Tag Archives: globalization

Digital Globalization– New Era Of Global Flows: Changing Rules– Rise of Connectivity, Decline of Cross-Border Trade…

Globalization is the ever-increasing integration of– people, cultures, business interests, innovation, governments… But its a contentious issue with people on one side, arguing that globalization is changing the world for better– propagating a heightened level of economic growth, improving human rights, improving access to technology, goods and services… On other side, critics argue– its destroying indigenous cultures, increasing inequality, deteriorating interests of workers, diminishing sovereignty of countries, exploiting under-developed countries to further the interests of the few developed countries…

The world is in midst of a rise in protectionism– anti-trade policies are at highest point since 2008 financial crisis. According to Fabrizio Minei; in recent years, the amounts of money that are flowing across-borders has drastically decreased, which represents drastic shift from international commerce, with localized markets more dependent on domestic consumption for growth… There is a global trend towards– regionalism, with like-minded nations banding together in a club of traders, or mini-lateral groups operating as most favored-trading partners. According to Joshua Cooper Ramo; localism is on the rise– local banking, local production, local sourcing for food, restaurants… 

However others take different view; they say rather than signaling the death of globalization, the decline in traditional metrics signals birth of a new digital globalization– one that is re-balancing geopolitics with geoeconomics… To succeed in the digital era, companies need to think about globalization in a different way, using different metrics, devise new frameworks to develop winning strategies… According to Jeff Immelt; it’s time for bold pivot, developing  strategy that focus on localization… but localism combined within a global footprint…

In the article Digital Globalization by James Manyika writes: The conventional wisdom says globalization has stalled, but even though the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization as world connection is not in decline; rather it’s entering a new phase defined by soaring digital flows of data, information… Remarkably digital flows that were practically nonexistent just 15 years ago, now exert a larger impact on GDP growth than centuries-old trade in goods. And this shift makes it possible for many organizations to reach global markets with less capital-intensive business models… Although it too poses new risks and policy challenges as well…

The world is digitally connected more than ever and it has changed globalization in fundamental ways… The amount of cross-border bandwidth has grown 45 times larger since 2005, and it’s projected to increase by additional nine times over next five years… as digital flows of information, searches, communication, video, transactions, intra-company traffic continue to surge… In addition to streams of data, information, ideas… these digital flows enable movement of goods, services, finance, people… Virtually every type of cross-border transaction now has a digital component…

International trade was largely confined to developed nations and large multinational companies… Today a digital form of globalization has opened the door to developing nations, small companies, start-ups, billions of individuals… Tens of millions of small, midsize enterprises, worldwide have embraced the digital economy and developed global e-commerce markets… Approximately 12% of the global goods trade is conducted via digital e-commerce. Even the smallest enterprises are digital global via the internet; 86% of tech-based start-ups report some type of cross-border activity…

Even individuals use global digital platforms to– learn, find work, showcase talent, build personal networks… Over a billion people have international connections on social media, and over 500 million take part in some type of cross-border e-commerce. In this increasingly digital era of globalization, companies can better manage cross-border operations in– leaner, more efficient ways… Using digital platforms organizations can sell into growing global markets, while keeping virtual teams connected in real-time…

Researcher find that over a decade, all types of digital flows acting together have raised world GDP by 10.1% over what would have resulted in world without cross-border flows. This value amounted to about $7.8 trillion in 2014 alone with digital data flows accounting for about $2.8 trillion of this impact. These digital flows are key for growth, as they expose economies to– ideas, research, technologies, talent, best practices from around the world…

In the article New Era of Globalization by ING writes: Globalization is like a fault line on the world’s ideological map: Most people are either passionate supporters or violent opponents of globalization–there is virtually no middle ground. According to Mauro Guillen; globalization is not a feeble phenomenon, it’s changes how world works– it’s neither civilizing or destructive, it’s neither monolithic or inevitable… but it does requires open-mind to understand it. The world has under-gone historic developments in last few decades; internet, smartphones, social media, rise of China, emerging markets, fast cheap travel. But the notion that globalization is a uniting and unifying force that eliminates nations’ physical borders is diminishing…

However there are many tricky issues and popular disenchantment with the concept of globalization. There is need for new (different) approach on how globalization economic and political policy impact working people, e.g.; economic equality of opportunity for middle class workers, more responsive governance to empower individuals at the local levels… without sacrificing the benefits of globalization. According to Lael Brainard; globalization is not a choice; it’s a force– driven by logic of markets and technology. It’s not product or service but process– it transforms the way people work and live and the very map of the world: You can’t stop it but you can shape it…

 

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…

Rise of Globaphobia– Decay of Globalization to De-Globalization: World Intent on Re-Segregating Itself…

