The benefits of globalization for growing companies

It’s never been easier to set your company up for global success.

Thanks to globalization, even small companies can hire and onboard workers from around the world.

Despite the ease with which companies can hire internationally, many have been tentative about working with a remote team.

Some employers hesitate to take the leap out of concern for productivity or a lack of experience. Now that the world has witnessed the economic benefits of remote work, these are no longer valid excuses.

Today’s most talented workers expect the option to live where they choose and work remotely. The advantages of globalization apply to workers just as they do to the companies and multinational corporations that employ them.

This may be the perfect time to embrace globalization and grow your international team.

In this article, we look at the key benefits of globalization. We also dive into some of its disadvantages and how to overcome some of the common challenges associated with it.

What is globalization?

Globalization occurs when a company expands its reach across national borders through its products, services, knowledge base, customs, and ideas. As the company expands, it grows in influence and is also influenced by new cultures, laws, and people.

In this way, globalization has significant potential for dynamic growth. Companies bring something new to the areas they impact and gain exposure to different talents, ideas, and markets.

The goal of all this interdependence? To build mutually beneficial connections and maintain them over time.

Successful globalization occurs through the positive development of relationships among businesses and the countries in which they operate.

Global interconnectivity today is unmatched. Networks of commerce, supply, culture, and geopolitics—not to mention the Internet—have brought us all closer together.

Globalization falls into three categories:

• Political globalization refers to the way in which different countries collaborate for political and economic gain. The United Nations (U.N.) is an example of political globalization.

• Cultural globalization occurs when one culture influences another through its ideas, values, and customs.

Services and products are a part of cultural globalization. When a brand becomes a staple of a foreign country, it impacts that country’s way of life.

For example, Starbucks provides a casual, friendly cafe experience wherever it goes. The brand now has more stores internationally than in the United States.

• Economic globalization describes how companies operate and supply their goods and services to other countries. Some countries also support global expansion more than others.

The United States-Mexico-Canada Agreement (USMCA), enacted in July 2020, is a form of economic globalization that facilitates free trade and market support for all of North America.

7 benefits of globalization and why it can be good for business

The blurring of borders means businesses can work with employees in other countries. The rise of remote work combined with today’s technology has made what would have seemed almost impossible years ago accessible to companies of all sizes.

In the US, 35% of workers are now fully remote, and globally, 76% of workers want to continue working remotely. That means not only are businesses operating across borders, but workers are, too.

This bridging of people and companies leads to more diversity and better collaboration to reduce costs and increase flexibility.

Here are the key benefits of globalization for your business.

1. Availability of new markets

While foreign markets are only a click away, the complexity of managing your company’s economic growth in those markets can be daunting.

With different time zones, languages, and cultural customs, maintaining a consistent global presence presents its fair share of hurdles to overcome.

Those growth opportunities are worth the effort, though. International expansion opens up a broader labor pool for a company to draw from. The company then has the opportunity to provide jobs in areas in need.

Instead of forcible relocation or demanding hours, employees can work from the comfort of their own location and time zone. The recent rise of freelancers and independent contractors opens up the talent pool even more.

2. Cost-effectiveness

Expanding to new countries and cultures is also cost-effective.

Operational labor costs may be lower, and the workforce may be more affordable. Companies may be able to set lower prices for their products to reach a broader customer base.

Employers can cut costs even further with a remote workforce.

In addition to salaries and benefits, office space is one of the highest costs for any company.

Not only do you need to rent an office large enough for your employees to work comfortably, but you also have to maintain and stock it.

By setting up your company to work remotely, you can expect those savings to add up. One study found that fully remote workers save businesses more than $11,000 annually.

Without commutes and cubicles, factors including absenteeism and distractions also drop significantly.

3. Effective collaboration

In a global world, your remote employees are only an email, Slack message, or video call away.

Technological advances make it simple to replicate the parts of the office that facilitate collaboration while eliminating the parts that don’t. For example, instead of long email chains, public documentation tools allow workers to keep projects and notes available for all to see.

The biggest hurdle in using these technologies is simply practice. The more your team uses these tools with a remote-first mindset, the more efficiently your team will be able to work asynchronously and provide another boost to productivity.

4. Broader talent pool

Expanding your employment strategy to hire globally allows you to hire and retain the best talent, regardless of where they live.

The idea that top talent will move for the job is outdated, if not outright wrong.

In the first quarter of 2023, only 1.6% of workers relocated for a new job. This is a drop of about 3% from the same time last year.

Most people prefer living near friends and family in a familiar location. Even if you convince some employees to relocate, you may have to make your offer more attractive by providing relocation packages or other benefits.

