What is globalization in business?
You might know what globalization is, but do you know how it can influence business?
This article is centered on sharing information on everything you need to know about globalization in business.
So, if you are interested, ensure that you carefully read till the end.
What Is Globalization? – What Is Globalization in Business
Globalization is the increase in the flow of goods, financial products, information, technology, jobs, and technology across national boundaries and cultures.
It is when countries around the world are interdependent through the fostering of free trade.
Globalization ties the economies of most countries to each other.
A globalized business gains competitive advantages on numerous fronts.
They spread their goods, information, ideas, technology, and so on across national boundaries and cultures.
This helps them to have access to a large number of potential and new customers.
Also, when they get to establish their business abroad it can help to reduce their cost of operations.
For example, they can purchase raw materials at a cheaper rate in another location due to tariff removal or reduction.
Globalization affects different aspects of human living as it is a cultural, social, legal, and political phenomenon.
Socially, globalization brings about a better and larger interaction among the different populations in the world.
Culturally, it represents an exchange of values, artistic expressions, and ideas among cultures.
Legally, it has altered the approach to the creation and enforcement of international laws.
Politically, it has influenced intergovernmental organizations such as (WTO) World Trade Organization, and (UN) the United Nations.
Generally, globalization is a movement that is gradually raising a single-world culture.
When viewed from the world of business, globalization is a sure way to expand the reach of businesses to the world.
History of Globalization – What Is Globalization in Business
The concept of globalization did not just start in recent times.
Way back in a less developed world, globalization existed.
In early times, traders were known to travel far distances to purchase merchandise that was expensive or rare in their region.
In the 19th century, the industrial revolution introduced advances in communication and transportation that eased border trade.
Peterson Institute for International Economics, a think tank states that globalization slowed down after World War 1.
They went on to say that the nations proceeded in the direction of protectionism as import taxes were launched to protect their industries during the conflict aftermath.
This movement continued during World War 11 and The Great Depression until the United State of America became an instrumental force in reestablishing international trade.
A key factor that paved the way for globalization was when the (NAFTA) North American Free Trade Agreement was signed in 1993.
One of the effects of NAFTA was that American auto manufacturers were given the inducement to move an aspect of their production to Mexico, saving them more production funds.
In 2020, (USMC) the United States-Mexico-Canada Agreement replaced NAFTA.
For over 20 years now, governments globally have accepted and incorporated a free market system of the economy through trade agreements and fiscal policies.
Several trade agreements’ core is the reduction or removal of tariffs.
Benefits of Globalization in Business – What Is Globalization in Business
Globalization influences business in several different ways.
Those who utilize globalization by expanding internationally get to enjoy the following benefits:
Reduced Production Costs
Globalization enables you to discover lower-cost methods for the production of your products.
Also, globalization increases competition internationally.
This results in a decrease in product prices and also provides consumers with a wide range of choices.
People in already developed and developing countries enjoy a better standard of living with less money due to lowered costs.
Discovery of Different New Cultures – What Is Globalization in Business
Due to globalization, people get to discover and access new cultures such as music, movies, food, art, and so many others.
The free flow of culture is why people are more welcoming of different cultures.
This benefit the business workplace, as it is made up of different people from different cultures.
Globalization encourages people to accept and work amicably with people from different cultures
Access to Innovation and Technology from Different Countries
Globalization encourages the spread of innovation and technology across borders.
This constantly connects different countries in the world.
The spread of innovation and technology is not only wide but fast.
This is why a scientific advance discovered in Australia can be worked on in the USA in a couple of days.
Businesses are exposed to different innovations and technology across the world.
When they can effectively utilize them they will enjoy their benefits.
Discovery of New Markets – What Is Globalization in Business
Businesses gain great things from globalization such as varied revenue streams and new customers.
Companies who are interested in the benefits of globalization seek innovative and flexible ways to expand their business abroad or overseas.
As of now, companies can access new markets globally without having to establish a business entity overseas.
They can easily employ people in other regions or countries compliantly and quickly and then work to expand and benefit from new markets.
This is all thanks to International Professional Employer Organizations (PEOs)
Check here to discover 8 ways to identify market opportunities for business growth.