The word globaphobia means the irrational fear of economic globalization, which seems to haunt the popular psyche in most industrial countries… According to Reginald Dale; it’s a horrible mongrel of a word but it serves a useful purpose… It suggests that opposition to globalization is often based on emotion and wrong intuitive assumptions, rather than on reasoned analysis…

According to Lael Brainard; globalization is not a choice; it’s a force, driven by logic of the market and technological advance. It’s not a product but a process and it’s transforming the way people work and live, and the very map of the world. You cannot stop it but you can– shape it, manage it, derive many benefits from it…

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It’s hard to think of any aspect of modern life that globalization does not influence or touch in some way. The rising tide of globalization plays a growing role in– business, culture, environment, human migration patterns, international development, politics and science and technology… But not is all well with globalization, according to Fabrizio Minei; in recent years, the amount of money flowing across borders has drastically decreased… this represents a drastic shift away from international commerce… local markets are now more dependent on domestic consumption for growth and this trend could mark the end of modern globalization… But historically globalization is not new, during several decades there have been periods of shifts in global interdependence from globalization to de-globalization…

De-globalization is the process of diminishing interdependence and integration between nations. It’s widely used to describe the periods of history when economic trade and investment between countries decline… This decline occurs when individual national economies become less integrated with the rest of the world economies in spite of the deepening scope of economic globalization… Periods of de-globalization are seen as interesting comparators to other periods when globalization is the norm for many nations, such as, during years– 1850–1914 and 1950–2007…

However, even periods of stagnant international interaction are often seen as periods of de-globalization. The ‘KOF Index of Globalization’ shows a clear break of economic globalization in 2009… Even during the burst of the ‘dot com’ bubble and the events of 9/11 merely slowed down the pace of globalization, but there was no appreciable de-globalization effect. Whereas, the latest economic financial crisis created severe global impact, and a setback for globalization.

The KOF Index of Globalization 2014: The Index measures the three main dimensions of globalization: economic, social, political… In addition, it calculates an overall index of globalization and sub-indices referring to parameters such as: actual economic flows, economic restrictions, data on information flow, data on personal contact, and data on cultural proximity… It records these changes in globalization for a number of countries over a period of time.

The current 2014 KOF Index of Globalization involves 23 variables and covers up to 207 countries over the period 1970 to 2011. The KOF Index measures globalization on a scale from 1 to 100. The values of underlying variables are divided into percentiles, and extreme peaks are smoothed, resulting in lower fluctuation over time. The recent rankings show– Belgium and Ireland leading the pact, followed by Netherlands, Austria, Singapore, with Sweden 6th, Denmark 7th, Hungary 8th, Portugal 9th… and the biggest jump among the most global countries was Switzerland, which dropped two places to rank 10, and gaining two places, the U.S., the world’s biggest economy ranked 32nd.

The fact that the U.S. economy is not particularly open to rest of the world stands in the way of a higher ranking. China, the second-biggest economy dropped three places to rank 72.

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In the article Is It the End of Globalization? by David Francis writes: In the three decades before the 2008 financial crisis individual national economies became increasingly global but, in recent years, amounts of money flowing across borders has drastically decreased. According to McKinsey Report, the trend represents a drastic shift away from international commerce with local markets more dependent on domestic consumption for growth, and it suggests that this could mark the end of modern globalization…

The McKinsey Global Institute Report; measures how much money was removed from the global financial system in the wake of the financial crisis and the worldwide economic slowdown… The results are staggering; in 2007, $11.8 trillion in capital in form of investments, loans moved internationally… But in 2012, only $5 trillion crossed international boundaries, which is back to the level it was in 2000.

McKinsey hedges the report by saying that some of the capital removed from the system was part of a necessary global correction. But it also warns that global growth would be extremely difficult without more money in the system. For three decades, capital markets and banking systems rapidly expanded, diversified, but now that process called ‘financial deepening’ has largely grounded to a halt. Although global financial assets have surpassed the pre-crisis totals, growth has hit a plateau.

According to McKinsey; the global economy is at a crossroads: One path leads to regulatory integration on a global scale, creating national economies with extremely close ties. The second path leads to a world where national economies are more isolated and rely on domestic consumption for growth: It remains to be seen which way we’re headed…

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In the article Have we reached the end of globalization? by globalpublicsquarestaff write: Globalization impacts every single thing around us. So here’s the big question: Have we reached the end of globalization? For much of the last thirty years there has been a steady trend in commerce; global trade has expanded at about twice the pace of the global economy, for example, between 1988 and 2007, global trade grew on average by 6.2% a year according to the World Trade Organization. During the same period, the world’s GDP was growing at nearly half that pace: 3.7%…

But a strange thing has taken place in the last few years. Growth in global trade has dropped dramatically, to even less than GDP growth. The change leaves one wondering: Has the transfer of goods around the world reached a pinnacle? Has the world exhausted the drive for ever-more-globalization?

