International expansion can be a game-changer for your business. Access the global marketplace by going beyond national borders and reap the benefits of globalization.
Whether or not you’re working across borders, the odds are, that globalization is impacting your day-to-day operations and large-scale plans.
You’ve probably already experienced the effects of globalization.
This may have come in the form of a more interconnected workforce or global business opportunities in foreign countries. It’s safe to say that globalization has become a defining trait of how business is conducted in the modern world.
In this article, we’ll break down the key concepts of globalization and its influences on business. We’ll discuss the pros and cons of globalization, and how these may impact your global expansion.
What Is Globalization?
To comprehend the impact of globalization, it is vital to first understand its inner workings.
To put it simply, globalization is the interconnection we see in every aspect of our lives that eliminates borders and enables the exchange of goods and ideas on an international scale. Today, it affects pretty well everything: goods and services, data and information, patents and intellectual property, global capital, and the establishment of borders and trade restrictions.
While this may seem like a lot to unpack, there are a few crucial factors that facilitate how globalization functions. Here are some identifiers of globalization that will help us narrow our focus as we explore its impact.
- Economic Globalization: A key aspect of globalization is the development of multinational commerce and a global economy. Nations engage in the exchange of goods and services on an international scale, and multinational corporations play a major role in the process. Previously thought of in terms of developing countries and industrialized nations, today's definitions have shifted towards the level of development of economies.
- Technological Globalization: Major technological advances surrounding both the internet and telecommunications have fostered near-instantaneous communication across the globe. They have facilitated the vital transfer of information and data, reaching the most remote places on Earth.
- Political Globalization: International political institutions, such as the United Nations (UN), North Atlantic Treaty Organization (NATO), and the International Monetary Fund (IMF), are critical to inter-political exchanges across the globe.
- Migration Globalization: One of the most important and visible aspects of globalization is the movement of individuals on a global scale. Whether these individuals are travelling for work, pleasure, or even asylum, the exchange of people is a key benefit of global expansion.
- Environmental Globalization: Environmental concerns have large ramifications on a global scale, such as climate change, deforestation, and environmental emergencies. Nations often keep an open line of communication to combat these issues and often share resources to do so.
- Labor Globalization: Companies may outsource labor to other countries, often to a developing country's economy. They do so in the hopes of diversifying their workforce or looking for employees who can operate on a contractual basis. This has led to a global flow of workers, commerce, and the development of international supply chains.
- Health Globalization: Diseases can quickly spread across borders, as seen with pandemics like COVID-19. Global healthcare efforts, research, and cooperation are essential in addressing such challenges.
- Globalization of Social and Political Movements: Globalization has facilitated the formation of transnational social and political movements. Advocacy groups, NGOs (non-governmental organizations), and activists can coordinate efforts on a global scale.
Trends of a Globalized Workforce
As a business navigating the impacts of globalization, keeping track of market trends is crucial. 2023 has been a benchmark year for globalized patterns in international commerce.
75% of companies recently surveyed by the World Economic Forum have even expressed interest in diversifying their business practices to match the needs of a globalized economy.
Dynamic implementations like automated work incentives and artificial intelligence (AI) are being adopted by a wide majority of international organizations — with research indicating a boom in job creation as a result.
Additionally, the demand for remote work has seen a major increase in terms of international demand. Other non-office-based implementations such as the hybrid model are also seeing a large demand for implementation in the globalized network of commerce.
Other major global trends include:
- The global integration of the Gen Z workforce.
- The international application of the ‘gig economy.’
- The rise of Applicant Tracking Systems (ATS) to monitor global job applicants.
- Diversity, Equity and Inclusion (DEI) incentives being implemented on an international scale.
- Analytical skills becoming a global asset.
- Global increase in Educational, Agricultural and Digital roles growing in demand internationally.
- Traditional administration, Manufacturing and Commerce adjacent sectors seeing a decline in growth.
- An increase in global hiring incentives across the board.
Navigating Globalization
So, how can you keep up to date with this range of information? Here are some key points to look out for to understand how the changing trends of globalization can impact your business.
- Market Research: Take a look at market research to get an idea of the global demand for your products or services. If you want to dive deeper, try to research international markets to pinpoint opportunities for growth and potential challenges that may come with it.
- Supply Chains: If your business works on global supply chains, make sure you have a thorough understanding of logistics, trade regulations, and customs procedures in your countries of operation.
- Cultural Awareness: If you are working in tandem with other countries, developing cultural awareness can help you navigate business relationships effectively.
- Regulatory Compliance: Be aware of international laws, trade agreements, and regulations that may affect your business. As a global player, you must know how to comply with international standards and requirements to avoid legal issues.
- Exchange and Risk Management: If you are operating internationally and want to understand how globalization impacts commerce, take a look at the impact of currency exchange rates on your business.
- Talent Management: If you are planning on operating globally, learn about international labor laws, immigration regulations, and what it takes to manage a diverse workforce. Consider diversity and inclusion policies.
- Expansion Strategies: During global expansion, you’ll need to examine your market entry strategy, including assessing risks, competition, and local market dynamics.
- Adaptability: Understand that globalization requires adaptability and agility. Markets and circumstances can change rapidly, so be prepared to adjust your strategies accordingly by harnessing research.
