up as a result of globalization, allowing businesses from many nations to engage in international rivalry.

What is globalization in simple words? ›

Globalization is a term used to describe how trade and technology have made the world into a more connected and interdependent place. Globalization also captures in its scope the economic and social changes that have come about as a result.

What are the pros and cons of globalisation? ›

Here are the four largest advantages to globalization:
  • Globalization Broadens Access to Goods and Services. ...
  • Globalization Can Lift People Out of Poverty. ...
  • Globalization Increases Cultural Awareness. ...
  • Information and Technology Spread More Easily With Globalization. ...
  • Workers Can Lose Jobs to Countries With Low-Cost Labor.
May 30, 2023

How to deal with globalization in business? ›

Overcoming Globalisation Challenges for Businesses
  1. Find Suppliers and Partners across the World at Various Locations. Don't put all your eggs in one basket. ...
  2. Don't Rely On a Solitary Market. ...
  3. Partner With a Reliable and Experienced Headhunting Company. ...
  4. Embrace Modern Technology.

How does glocalization affect business? ›

Glocalization encourages innovation by pushing companies to think creatively about how they can adapt their offerings to different markets. This process often leads to the development of new products, services, or business models that cater specifically to local needs.

What are the positive impact of globalisation 5 points? ›

The mixing of people and cultures from all over the world enables the sharing of ideas and lifestyles, creating vibrant cultural diversity. People can take holidays in far off locations. Consumers enjoy a greater choice of goods and services at cheaper prices. Migration of people can fill labour and skill shortages.

What are the political disadvantages of globalization? ›

The disadvantages include:
  • Loss of sovereignty, independence, and national identity.
  • Loss of national power in favor of even bigger government.
  • Increased competition causes job losses in some domestic industries.
  • Loss of border control increases smuggling.
  • Uniform laws don't account for cultural differences.

What are the disadvantages of globalization in education? ›

The researchers found that globalization has increased emphasis on Western educational models and curricula, often neglecting local cultural and contextual factors. This has resulted in a loss of indigenous knowledge and a disconnection between education and the needs of local communities.

What are the advantages and disadvantages of technology in globalization? ›

Examples include the growth of multinational tech companies and media globalization. The advantages are easier trade, a more integrated global economy, and faster innovation, but the disadvantages include job losses to automation and the spread of misinformation.

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