The world has undergone historic developments in the last few decades: Internet, China’s opening up, rise of emerging markets, fast and cheap travel… all of these trends led to a massive acceleration in global trade. But have those trends peaked? Are people getting more interested in local products compared to global brands?

According to Joshua Cooper Ramo; localism is on the rise– local banking, local manufacturing, local sourcing for food and restaurants… Is this simply a pause or could it be more than that? According to Global Trade Alert, we are in the midst of a great rise in protectionism, for example; in the 12 months preceding May 2013, governments around the world imposed three times as many protectionist measures than moves to open up. Anti-trade policies are at their highest point since the 2008 financial crisis.

According to the Petersen Institute; the rise of these measures cost global trade 93 billion dollars in 2010… Globalization and trade have produced huge benefits for people, especially the poor, who have been able to make their way out of poverty in a faster growing, more connected global economy. But globalization won’t continue by accident or stealth– politicians must help make it happen…

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In the article The End of Globalism by John Ralston Saul writes: Grand economic theories rarely last more than few decades. Some, if they are particularly in tune with technological or political events, may make it to half a century… Thousands of people have done well out of their belief in globalization, and their professional survival is dependent on our continued shared devotion to the cause. However we have scarcely noticed this collapse, because globalization has been asserted by its believers to be inevitable– an all-powerful god; a holy trinity of burgeoning markets, sleepless technology, borderless managers…

Opposition or criticism are treated as little more than romantic paganism… Inevitability is the traditional final justification for failing ideologies. Less traditional– and a sign of inherent weakness– is the extent to which globalization was conceived as old-fashioned religiosity. Perhaps the economists and other believers who launched globalization were instinctively concerned that people would notice this new theories was oddly similar to the trade theories of the mid-19th Century, or the unregulated market models that had been discredited in 1929… So do they threat these intervening 40 years as an accidental interval, and began again where their predecessors left off…

Is globalization truly come to the end? It’s debatable, but globalization does provides both opportunity and challenge, for example; financial system globalization is inevitable to avoid… more nations will choose to gain common development opportunity through global– partnership, sponsorship, joint-ventures…

According to Hussein Shobokshi; the main idea behind globalization is the entire world would benefit from a closer exchange of ideas, technology, experience… But, many nations’ reaction to the financial crisis was that they turned inwards, erecting barriers and imposing restrictions in order to ‘protect’ national economies. Furthermore, countries gave priority to national industries. As a result of this, the idea of globalization being a uniting and unifying force that does away with borders has proven false…

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According to Mark Leonard; there is a global trend of competing mini-lateral friendship organizations, for example; on one hand, there is the ‘world without the West’, which encompasses the BRICs (Brazil, Russia, India and China), and the Shanghai Cooperation Organization, and a host of sub-regional bodies… On other hand, the West is creating new groupings outside the universal institutions, such as; Trans-Pacific Partnership, Transatlantic Trade and Investment Partnership… But, the interdependence that formed the foundation for major economic growth has now become a threat…

Most major countries are not willing to lose out on the great benefits of a global economy, but all these countries are also thinking about how to protect themselves from its risks… Hence there is movement that undermining globalization in the form of de-globalization, for example; China is moving toward domestic consumption… U.S. is moving toward energy independence… Russia is trying to build a Eurasian Union… And even Germany is trying to change the EU so that its fellow member states are bound into German-style policies.

Since the Cold War interdependence has been a force for ending conflict, but now it’s creating it. After 25 years of being bound together ever more tightly, the world seems intent on re-segregating itself…

Blurring of Globalization, Localization, Internationalization, Regionalization… Business Dilemma in Changing World…

Globalization, Localization, Internationalization, Regionalization… What’s the difference?  There are many definitions for these terms, but as a starter try these: Localization is the process of adapting a product-service and making it linguistically, culturally appropriate to the target market-locale (country, region, language…) where it will be used and sold…

Globalization is the  process of international integration and implies the opening of world markets to a broader outlook of interconnection, interdependency…

Internationalization is the process of generalizing a product-service so that it can handle multiple languages and cultural conventions without the need for re-design (i.e. language, culture neutral…)

Regionalization is tendency to form decentralized regions, and when used in opposition to globalization this often means the world is less connected with a stronger regional focus…

According to experts; internationalization and localization are subsets of globalization and localization is described as the old-fashioned way of doing things. Globalization is the new thing, which for some experts is synonymous with internationalization, but for others it’s very possible to globalize but fail to correctly internationalize…

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Traditionally, to be an international company all that was need were offices in multiple countries… however, to be truly global requires– multicultural sensitivity and consciously considering how every action — or inaction — affects all customers, suppliers, distributors, and employees, regardless of where they live… It means building awareness into the fabric of the company at every level, including; organization, process, product, documentation…

According to Jun Chen and Zhiqiang Jiao; multinational corporations (MNCs) are facing the paradox of globalization and localization in entering each new market. Generally, there are two perspectives for how a MNC configure its cross-border activities: The first is a global convergence perspective, which focuses on leveraging corporate resources and attaining global synergies. The second is international diversity perspective, which lays more emphasis on local adaptation and harnessing diversities. Both perspectives have their pros and cons, but balance between international standardization and local adaptation is vital.