- Continuous Learning: Globalization is an ongoing process. Commit to continuous learning and staying updated on global trends and developments.
- Consult Experts: When necessary, seek advice from experts in international business, finance, legal matters, or cultural relations
Pros of Globalization
While we have covered the inner workings and areas of interest that come with globalization, it’s still crucial to know how globalization can positively impact your business.
Here are a few ways that globalization can help you, your enterprise, and your employees.
Global Market Opportunities
Globalization allows businesses to access a larger customer base, including international markets. This can lead to increased sales, revenue, and growth potential. Additionally, with a larger customer base also comes the potential to tap into a larger workforce.
Diversification
Operating internationally reduces reliance on a single market economy. This can help streamline and balance revenue streams, especially if certain economies are facing a downturn.
New Demographics
One of the pros of globalization comes in the form of access to new demographics that will potentially be interested in your services. This allows your enterprise the opportunity to examine the trends of a new consumer market.
Economic Growth
By expanding into new markets, businesses can generate additional sources of revenue, potentially leading to higher profits.
Economies of Scale
Operating on a global scale often allows businesses to achieve economies of scale, resulting in lower production costs and higher profit margins.
Resources and Skills
Globalization allows businesses the potential to tap into specialized workforces. These employees bring skills and resources that may be more readily available in certain international locations.
Innovation
Globalization allows a business to innovate alongside an international workforce. Access to different cultures and markets can help generate new ideas and approaches.
Intelligence and Flexibility
Operating across borders requires businesses to develop cultural intelligence and adaptability, which can be valuable assets in a diverse global market.
Building a Reputation
A pro of globalization is that a business can establish a presence in multiple countries and enhance a business's brand reputation. This can also be accomplished by hiring internationally.
Potential Collaborations
Globalization encourages businesses to collaborate with partners, suppliers, and distributors around the world, leading to potential synergies and innovations.
Adaptation to Trends
Being part of an international market allows businesses the chance to quickly acclimate to consumer preferences, market movements, and technological refinements on a global scale.
Cons of Globalization
Despite its many benefits, globalization may present some disadvantages to business operators. If you are thinking of diversifying both your influence and workforce, it’s crucial to know what advantages of globalization work for you and what disadvantages to keep an eye out for.
Here are some of the crucial drawbacks that come with a globalized market.
Competition
Globalization presents a lot of challenges when it comes to competition. Your enterprise may face competition not only from local companies but also from global corporations with more of an edge and presence in the international market.
Uncertainty
Conducting your business in global markets is a double-edged sword. When you expose yourself to the economic growth of foreign markets, you also expose yourself to economic downturns, which can impact your business.
Exchange Risk
If you choose to engage in international trade you make yourself vulnerable to instabilities in exchange rates. Changes in currency can heavily impact profit margins and the wages for your workers.
Regulatory Challenges
Globalization generates various regulatory environments in different countries, which can create compliance challenges and unexpected risks for businesses.
Supply Chain Vulnerabilities
Global supply chains can be complex and susceptible to disruptions, such as natural disasters, trade disputes, or global events (e.g., the COVID-19 pandemic), leading to delays and production interruptions.
IP Theft
In some regions, intellectual property protection may be weaker, making it easier for competitors or entities to steal or infringe upon a company's intellectual property rights.
Barriers
Managing a global workforce and dealing with diverse customer bases can present challenges related to language barriers, cultural differences, and communication difficulties.
Infrastructure Costs
Global businesses looking to establish and maintain global operations must prepare to invest substantial upfront capital. Accessing the global marketplace often involves significant costs related to logistics, transportation, and infrastructure development.
Labor Concerns
Organizations that engage in outsourcing production to countries with lower labor costs may face the lens of criticism if any exploitative practices are discovered.
Identity Concerns
As your business expands internationally, there may be a risk of losing your initial local identity. You may lose some of your local charm and become viewed as more of a large multinational entity.
Cultural Misunderstandings
As you expand your workforce internationally, there comes a risk of misunderstandings surrounding cultural norms, which can lead to either minor or major communication breakdowns.
Trade Tensions
Political tensions, trade disputes, and protectionist policies in some regions can disrupt global supply chains and affect market access.
Security Threats
Businesses operating in multiple countries may face cybersecurity threats and data privacy concerns due to the global flow of information.
Increased Complexity
Managing operations across borders introduce additional complexity in terms of logistics, legal compliance, taxation, and reporting requirements.
While these potential downsides may seem like enough to dissuade a business operator from the global market, like anything worthwhile, operating in a globalized market has risks that come with great rewards.
That’s why, if you are worried about the disadvantages of globalization, you can trust Borderless as your international Employer of Record. We take care of compliance, while you focus on operating your business how and where you desire.
Benefit from Globalization by Staying on Trend
Globalization isn’t going anywhere, and any international or local business operator should pride themselves on being able to function within its restrictions and thrive alongside its benefits.
If you are a business looking to bring on an Employer of Record to manage the impact of globalization on potential employees, trust Borderless to be in your corner.
At Borderless, we stay up to date on international policy, compliance standards, and employment laws, so you can too. Follow our blog with new posts on the latest in global business, hiring trends, and international markets daily.
Disclaimer: Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
