Question- What are the Issues of Globalization?

Answer -

With this plethora 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 and some of their services to developing countries. While this has generally been good for local economies in developing countries, local workers are still exposed to high degrees of exploitation. Organisations like the ILO have 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 posing businesses with the daunting demand of creating products and services that are ethical, sustainable AND affordable. This is one of the most challenging negative effects of globalization for 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 US, from where much unskilled labour and many services have been outsourced to developing countries. Many locals have lost their jobs or been forced to accept lesser wages and poorer working conditions as a result. 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.

Sadly, the environment also suffers as a negative effect of globalization. As great as increased flow of goods and knowledge are for people, the underlying business activities adversely affect the environment. Global transportation networks and increased market demand means more use of fuels, contributing to 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, to whom, and when. One of the big ones to watch out for is permanent establishment risk, which makes your company liable to paying corporate taxes. Many regional and national governments and organisations are now working together to clamp down on companies 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 also need to consider how to employ people legally in all the countries where they are based. One of the disadvantages of globalization is that all countries have their own labour law. This 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 mammoth administrative task and requires a thoughtful and responsive strategy.

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