Why Localize? Localization  is the process of adapting a product or content to a specific local market… In addition to translation, localization process may also include adapting images and graphics relevant to target markets, modifying content, layout and text, converting to local currencies, using of proper formats for dates, addresses, and phone numbers, addressing local regulations and more.

The goal is to provide a product with the look-and-feel of having been created for the target market to eliminate or minimize local sensitivities. There are many statistics that effectively illustrate the need to localize content for each target market, for example:

  • It would take 83 languages to reach 80% of all the people in the world, and over 7,000 languages to reach everyone…
  • 56.2% of consumers say that the ability to obtain information in their own language is more important than price..
  • 74% of multinational enterprises believe it is either important or most important to achieve increased revenues from global operations…
  • 65% of multinational enterprises believe localization is either important or very important for achieving higher company revenues…
  • 71% of North American executives expect revenues from foreign operations, sales and/or imports to increase…
  • A critical success factor for cross border merger and acquisition deals is the ability to communicate information clearly and accurately in multiple languages.
  • 95% of Chinese online consumers indicate greater comfort level with websites in their language; only one percent of US-based online retailers offer sites specific to China…

In the article Time to Replace Globalization with Localization by Colin Hines writes: Economic globalization has a clear end goal: maximum trade and money flows for maximum profit. From this goal comes a clear set of policies and trade rules supporting this approach. The adverse effects of this economic priority have become increasingly evident and include growing global inequality, job insecurity and adverse environmental effects.

There is now growing support for a radical alternative, that of localization.  This has at its heart the protection and rebuilding of local economies rather than gearing them to ruthlessly out-compete each other internationally. Depending on the context, the ‘local’ is predominantly defined as part, region, state… within the nation, although it can be the entire nation itself or occasionally a regional grouping of nations.

Everything that can sensibly be produced within a nation or a region should be. Long-distance trade is then reduced to supplying what could not come from within one country or geographical grouping of countries; the historic role of such trade…

Localization is not about restricting the flow of information, technology, management and legal structures, but it’s about a different end goal for such activities… Localization can help ensure a more just, secure, environmentally sustainable future… The prerequisite for achieving a re-localization of the world economy is to replace globalization with a plausible alternative. The policies involved must reverse the instability and insecurity created by trade liberalization.

Their essence should be to allow nations, local governments and communities to reclaim control over their local economies; to make them as diverse as possible; and to rebuild stability into community life… This does not mean a return to overpowering state control, merely that governments provide the policy framework which allows people and businesses to re-diversify their own local economies. It would ensure a transition from the present situation to one where goods and services are provided locally wherever possible.

Reducing product or service miles is also an environmental goal. In short, there is a positive discrimination in favor of the local… Under these circumstances, ‘beggar-your-neighbor’ globalization gives way to the potentially more cooperative ‘better-your-neighbor’ localization… It’s time for a radical change…

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In the article Globalization, Localization and Internet by Ori Fishler writes: Many companies that sell products or services internationally are finding themselves in a familiar dilemma, should their web presence be global or local? While a global site is easy to control and maintain and can ensure consistency in branding and content quality, it can not address local culture, interests and variation.

According to ‘Localization Industry Standards Association’; globalization is a process with 2 parts: 1. Internationalization which is the process for defining applications and sites to work in every market, 2. Localization which is the adaptation of an international framework to local needs and process…

The challenge in this approach is that defining international requirements and anticipating all local variations is very expensive and time-consuming. So what should a company that is expanding internationally do?

Here are a few questions and guidelines to consider: Globalization is the term given to the process of making sure that an application does not contain any internal dependencies on a particular culture… Localization is a process of adapting an application and in particular the user interface, to suit a specific culture… Localization typically involves tasks such as translating strings into different natural languages, resizing user interface elements to fit on the screen, and regenerating images for specific cultures…

Although globalization has touched most populations, it has spread unevenly. Regionalization is the integration process that builds concrete patterns and networks within a regional space and creates a transition into the global market. It emerges as a response to globalization and can be mutually reinforcing… Regions throughout the world are known to be as diverse as the inhabitants that occupy them.