Discovery of New Talents
Aside from the discovery of new markets and revenues, globalization provides companies and organizations with the opportunity to discover new and specialized talents.
For example, tech talents are found in thriving markets like Stockholm and Berlin.
When companies find talents, they will want to hire them.
Again, thanks to PEOs companies can easily employ people oversea without having an established legal entity there.
Challenges of Globalization in Business – What Is Globalization in Business
As globalization comes with great benefits, it also comes with challenges.
Some hurdles and challenges you will likely encounter when taking your business global includes:
When a company is globalized it will recruit individuals outside its country’s borders.
This can be challenging because it creates uncertainties for a company’s HR teams.
For a company to recruit internationally, they will need to plan how candidates will be interviewed.
Also, they will need to thoroughly screen for qualified candidates many miles apart from the headquarters.
Furthermore, the company will need to find out the demands for benefits and salaries to come up with competitive offers.
So, to ensure the success of every hire, the HR team will need to consider challenges such as cultural differences, language barriers, and time zone to get good fits for their company.
This whole process can be very challenging and discouraging for companies.
Incurring Export Fees and Tariffs – What Is Globalization in Business
As a global business, you will be exporting goods across borders to different markets.
This can be quite challenging because of the expenses.
For some markets, companies have to pay expensively for exporting their goods and still incur tariffs.
29% of both UK and U.S. tech leaders report to encountering this challenge in their global business.
Managing Immigration of Employees
Aside from employing people internationally, global businesses often have to bring their employed staff from other countries to the country of their business headquarters.
This is a challenge that 28% of UK and US tech leaders agree to be a top challenge.
Immigration laws often change, and also some countries make it extremely difficult for employees of foreign nationals to obtain visas.
Cultural Identity Loss – What Is Globalization in Business
Although globalization has provided easy access to foreign countries, it has as well begun to blur out the uniqueness of different societies.
When a certain culture is successful in the world, other countries immediately begin to imitate them.
This makes the different cultures start to lose their unique feature, and reduce the world’s global diversity.
Compliance and Payroll Challenges
Another challenge of global business is managing the payroll of overseas staff and compliance with tax laws and changing employment.
It can even get more difficult for a company’s management team when they have to manage different operations in numerous markets.
Changes That Globalization Brings in Daily Business Operations – What Is Globalization in Business
Both the challenges and benefits of globalization bring about changes in the way business operates.
When a company decides to become global they need to be willing and ready to internally process the changes.
When they do, it will enable them to easily accommodate the new markets, and create a comfortable and accepting global workforce.
Companies that venture into the global market will see their business change in various aspects.
For example, a globalized workplace will become more diverse.
Diversity in the workplace is generally a positive change.
However, it can create challenges like different cultural expectations and language barriers.
Here are some of the changes you should expect in your business operation due to globalization:
Expectations of International Employees
The expectations of foreign employees vary concerning certain work-related issues such as their method of managing their everyday work schedules, benefits, and salaries.
Companies invested in globalization and employing foreign personnel will need to be as accommodating as best as they can.
What this means is that there might be changes in the way certain things are done to satisfy the expectations of international employees.
During the process of hiring international employees, the HR team has to make sure that the offers for those employees are competitive but also similar to local expectations.
Increased Competition – What Is Globalization in Business
Global businesses need to do more than adjust their internal operations.
This is because going global introduces a company to new markets and revenue streams.
Also, it introduces it to more talents.
All of these attractive benefits and also the easy approach to becoming a global business thanks to international PEOs services make the global business place very competitive.
The more companies become global, the higher the competition.
So, a company venturing into the global market will need to know of this increased competition and be prepared to face it.
Supporting Foreign Clients/ Customers
Just as you will need to satisfy the expectations of foreign employees, you will also need to do so for foreign clients or customers.
You should be capable of meeting their needs, and crossing barriers and challenges such as language.
Your customer service and support need to meet your foreign customers’ or clients’ expectations.
For example, if your foreign customers don’t speak your company’s official language, then you need to provide a service that can communicate with them in their native language.
Or if their time zone is not close to yours, then you need to provide services that will be readily available to them during their active hours.
These sorts of changes are essential for you to succeed in the global market.
Marketing Changes – What Is Globalization in Business
Marketing your services or products to a new audience can also bring about challenges.