Existing employees increasingly want to work remotely, too. About 39% of employees would consider relocation if their company would allow them to be fully remote.

The beauty of globalization is that you don’t have to miss out on hiring top talent because of location. You can hire the best employees globally without asking them to uproot their lives.

If any of your employees want to move, it’s a win-win for both of you.

5. Improved diversity and inclusion

Diversity and inclusion are beneficial for every organization.

Hiring a truly diverse workforce is hard if you are limited to local talent only.

When you remove the restrictions of working at headquarters or in your country of origin, increasing the diversity of talent becomes much easier. It is now a natural extension of the ability to hire people from anywhere in the world.

Globalization also helps your employees showcase their talents on equal ground.

Introverts tend to fly under the radar in an office environment, but working remotely allows introverts to excel.

Extroverts can participate in team-bonding activities, meet with nearby coworkers, or work from a coworking space. With remote work, the possibilities are endless.

6. Universal standards creation

Another benefit of globalization is the opportunity to create universal standards that apply across companies within an industry.

Companies that work together to share knowledge and streamline procedures demonstrate increased transparency and efficiency in their operations.

Governments work with employers to create and maintain fair labor laws in compliance with international standards.

The International Labor Organization (ILO) is a UN agency that works with 187 members to set standards, develop policies, and create programming.

Employees and workers will be more likely to consider global work if they know with certainty that their employers and country of interest will offer the same competitive opportunities in other locations.

Employers will be more likely to expand with the knowledge that their employees will be treated fairly and in full compliance with international standard requirements.

7. Cultural gains

Global expansion provides businesses with cultural opportunities, too.

Exchanging information and knowledge with other companies establishes your reputation in the industry. It also provides you with essential knowledge of the community your business is joining and connections within the industry.

You may find new avenues to explore for your business or discover technological advances you haven’t yet taken advantage of.

Your employees will get to explore new locations, foods, music, and customs. Some may even decide to learn the regional language.

Now that you know some of the benefits of globalization, let’s address some disadvantages.

5 potential disadvantages of globalization

As you expand your business across borders, keep these potential issues in mind:

1. Permanent establishment risk

Permanent establishment occurs when your business has established a presence in another country and becomes subject to taxation there.

Your business doesn’t necessarily need a physical presence, like an office building or factory space, to risk permanent establishment. Sales and other services may also be sufficient to establish a presence abroad.

You also risk permanent establishment with a remote workforce. For example, if your remote workers use a home office, that could be considered a fixed place of business.

The only way you can avoid the risk of a permanent establishment in a country is by knowing the laws and legislation.

As a tax classification, permanent establishment could lead to significant costs if you don’t understand the risks. Our guide to permanent establishment risk can help you learn more.

2. Intellectual property control

It is challenging to protect your IP in every country where you have employees. Some global employment providers may even pass your IP to their partners.

The rules and regulations governing IP vary from country to country. Even if you’ve established a trademark, patent, or copyright in the US, there’s no guarantee that your business has protection once you head elsewhere.

If you hire and employ independent contractors, ensure your written contracts of service clearly outline who maintains the rights to IP once the work is completed.

No matter where you hire, make sure your IP stays protected.

As an expert in international employment law, Remote created IP Guard to guarantee the maximum protection for your IP abroad.

3. Tariffs and export fees

If you plan to engage in international trade of products or goods, you should consider tariffs and export fees.

Each country has different tariffs and fees for international shipments, which affect a company’s bottom line. The United States currently has free trade agreements (FTAs) with over 20 countries.

Some countries assess higher fees than others, so be sure to have this information before you ship internationally.

4. Investment costs

Another challenge of globalization is the costs involved with establishing your business in a different country.

For example, you must identify the location and type of infrastructure you need. Are you constructing new buildings or restoring existing structures? Will you need to build access roads or connect to electricity, water, and sewer systems?

A remote workforce may simplify this process for you. As remote employees work out of their homes and other non-office spaces, you will not need to establish and maintain a separate physical location.

Establishing a relationship with an employer of record (EOR) will also cut down on these costs.

Without an EOR, you must establish individual legal entities in each country you expand to. This process is expensive and time-consuming, especially for smaller businesses.

EORs cut down on these costs by acting as your legal entity. You don’t have to limit your expansion, either, since Remote has fully owned entities in dozens of countries.

Plus, you won’t have to manage HR and payroll on location. Remote handles it for you.

5. Increased competition

With globalization, companies compete with more employers for workers, customers, resources, and their place in the market. Your business may have to offer more competitive wage packages or robust recruitment practices to hire and retain top talent.

The costs of doing business as a whole may increase as you factor in employee costs, production costs, and marketing costs for different locations.

