Is Globalisation On Decline? Why It Matters To You?

Beware of Globalisation! Get Ready to face globalisation! Be Globalised ! These were some of the many thoughts that used to occupy the minds of entrepreneurs who were directly or indirectly involved in businesses from any sector.

The ambitious wanted to be a global company, via globalisation. The less ambitious was mostly scared of it. But did you know, Globalisation is declining since 2000.

So what trend is replacing it? What it means for your business?

Globalisation is the buzz word that we have been hearing for many years. Globalisation symbolised shipment of goods across the world, outsourcing of work to cheaper countries, etc. But post 2000, things began to change.

The 2008 crisis and the Great Recession made the international trade go down. But most of us believed that once the markets got back on tracks, the international trade will flourish once again. But surprisingly, it didn’t. Today, 10 years later, as we look back, we find that shape of Globalisation has changed dramatically.

The cross boarder trading of manufactured goods has declined and instead the cross border trading of services has increased!

This means goods that are manufactured in a country is sold more inside the same country, than it being exported, this also meant lower imports. This is because, companies are no longer seeking cheaper destinations to manufacture. For example, according to Mckinsey Global Institute, only 18% is the export from a low wage country to a high wage country. The reason could be automation, which depends less on manpower cost.

Countries have started identifying larger consumer markets for their products in their own countries. This is a major shift. It also means manufacturing of goods closer to the target market, instead of shipping it from across the globe. This is because, “speed to market” is very important in several industries where trends come and go very fast.

Another major shift is that a cross border trade shift , is happening with nearby countries. Which is called as regionalisation. Regionalisation is the current big thing. That is, companies are more interested in shipping goods to nearby countries or nearby states. This makes movement of goods faster, less expensive and increase customer presence by adhering to local cultures and trends.

So what does this mean to your business? small or big? what ever industry?

It means either success or failure. Failure if you stick on the old models (especially if you are in the manufacturing or EXIM business). Failure, if you are in the service industry and you cannot capitalise on this new wave of growing global opportunity.

It also means success to your business, if you locate your manufacturing units closer to your markets, you start exploring your regional markets (can be nearby states or nearby countries), or if you move into the “service industry” to tap the global demand.

So which side of globalisation history are you? the old chapter or the new?