So, as your business goes global, you need to alter your marketing strategies and plans to effectively communicate your products’ benefits in an approach that will resonate with your foreign audience.
Also, you shouldn’t assume that the marketing campaign that made waves with your American audience will do so with consumers in Asia, Europe, or wherever you expanded your business to.
This is because the needs and wants of consumers in different markets vary.
So, be ready to adapt and create marketing strategies based on your audience.
Factors That Make an International Business – What Is Globalization in Business
An international business takes advantage of globalization by operating and producing or selling goods in different countries.
A business is considered to be international if it:
Domestically produces goods and sells internationally and domestically
Producing goods domestically is when you stay in your business’ headquarter country to do your production operations.
If you do this, and then sell those your goods internationally and domestically, you are considered to be an international business.
You can decide to sell your goods in several countries or just your HQ country and one more country.
Anyhow, you do it, your business is international as long one country apart from your HQ country gets to purchase and use your goods.
Produces goods in a different country but sells domestically – What Is Globalization in Business
This is when a business goes to another country different from their business’ headquarter country to produce their products.
However, after the goods have been produced, they move them to their headquarters country and sell them.
For example, let’s say you have your business headquarters in America.
However, when you wanted to produce your goods, you went to China to do so.
After your production is done you don’t sell those goods in China, but rather went back to America to sell them.
As long as you take your business operation outside your country, you are considered to be an international business.
Produces goods in one country and sells both internationally and domestically
Your business is also considered to be an international one if your production operations take place in a country outside of your HQ country.
And then, the goods produced are sold in both your HQ country, the country of production, and sometimes other countries.
For example, you can have a business in America, make productions of your goods in China, and sell the goods in America, China, and any other country you chose.
Models of International Businesses – What Is Globalization in Business
Businesses that fall into any of the above categories, can model their international business as either multinational or transnational.
Let’s take a look at the two models:
Transnational Model – What Is Globalization in Business
These are international corporations that have offices in numerous countries.
Each of these offices is responsible for different aspects of the company’s operations.
For example, the marketing team office can be in London, the production team in Australia, and the development and research in Bogota.
Nestle is an example of an international corporation effectively making use of the transnational model.
They have their business operations split across the globe.
Each of their brands’ operations is split into regions.
Nestle has over 100 offices worldwide that are responsible for distinct tasks.
All the Nestle offices report back to the headquarter located in Switzerland.
Multinational Model – What Is Globalization in Business
Just like with transnational corporations, multinational corporations have offices in numerous countries.
However, unlike the transnational model, corporation that goes with the multinational model have offices that are smaller representatives of the bigger organization.
What this means is that each office has different teams and leadership.
They function as an organization on their own but are still under the headquarters organization.
PepsiCo is a good example of the multinational model.
They have 32 offices in 24 countries.
Before choosing any of the two models, you need to consider both of their pros and cons and see the one that will work best for your business.
How to Globalize Your Business – What Is Globalization in Business
When you are ready to go global with your business, you will do some things to ensure that you succeed.
Here are a few things you should do:
Research and Understand the New Market
If you have discovered new global markets that you want to venture into, you have to conduct research before rushing into them.
You need to understand them and narrow them down to the ones that will work better for your business.
Some things you will need to find out about any market you want to venture into include size and entrance, resource and labor supply, and cost efficiency.
Also, you will need to consider legal regulations and geographical constraints.
Be Sensitive of Cultures – What Is Globalization in Business
You are branching into different cultures, so you need to be sensitive to different cultures.
Your cultural sensitivity should reach certain areas.
Your contents, websites, and landing pages have to be engaging to customers of different cultures.
Ensure that you create contents and visuals that are in sync with the culture you are reaching out to.
Conclusion on What Is Globalization in Business
Globalization can either be bad or good.
It has its good side and its bad side.
However, globalization is slowly uniting the world together and expanding businesses.
Business people are meant to take hold of the opportunities globalization has provided and expand their businesses.
If you chose to venture into the global marketplace, you need to be ready to make some adjustments.
This is because you will no longer be dealing with people from your country or culture, but also people from other cultures and countries.
Satisfying their expectation will ensure your success in the global business world.