Technological advancement has helped regionalization by creating the ability to transport and alter goods with lower costs to different regions… By serving varying regions it’s tremendously important for companies to specialize their products for each different region: This process is better known as localization…

In the article International Business Localization by internationexpert   writes: Venturing into the international markets is about breaking down walls and barriers. These barriers can include; physical, geographic, political, cultural, economic, legal… Breaking down these barriers can enable collaboration, sharing ideas and conducting commercial business with companies, organizations, countries,  people… outside the local markets…

The more you learn about other cultures, business etiquette,  localization needs… the more likely you will succeed in establishing a base of business in your target international/global markets. Very often the biggest barrier for many is– oneself. No matter how hard many try, there is still the barrier of– Why don’t others do business the way we do? Some countries require full localization of product-services, documentation, while others do fine with partial localization…

The culture of business is about understanding how business works in different countries; and the best way to learn and understand is– to ask, but more important– to listen …

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The 21st century is an era of economic globalization with enterprises from developed countries swarming into many developing countries to ‘localize’ products-services, and particularly in China. Simultaneously, enterprises in the developing countries, including China, are also actively entering-engaging markets, both in the developed and developing countries…

According to CCID Consulting (Chinese consulting company); localization and internationalization talk about the same thing: Some people stand out of the door, while some stand inside. Those who enter it talk ‘localization’, while those who go out speak of ‘internationalization’. In fact, ‘localization’ and ‘internationalization’ mean that enterprises leave their former fertile soil to tillage a piece of new land… 

When enterprises select their strategies they face two directions: 1. Change themselves to adapt to the market… 2. Stick to their strategy and lead the market… Whatever the choice, localization does not mean; set-up local company, speak local language, provide services that are already available in the local market… In fact, localization really is a thinking model: Companies need to learn and understand the local market and even get integrated into the local culture.

This is why many multinational companies choose local people to serve as their executives for the local branches. When the management team cannot fully understand the market, failure; rather than opportunities is the only result… To learn about the thinking of localization, some indigenous methods may have to be grasped… companies need to put a mirror in the door between localization and internationalization to see whether they look more like a foreigner or local person: Make sure of it, and then march forward!

According to Jacqui Hauser; globalization is a goal for more and more companies, and the lines within companies between ‘home country’ and ‘host country’ are becoming blurred… and the need to set priorities that fit a global mobile workforce is a critical factor… Without a doubt, companies are utilizing localization– defining the word in their terms– more than ever…

International Trade– Models, Benefits, Risks: Global Economic Outlook, 2013… Open Markets Drive Trade Development…

International Trade: Countries cannot live in isolation. They must mutually share their resources, technical know-how, products and services, and undertake international trade in order to grow their economies and prosper…

The world economies are closely inter-dependent; economic progress of all nations depends on their ties with other countries… International trade is a vital engine for economic development, and in most countries it represents a significant share of their gross domestic product (GDP)…

According to Ben Bernanke: In U. S., as best we can measure, international trade is critically important. According to one study that used four approaches to measuring the gains from international trade, the increase in trade since World War II has boosted U.S. annual incomes on the order of $10,000 per household (research by Bradford, Grieco, and Hufbauer).

The same study found that removing all remaining barriers to trade (i.e., free trade) would raise U.S. incomes anywhere from $4,000 to $12,000 per household. Other research has found similar results. Our willingness to trade freely with the world is indeed an essential source of our prosperity– and I think it’s safe to say that the importance of trade for the U.S. will continue to grow…

While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries… The classical model of international trade was developed over 200 years ago by Adam Smith. He believed that different countries possessed unique advantages in the production of certain goods. He then showed that world output would rise if countries traded freely along the lines of their productive advantages…

Torrens and Ricardo expanded on this theory by showing that even if a country did not have an absolute advantage in any goods, both it and other countries would still benefit from international trade. This would be the case if countries specialized in the production of goods with which they had the greatest absolute advantage, or the least absolute disadvantage– this is known as law of comparative advantage

Pre-trade relative prices, in many cases, determine the direction of comparative advantage and therefore the direction of trade… International trade is most commonly recognized as the exchange of goods or products; however, trading services such as, expertise in a particular field or the ability to facilitate the trade of goods is another common form of foreign trade.

Trading capital on the foreign exchange market (FOREX) represents a third facet of international trade. Capital or currency held for foreign trade fluctuates in value hourly due to political, business, weather and other conditions and factors from nation to nation. Trading currency in the international market attempts to profit from the rising value of one nation’s currency through selling the lower value of another nation’s capital…

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In the article Different Types of International Trade Models?  by Peter Hann writes: International trade models may be traced back at least to the theory of absolute advantage put forward by Adam Smith. This theory demonstrated that it was beneficial for a country to specialize and to engage in international trade if it could produce some goods more efficiently than its trading partners.

