The Current State of Globalization in Business
Changes in information and communications technology, international trade liberalization and advances in transportation systems have enabled the rapid spread of business supply and distribution networks beyond the old local and national constraints and onto a global stage – a process often referred to as “Globalization”. This process has accelerated significantly since about 1990 and has dramatic implications for all types and sizes of business and not just for large multinational corporations.
While it is true that globalization has advanced substantially over the last two decades, it is still an uneven and incomplete process and one that will continue to adapt and develop in the years ahead, providing great opportunity for business, despite the geopolitical headwinds being experienced in some developed economies such as US and UK in recent times. In fact, economic globalization is neither as extended nor as pervasive as either its promoters or detractors often seem to imply and there is a lot of confusion about the nature of globalization and its effects on the world we live in.
Many people, including some top businesses people and national politicians have an outdated mental model of how business and trade really works in today’s global supply chains that tie our economies together. This is a really serious issue because it is quite clear that if your model of something is outdated or flawed in a significant way, then your response to circumstances, whether favourable or unfavourable to your interests is going to be seriously undermined and you are more likely to miss out on real opportunities, to overestimate or underestimate certain risks or even to run the risk of being totally blind-sided by unexpected competitive threats out of left field.
In fact, one of the most startling positive effects of globalization has been the dramatic reduction in global poverty and the emergence of new consumer markets in developing countries with the economic opportunities that have opened up to countries such as China, India, Indonesia, Korea, Vietnam, Mexico and others. In fact, the World Bank’s index of extreme poverty has fallen from about 35% of the world’s population in 1970 to less than 10% today. Meanwhile developed countries in Europe and North America have been enjoying low inflation and access to new sources of materials and consumer goods. Simultaneously, the profits of corporates have grown, even as competition has intensified, and employment has shifted in favour of high-skilled knowledge workers while the salaries of lower-skilled manual workers have stagnated or declined.
For Ireland, all of these developments imply that in the future, even small and medium-sized businesses (SMEs) that have been exclusively focussed on home markets up to now, are going to need to learn how to tap into the opportunities provided by globalization in terms of new sources of supply and new overseas markets for their products and service. At the same time, they will have to guard against the threats posed by increased competition from overseas companies operating in lower costs environments who would come in to eat their lunch. This will require new capabilities and competencies in international supply chain management, global business competence and international trade to be developed, nurtured and refined continuously. These skills are in short supply and those companies that take the strategic decisions now to acquire or develop these capabilities will be those most likely to thrive in the future.
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