Tag Archives: global companies

Age of Globalization is Unraveling– Changing Business Landscape: New Normal is– Retreat or Reset…

The world is losing its taste for global business, and the golden age of globalization is unraveling… global companies must rethink strategy– they either must retreat or reset in order to stay relevant… According to McKinsey Global Institute Report; after 20 years of rapid growth, traditional trade flows of goods, services, and finance have declined relative to GDP… Many analysts contend that these are short-term effects and trade will resume and even accelerate…

But many companies are struggling to find the most productive global business model. Several approaches have emerged, e.g.; reshoring, or relocating manufacturing operations to the companies domicile, is one option… According to Simon Jack; global companies clearly are in retreat, but to suggest some more general theory of economic decline is perhaps pushing the theory a bit far…

In the article Unraveling of Globalization by Jeffrey Rothfeder writes: Globalization is the tantalizing but perilous business principle that has quietly counted among its casualties some of the world’s largest companies... Indeed, multinational executives avoid talking about it publicly, since profits in global markets are underwhelming, and doing global business is full of unanticipated risks… And that is a far cry from way globalization was pitched as the strategic imperative ‘du jour’, nearly two decades ago…

It was supposed to act like– rising tide, lifting all boats in poor and rich countries alike… Buoyed by thousands of new assembly line jobs courtesy of multinationals in emerging nations, the middle class would swell, which in turn would propel local consumption… More factories needed to meet the demand, and further raising local standards of living and handing the largest non-domestic companies a vast and enthusiastic new customer base…

Yet despite all the activity and enthusiasm hardly any of the promised returns from globalization have materialized… and now there are urgent, if still hushed, discussion in many global businesses: Should they reconsider, or even rein in, their global growth strategy? According to Dan Ammann; companies have come to believe that a large global footprint is critical to success… but given recent events, many wonder if they should be a little more hesitant, less eager and more discerning about where they invest their efforts…

According to Bhanu Baweja; globalization is beginning to be seen as international trading patterns with increasingly protectionist attitudes rather than as golden age of open borders… Between 1986 and 2005, global trade volume increased at rate of about 2 to 3 times that of GDP growth, but since then the ratio has fallen dramatically and is now close to 1…

Moreover, the recovery in world trade volume is much slower in this post-recession period than prior ones… Part of the problem is that the G-20 countries (i.e., big economies and trade partners) added more than 1,200 restrictive export and import measures since 2008– 12% more in just the past year– despite a so-called standstill agreement…

Still, the most tangible metric that belies the pollyannaish depictions of globalization is corporate financial performance, which is also a window into the fundamentals of local economies. Although most companies don’t separate out geographical earnings, but revenue comparisons provide an apt picture– and few multinationals can boast big returns in global markets…

Given the failures of globalization, virtually every major company is struggling to find the most productive international business model. According to Chuck Robbins; globalization is very dynamic situation, in today’s world… Instead of flat and seamless, globalization is full of hurdles and obstacles, and multinationals must rethink their strategy… Simply put, globalization today is barely profitable and developing the right strategy is very perplexing for most companies…

In the article Globalization Goes Into Reverse by Noah Smith writes: There is backlash against globalization in many developed countries. Although the public is mainly positive about international trade and immigration, political candidates have much support for opposing what was unthinkable a decade ago… and by many measures, globalization has been in full retreat since the crisis of 2008…

First, it’s trade: For many decades, up until 2008, global trade had been increasing at a healthy clip. But the recession stopped trade growth in its tracks, and it hasn’t recovered… 2008 was the all-time peak of world trade as a percent of global gross domestic product…

Second, it’s immigration: Globally, the number of migrants living in other countries has continued to increase… In U.S., the big immigration boom is over… Immigration to U.S., the subject of so much political hand-wringing, has gone into reverse… From 2008 through 2014, the population of immigrants living in U.S. declined by more than 1 million… The reason? Undocumented immigrants are leaving in large numbers…

Third, it’s finance: According to Izabella Kaminska; cross-border financial flows remain well below the pre-crisis peaks and cross-border bank claims have actually declined… In other words, the great global boom that marked the end of the 20th century and the beginning of the 21st is unwinding...

In the article Retreat of the Global Company by The Economist writes: Companies were obsessed with internationalizing– customers, production, capital, management… But body of evidence suggests the trend has slowed significantly. In 2016 cross-border investment fell by about 10-15%… The proportion of sales that global companies make outside their domicile is shrinking… Their profits are falling and flow of new investment is declining relative to GDP: Global companies are in retreat…

According to study by McKinsey; in 2007, the global companies operating in U.S., accounted for 19% of private-sector jobs, 25% of private wages, 25% of profits, 48% of exports, 74% of research and development… However, the mood changed after the financial crisis, 2008, when these companies were seen as agents of inequality, i.e., they created jobs abroad but not at home…

Between 2009 and 2013 only 5%, or 400,000, of jobs created in U.S. were created by global companies domiciled there (although figures suggest that job creation picked up in 2014). The profits from these companies were pocketed by shareholders in the form of dividends, buybacks elite… As result, the tapestry of rules designed to help global companies is fraying… Global companies must rethink competitiveness again. Some of the old arguments for going global are now obsolete…

There is no denying that the world finds itself in new era: technology drives innovation, politics drives globalization… But absent some truly cataclysmic event, the best bet is that globalization will still march on... This is reinforced with significant advantages that are ingrained in global companies, e,g,; enforceable patents, technology, innovation, management, supply chains, financial leverage, economies of scale… However, these advantages are less than they were…