Workers also face increased competition to secure preferred jobs as the talent pool widens. They may see their jobs reduced, eliminated, or transferred as production moves elsewhere.

Working with partners like Remote can help. Remote’s team of experts understands the local markets, analyzes trends, and helps you offer competitive benefits.

What are some challenges of globalization to be aware of?

Hiring employees globally adds complexity if you lack experience in hiring and managing a remote team.

Figuring out local employment laws while supporting your economic growth can seem daunting.

Luckily, that shouldn’t stop you from enjoying the benefits of globalization when building your remote team.

Remote specializes in understanding local employment laws across the globe. We help you effectively manage risk, fast-track onboarding, and scale while avoiding the legal risks of international expansion.

The challenges of globalization include a lack of market knowledge, recruiting difficulties, and compliance. Let’s examine each of these below.

Lack of market knowledge

Failing to understand local markets provides businesses with substantial challenges. Each market behaves differently, and the spending habits, needs, and pain points of consumers vary widely.

Your business needs to know the competitors you face for your product or service locally and internationally.

Also, the cost of living index affects what your customers are willing to pay.

Gaining this deep understanding of individual markets takes considerable time and effort. Fortunately, Remote already has this knowledge and can help you navigate foreign markets like a local.

International recruiting

Global recruiting is a unique process. When creating systems for recruiting, vetting, hiring, and onboarding from country to country, you must consider time zone, cultural, and language differences.

People are also compensated differently, depending on the country.

For example, in the United Kingdom, full-time employees are eligible for 28 working days of annual leave. Employers are also required to contribute a minimum of 4% to the employee’s pension fund.

Do you want to pay everyone the same salary, independent of location, or would you adjust wages based on the cost of living instead? You may want to investigate the demand for international markets and employee expectations for benefits to be competitive.

Compliance with international laws and regulations

If you own a legal entity in the country, you need a trusted local payroll provider or an internal team of local payroll experts.

This makes sense if you’re planning a major expansion into the country, but most businesses don’t need to go to that much trouble.

Working with an EOR that owns its local legal entity is the safest, smartest way to manage payroll and benefits in another country.

An EOR is a third-party institution that hires, onboards, employs, and pays workers for another business. They manage and maintain compliance for HR and payroll, freeing up companies to focus on other areas of the business.

If you manage operations in multiple countries, you need to be aware of the differences in employment and tax law regulations.

For example, Belgium offers the highest minimum wage, 1995 euros monthly, of any country in the European Union. Denmark, however, does not have a minimum wage requirement. Instead, national collective bargaining agreements agreed upon by worker unions and employer associations set the standards of approximately 110 Danish kroner (DKK) per hour.

If you don’t partner with an EOR, you must fully understand and correctly implement the rules and regulations in each new location you expand to. Failure to maintain compliance could result in costly fines, penalties, and reputational damage.

Ready to reap the benefits of globalization with an international workforce?

While the advantages of globalization for your business are numerous, you also need to consider the disadvantages and challenges of expanding beyond borders.

Allowing employees the flexibility to work from anywhere is no longer a perk. It’s required for the most talented, experienced, and in-demand workers.

Don’t give the competition an edge.

Embrace globalization. Employ top talent worldwide and let remote work become your organization’s superpower.

If you want to start hiring and onboarding employees quickly, start with Remote. Read our guide on hiring leading tech talent globally to help your business succeed.

Remote also offers EOR services in over 50 countries, allowing you to start your expansion almost anywhere in the world. Its team of experts ensures your business fully complies with local tax, labor, and employment laws so that you can hire with complete confidence.

Don’t wait to reap the benefits of globalization. Contact Remote to start building your global workforce today.

FAQs about globalization and its advantages and disadvantages

Let’s take a quick look at some common questions surrounding globalization:

How does globalization affect daily life?

Globalization increases exposure to new cultures, countries, and ways of life. As companies expand, they enjoy improved diversity and inclusion within their workforce.

Consumers enjoy greater availability and a wider variety of goods and services in their areas.

What are the economic benefits of globalization?

Globalization gives more countries access to advanced technologies, services, and products. These advancements boost economic growth for many areas that were previously poor or otherwise struggling.

As businesses expand to areas with ready access, they can source materials at lower costs. Consumers enjoy greater options and lower costs, increasing their satisfaction and the likelihood that they’ll continue to purchase from the company.

Does globalization benefit everyone involved?

The benefits of globalization are wide-reaching. While most countries see its advantages to at least some degree, the residents of developed and industrialized countries benefit more.

Poor and working-class individuals see the negative ramifications of globalization when jobs are eliminated or outsourced.