We live in a more globalized world than ever, but is that a good thing for you and your business?
Depending on your point of view, globalization is either the best or worst thing about the modern world. Technology has made the world much smaller and opened up a host of new markets and opportunities. On the other hand, it has also exposed businesses to new risks and unfamiliar challenges for which they might not be fully prepared.
Here are the pros and cons of globalization and how you can prepare your business to thrive.
Globalization – the pros
Whatever the size of your business, globalization presents a host of opportunities, including:
• Accessing new markets: The most important impact of globalization is that it can open up your business to new and exciting markets. The barriers to overseas expansion are coming down, giving even small businesses the chance to sell their products and services to customers in markets that were previously out of reach. Innovative business structures and e-commerce also make it possible to export to new markets without necessarily setting up an overseas business entity with all the costs and risks that come with it.
• Broadening your talent pool: Improved technologies and faster communications are breaking down the barriers to international cooperation. While most businesses would have previously drawn their talent pool from their immediate surroundings, it is now possible to work quickly and efficiently with professionals from any country in the world. It opens your business up to new professionals with skills that might previously have been unavailable.
• Reducing your costs: The cost of labor can be much lower in many parts of the world. South Africa, for example, has labor costs of between 40% and 60% of levels in the UK. Sourcing talent from these countries can help you optimize your costs and make valuable cost savings.
• Transforming culture: Exposing your company to new markets, countries, and professionals can encourage a positive culture change to incorporate new ways of doing business and open up new opportunities. A more diverse and cosmopolitan business environment in which you’re accustomed to working with multiple professionals from all walks of life can be immensely beneficial.
Globalization the cons
However, there are dangers and risks to globalization.
• Regulatory risks: Operating in a new and unfamiliar market can be difficult. Your domestic team may have a limited understanding of the market or the local
employment laws. Regulations are constantly changing, which can be difficult enough for locals to keep on top of, not to mention foreigners. Without a full understanding of requirements, it can be easy to run afoul of the authorities.
• Data protection: When moving data from one country to another, you need to make sure you understand the data protection laws in each of the territories in which data is being housed. Data protection regulations vary considerably from country to country, and the fines for non-compliance can be extremely high.
• Loss of focus: Spending time focusing on new pastures may be profitable, but if you’re not careful,l it might distract you from your core markets and customers back in the UK. Expansion is good, but you don’t want to lose focus on what’s made your business successful to this point. Managing compliance across multiple jurisdictions can be almost impossible for most small to medium-sized businesses.
• Additional costs: Globalization may make overseas expansion easier than ever, but there are still costs to getting started. How high this will be will depend on your chosen structure. Traditionally, if you were planning to employ overseas professionals, you would need a legal entity. However, other, lighter-touch structures can be used today.
• Competition: Globalization works both ways. While you can expand to another country, businesses in those countries can also come the other way. In a globalized economy, competition is high, and you’ll need to be on your game to thrive.
Making globalization work
As a business, whether globalization ends up being a bonus or a threat depends largely on how you approach it. Capitalizing on the opportunities of outsourcing and foreign expansion can set you up for success.
This starts with choosing where and how you are going to target. There are two reasons you might want to expand your reach:
1. To outsource domestic operations to a specialist provider.
2. Expand your product or service to new territories.
Each of these options will need staff either on a full-time basis or as contractors. However, managing those staff can be difficult, which is why it pays to work with a specialist outsourcing company or Employer of Record (EOR). An EOR will serve as the legal employer in that country. They will assume all legal liabilities relating to employment and will handle all administrative duties including:
• PAYE
• Tax deductions
• Employee benefits
• Onboarding
• Disciplinary processes when necessary.
The company will employ the staff directly, and you will typically pay a set fee per employee. You may also pay additional fees for one-off services such as specialist recruitment software.
An EOR might also offer customized services, including assistance with recruitment to help you find the right people for your organization.
Another option is to use a Professional Employer Organization (PEO). They will do many of the same things as an EOR, and the terms are often used interchangeably, but a PEO sees employment liabilities shared with you. They handle all the onboarding and administrative duties of the employment while you manage day-to-day relationships. It’s a lot like having your little HR department.
For freelancers and contractors, meanwhile, an Agent of Record can provide services such as onboarding, contract management, and worker classification. They can help you find the best freelancers in each role and ensure you comply with employment regulations.
The specialist knowledge on offer from an EOR or PEO can be invaluable in helping you stay compliant with all regulations and ensure all workers are classified correctly. Their local insights can help you find the best people for each role, and ensure that they are trained in the practices and offerings of your company.
Globalization, therefore, can open the door to a whole world of opportunity – quite literally. However, opportunity does not come without challenges. A globalized marketplace is more lucrative but more complex and competitive. As with anything, the secret to making it work is to develop the right strategy, work with the right people, and set clear, attainable goals.
If you get it right, you could take your business to a whole new level.
To help your business thrive in a globalized world, download a PDF of our report today.