This theory was further developed by the comparative advantage theory of David Ricardo, which showed that a country should specialize in those goods in whose production it was comparatively efficient. Ricardo’s theory has been further refined in more recent times to produce neo-Ricardian theory that uses fewer assumptions than the original theory.

Other important international trade models include; the Heckscher-Ohlin theory that emphasizes the importance of factors of production in a country, and the gravity theory that looks at the size and proximity of trading partners. While Smith only demonstrated that international trade was beneficial in certain specific circumstances, Ricardo’s theory showed it always makes sense for a country to specialize in producing those goods and services in which it is comparatively most efficient. This specialization increases productivity and boosts the total output of the country.

A country does not need to have an absolute advantage in producing goods provided the opportunity cost of producing the goods is lower than that of its trading partners in producing same goods. Ricardo’s theory of comparative advantage uses numerous assumptions. For example, it assumes that the only input to industrial production is labor and that labor is mobile between industries, but not between countries.

Modern refinements to Ricardian theory have produced international trade models that can demonstrate comparative advantage across a range of goods and countries, rather than Ricardo’s original model that used two countries and two categories of goods. The Heckscher-Ohlin model of international trade emphasizes the resources available in each country and stresses the importance of factors of production in each country. The abundance of factors such as, labor or capital in a country determines the type of international trade the country engages in.

The country produces and exports goods that take advantage of the factors of production that are abundant, and will import those goods that require the input of factors of production that are scarce in the country. International trade models also include the gravity model that looks at the economic mass of each country and the distance between the trading partners. The gravity model arrives at a prediction of the trade flows between the countries based on these elements and other factors such as, the historical context between countries that have affected trading patterns…

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Global Economic Outlook 2013, May 2013 Update: According to the World Trade Organization (WTO); global commerce is set to grow by 3.3% in 2013, as persistent gloom in the EU led it to cut a previous forecast of 4.5%. The announcement marked the second time that the WTO has reined in its figures for 2013, after initially estimating that world trade would expand by 5.6%.

The WTO report said: In 2013, improved economic prospects for U. S. should only partly offset continued weakness in the EU, whose economy is expected to remain flat or even contract slightly according to consensus estimates; and, China’s growth should continue to outpace other leading economies, cushioning the slowdown, but exports will still be constrained by weak demand in the EU. As a result, this year looks set to be a near repeat of 2012, with both trade and output expanding slowly…

In 2012, the WTO said, global commerce expanded by 2.0% from the level in 2011, compared with growth of 5.2% that year. In 2012, the dollar value of world merchandise exports increased by 0.2% to $18.3 trillion… That trend was driven by falling prices for traded goods with commodities such as; coffee, cotton, iron ore and coal seeing major drops, while oil remained relatively stable. Meanwhile, the value of world commercial services exports rose by 2.0% to $4.3 trillion…

 In 2013, First Quarter Trade Results: Merchandise trade growth increased in major economies during the First Quarter of 2013. Compared to Fourth Quarter of 2012, value of merchandise imports and exports for the total of G7 and BRICS countries increased by 1.3% and 2.8%, respectively. Compared to the previous quarter, merchandise– imports and exports– increased in First Quarter of 2013 in most major economies, for example: Germany (by 3.9% and 4.8%), China (by 0.9% and 5.6%), Brazil (by 5.1% and 4.9%), U. S. (by 0.7% and 1.0%), Italy (by 1.4% and 3.2%), Canada (by 1.6% and 1.2%), France (by 0.5% and 1.9%), and Russian Federation (by 4.9% and 0.0%).

Conversely imports grew and exports contracted in South Africa (by 4.3% and minus 0.3%), while the opposite pattern (i.e. imports contracted and exports increased) held in UK (by minus 0.3% and 1.3%) and in India (by minus 0.9% and 6.1%). In Japan, imports contracted slightly in the First Quarter of 2013 (by minus 0.1%), whereas exports decreased more significantly (by minus 2.3%) for the fourth consecutive quarter…

Most countries of the world cannot have a growing economy or lift the wages and incomes of their citizens unless reach beyond their borders and sell products, services… to the world’s populations…  Exports support millions of jobs worldwide, for example; in U.S. more than 50 million workers are employed by companies that are engaged in global trade, and this represents approximately 40% of the U.S. private sector workforce…

Often overlooked is the fact that more than 97% of the quarter million U.S. companies that export are small and medium-sized enterprises (SMEs), and they account for nearly a third of U.S. merchandise exports… International investment is also critical to the future prospects of world business, for example; multinational corporations earn trillions of dollars in revenue through their foreign operations, which create tremendous value for stakeholders…

There are both benefits and pitfalls in international trade, and how these are managed determines the relative success of operations… Consider benefits: When trading internationally the universe of potential customers and suppliers increases significantly… The idea that a business relies solely on one market (e.g., home country) and directs all its resources into a single currency may prove to be more risky than it may first seem. Just look at the number of unprecedented global disasters over the last few years and the drastic impacts these have had on markets…

