Is globalization broken? This is the loaded question posed in a substantive piece of research from global banking institution DBS and FT Longitude, the Financial Times’ thought leadership division.
In recent years many have questioned whether the wide-scale disruptions from Covid-19, rising geopolitical tensions in Asia and Europe, and the ongoing impact of climate change might have a stymying effect on global trade and investment. While economic growth has persisted, the hyper-globalization of past decades — characterized by the extensive and swift integration of national economies — is not as dominant as before.
But globalization is neither, dead, dying nor broken beyond repair. It is simply taking on a new shape.
The new phase of globalization, as highlighted by the report, is driven by digital innovation and data-driven business models just as much as by manufacturing and logistics. It depends on a multi-polar economic framework and is more attuned to sustainability and net-zero goals than previous globalization models.
“A rebalancing of trade and investment on this scale does not occur without market disruption and discontinuity,” the report, entitled “Pivotal”, reads. “As opportunities for growth and innovation emerge, so do new complexities as businesses adapt and diversify their operating models. In parallel, a series of supply chain shocks have made volatility and uncertainty a near-constant reality.”
Against this backdrop, the business leaders surveyed for the report revealed they are dedicated to improving productivity and operational performance while focusing on four principal areas of transformation:
- Diversifying revenue streams
- Embracing digitalization
- Driving net zero
- Reconfiguring supply chains
The survey sample included 570 respondents working across nine industry sectors and 15 markets worldwide. Respondents were 75% executive leadership and 25% senior managers reporting into executive leadership, with 75% from treasury and finance and 25% from corporate strategy functions. The majority (85%) of respondents were from $1 billion-plus businesses.
Business diversification (market presence, products, supply chains) is a major strategic priority for multinational companies, as cited by 64% of survey respondents.
With a heightened sensitivity to risk and the lessons of the pandemic still fresh, many companies are looking to unlock new revenue streams to insulate themselves from localized economic downturns and supply shocks. Many are now also building greater resilience and agility into their supply chains. In order to do that, they are seeking strategic partnerships with new suppliers, looking at nearshoring and improving supply chain visibility.
Asia appears to be benefitting most from these shifts. Around three-quarters of executives say that building top-line growth in the region is a top priority in the next two years, supported by wider efforts to diversify and transform the business through innovation.
But this drive towards corporate diversification has implications for all world regions — and can be leveraged by investment promotion agencies worldwide. Companies are essentially hedging their bets and spreading their facilities and investments in more locations, meaning more opportunities to win projects. Successful investment destinations will be those demonstrating they understand the risk sensitivities and strategic priorities of global companies. In this new era of globalization, there is still much to play for.
The full report can be accessed here.
