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The Impact of Globalization on Business

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One does not have to look extremely far to see the profound impacts that technology and globalization are having on day-to-day life. The use of modern technology permeates every aspect of daily life, from work tasks to personal activities. Although these trends are causing many changes, the impact on businesses may be the most significant one. 

Every link in the supply chain is now subject to the whims of a global market, with commerce becoming more interconnected on a global scale. Without the enormous impact that technology is having on day-to-day life, this reality-often referred to as globalization—would not be possible. 

Entrepreneurs and employees alike are facing a transformative but disruptive future due to globalization itself. Looking at current effects is necessary to comprehend what the future holds. 

Main Effects of Globalization on Business Right Now 


Outsourcing is one of the most widely acknowledged effects of globalization, and it is challenging to talk about the subject without bringing it up. This is regarded by many as the worst effect of an increasingly globalized business environment because it puts workers at risk of losing their jobs unexpectedly while others far away profit. 

Businesses typically pursue outsourcing initiatives for a variety of reasons, with the following being the most prevalent: 

  • Lower salaries and wages 
  • Fewer limitations at work
  • Enhanced tax environments 

According to the Business Services Association, more than 3 million jobs are supported by outsourcing in the UK alone, where it accounts for about one in ten of all jobs. 

Outsourcing does have advantages for businesses and, in some cases, the economy. The same data as above demonstrates that due to outsourcing initiatives over the past 30 years, the gross domestic product (GDP) is growing about 0.4 percentage points faster than it would have otherwise. 

Businesses looking to cut costs and boost productivity can undoubtedly benefit from outsourcing in real and noticeable ways. However, given the growing consumer backlash against companies that hire foreign workers instead of domestic candidates, it can result in less-than-stellar reputations among target audiences. 

Increased Rivalry 

While it may frequently be stated as such when the subject is brought up, there are several drawbacks for businesses regarding globalization. The level of competition that globalization brings for businesses is the most obvious one; businesses that once competed locally or nationally now find themselves competing in a global marketplace. 

While some businesses (like neighborhood restaurants and grocery stores) are comparatively insulated from the direct effects of competition fueled by globalization, there are nonetheless indirect effects that can be felt. A rise in interconnectivity, however, means that customers may be able to find alternatives elsewhere, which could be problematic for businesses that compete for customers and clients online or across sectors like retail. 

Greater Understanding 

Businesses consider three key factors in their daily operations: capital, people, and trade. They also happen to be important contributors to globalization, as this dynamic is causing all three to become more widely available on a global scale. However, the most fast-paced aspect of globalization is the dissemination of knowledge and information. 

Information now literally travels at the speed of light, due to the internet. The prevalence of online education shows that there are fewer and fewer differences between developing and developed countries in terms of access to education. 

Lower Costs 

Of course, the goal of every company is to maximize profits. In previous decades, there was much less fierce local competition, which allowed businesses to charge more for goods and services with little external pressure. Globalization, however, has completely altered this dynamic. 

What effect does globalization have on business prices? Here are a few instances: 

  • Lower (nominal) profits for businesses due to less room for price increases 
  • A wider variety of raw materials, as well as reduced costs for businesses due to competition 
  • More goods and materials being shipped results in lower shipping costs for businesses

Increased Effectiveness 

Given that technology has been and continues to be at the forefront of globalization, it should not come as a surprise that businesses are experiencing a significant increase in efficiency. Other factors need to be considered, even though much of the conversation about globalization focuses on employment and profitability—two important indicators of efficiency and productivity. 

Technology is more advanced and more accessible than ever thanks to the massive amount of global trade and information sharing. The availability of equipment, machinery, and software for businesses to use in routine operations has had a significant impact on productivity and profitability. 

About the author

Neha Verma

Neha Verma is a content writer who has 5+ years of experience in writing content in different domains and industries. She has been working with B2B & B2C industries and has created content for presentations, the training worked on web content, and copy content. She specializes in blogging, email marketing, and digital marketing content. Currently, she lives in India.