While expanding beyond home markets can increase sales, provide better profit margins, reduce pricing pressure, and could reduce seasonal market fluctuations… The ability to stand out from competitors is a crucial factor in business: In the home market your business may be viewed as comparable to competitors, but when placed in another country’s environment it may be considered a unique product or service not to be missed. By making the product or service available to worldwide buyers, you instantly create another life-line for the business… boost sales potential and allow your business to flourish…

However there are pitfalls, in international trade, and the key is managing risk… First and foremost, it’s crucial that you have a clear understanding of what international trade involves. It’s easy to become engulfed in the excitement of its benefits and marginalize risks… For example, it’s dangerous to assume that laws in countries are similar to those of the home country… and most critical is the development of meaningful relationships in the target countries…

With so many aspects to consider when trading at an international level, it’s easy to leave currency exchange to the last-minute, and it could have a negative impact on business’ profit, and if you do not plan ahead, the market’s volatility could always change the worth of the currency– and not always for the best…

International trade and investment is inevitable part of world economy, but international trade has to be approached sensibly and with a clear thought process so as to maximize the benefits and minimize the risks…

Globalization– Global Connectedness Index: We’re Not As Connected As We Think– Global Connectedness Really Matters…

Connectedness is the enabler for globalization, which is the world’s engine for economic progress– companies must adopt strategies to benefit from the migration of production and consumption and changing geography and geopolitical world…

Globalization around the world, today, is less connected than it was five years ago. The world’s shifting economic center of gravity is reshaping industry connectedness, and connectedness is the enabler for globalization; the world’s engine for economic progress. Companies must adopt strategies to benefit from migration of production-consumption and changing geography-geopolitical world.

The ‘DHL Global Connectedness Index’ (GCI) developed by Pankaj Ghemawat and Steve Altman is comprehensive analysis of the state of globalization around the world, and draws on over one million data points from 2005 to 2011; it concludes that the world today is less globally connected than it was in 2007. It documents how global connectedness, measured by; international flows of trade, capital, information and people, grew robustly from the report’s baseline year of 2005 to 2007 then, it dropped sharply at the onset of the financial crisis. Despite modest gains since 2009, global connectedness has yet to recapture its pre-crisis peak.

According to Frank Appel, CEO Deutsche Post DHL; it’s important to remember the tremendous gains that globalization has brought to world’s citizens and to recognize it as an engine of economic progress. Above all, governments must resist protectionist measures that hinder cross-border interactions. While the world as a whole experienced only very modest increase in global connectedness from 2010 to 2011, some individual countries had large gains. The GCI index covered 125 countries, accounting for 98% of the world’s GDP and 92% of population.

The top 10 overall spots went to, descending order, the Netherlands, Singapore, Ireland, Switzerland, Luxembourg, UK, Sweden, Belgium, Hong Kong, and Malta… For ‘depth’ alone, the leaders were small countries: Hong Kong, Singapore, and Luxembourg topped the list. Large countries had greater ‘breadth’ in their connectedness patterns; U.K., France, and U.S. led the list. The countries with the largest increases in their global connectedness scores from 2010-to-2011 are; Mozambique, Togo, Ghana, Guinea and Zambia– all of which are located in Sub-Saharan Africa.

While this region remains the world’s least connected, it averaged the largest connectedness increases from 2010 to 2011. The Netherlands retained its 2010 position as the world’s most connected country. Of the top ten most connected countries in 2011, nine of them are located in Europe. According to Professor Pankaj Ghemawat; investigating the actual extent of globalization on a country-by-country and regional basis reveals two critical things; first, cross-border flows are significantly lower than commonly perceived; second, every country has untapped possibilities to benefit from more connectedness.

At a time of economic weakness, this represents one of most powerful levers available for boosting growth. The report concludes; the world’s shifting economic center of gravity is reshaping industry connectedness…

The DHL Global Connectedness Index (GCI) measures both the ‘depth’ of a country’s connectedness (i.e., how much of its economy is internationalized) and its ‘breadth’ (i.e., how many countries it connects with). The economic crisis of 2008 made connections both; shallower and narrower. The ‘depth’ measure has rebounded since 2009, and is now 10% higher than it was in 2005– though it remains below what it was in 2007. But the breadth of connectedness has continued to slip, and is now 4% lower than in 2005.

At first, as the economic crisis took hold, both trade and capital flows became less globalized, but since 2009 trade has bounced back, whereas; capital flows have continued to become less globalized. This seems to reflect a fall in the number of places into which companies from any given country are willing to put their foreign direct investment. According to Pankaj Ghemawat;  people consistently assume the world is much more interconnected than it really is. This is why they underestimate the gains that could be made by further globalization… Here are some of its most striking report findings:

  • Global connectedness declined sharply at onset of the financial crisis from 2007-2009, and despite modest gains has yet to recapture 2007 peak.
  • World’s most globally connected country (the Netherlands) is hundreds of times more connected than least connected country (Burundi).
  • Countries’ levels of global connectedness are impacted both by their domestic and their foreign policies.
  • Industries vary widely in levels and patterns of globalization, contrary to popular notion that every kind of business is rapidly integrating across national borders.

In the article Why Global Connectedness Matters by Frank Appel writes: Globalization is crucial for economic growth. It has lifted millions of people out of poverty. Citizens of global countries enjoy access to a wider variety of goods and services, lower prices and more and better-paying jobs. Global countries maintain a competitive edge, and their populations enjoy more prosperity.

According to the GCI index; Europe is the world’s most connected region leading in– international flow of trade, information, and people. As the study notes; this is an important reminder of what EU integration has managed to achieve – and what its fragmentation might put at risk.

Five years into the global financial crisis,  some might argue the risks of globalization outweigh benefits, however there is convincing evidence to contrary. GCI concludes; every country has untapped possibilities to benefit from more connectedness, and that potential gains can reach trillions of dollars. While the economic dimension of globalization tends to dominate today’s debate, it’s important to remember that a global world is also about advances in human development; education, health, environment…

Cross-border flow of information and people– manifest themselves in greater cultural understanding among nations. Shared information enables innovation, and more cooperation often leads to less conflict…

In the article Is Globalization Still The Answer? by Delphi Dialog V writes: We don’t trade nearly as much as we could with other countries. We don’t read news sites from other countries. And, the news we read is dominated by domestic issues– despite disasters abroad. We prefer giving money to less fortunate people nearby, rather than those in distant countries. We trust people who live far abroad ten-times-less than those nearer to home.

According to Pankaj Ghemawat; despite the fact that trillions of dollars could be generated through greater connectedness, we still aren’t improving; global integration is still quite limited. We tend to see globalization chiefly from a trade perspective… Possible limiting factors are; language, culture, politics, and educational equality.

Is language the culprit for lack of connectedness? It’s always easier to connect with colleagues in language they share, rather than needing an interpreter… But what of children– poorest in most of the world– how will they fare; since socioeconomic background is an important predictor of people’s success. We must increase education equality for all people and especially poor children. Otherwise, globalization will exacerbate the inequalities we see today. We tend to view education as a local issue. Education is one of best ways to combat fears about globalization, and make it safe….

In the article Track Connectedness Today Deliver Better Tomorrow by Pankaj Ghemawat writes: We cannot simply take for granted that future generations will enjoy benefits of a more connected planet. Rather, decisions taken today exert powerful but not necessarily positive influence on what the world will look like in 2050. The world is less global than is commonly presumed. An understanding of extent of globalization today is prerequisite for an informed position about whether it should be increased or scaled back, and yet hard facts about how connected the world really is seldom enter into the heated debates that take place on this topic.

To cite just a few examples; only 2% of telephone calls are international, immigrants make up only 3% of the world’s population, foreign direct investment (FDI) comprises only 10% of gross fixed investment around the world, and roughly 20% of economic output is traded across national borders. Business executives tend to overestimate these and other measures of globalization by three-times or more: common place notions of globalization are far off base, and it’s fair to call it ‘globaloney’. The fact that the world is less connected than most people think helps calm many fears about globalization…

Why does all of this matter? Because deepening global connections has potential to contribute to trillions of dollars in economic gains, as well as various non-economic benefits. According to ‘Global Trade Alert’; there are three-times more discriminatory, than liberalizing or transparency-enhancing trade policy measures implemented since November 2008. We cannot simply take for granted that future generations will enjoy benefits of a more connected planet.

Perhaps greatest value of the GCI lies in its detailed country-by-country profiles with its hard data and analysis on virtually every country’s level of globalization. Why?

Because those profiles reveal limited extent of globalization, and where it really matters to people: That can go a long way toward putting fears about globalization into perspective. According to Randy Buday; in this period of slow growth, it’s important to remember tremendous gains globalization has brought to world and recognize it as an engine of economic progress. It’s crucial that governments around the globe resist protectionist measures that hinder cross-border interactions.

As Walter Lippmann wrote in 1922; the world that we have to deal with politically is out of reach, out of sight, out of mind. The world must be explored, reported, imagined. Opportunities for gains from global connectedness in many cases are not obvious.

Most of us need to adjust our world view to see the headroom for gains– we need to reach out to form new connections before specific opportunities come into view. We still have room to benefit enormously from expansion of our circles of human cooperation, especially done in a deliberate way, capturing tangible gains while avoiding potential pitfalls…