Toward Proactive Management – Globalization

In order to survive – let alone thrive – in the 21st century, management must proactively cope with ceaseless waves of change. One way to proactively approach the future (which doesn’t yet exist) is to examine existing conditions that are likely to drive change as the 21st century unfolds. There are a daunting number of current realities that, jointly or severally, are likely to drive change. For convenience of organization, this blog groups change drivers as:

Globalization

Sustainability

Technology

Demographics & Trends

This post series of posts examines a few especially significant change drivers in each of the four categories. This post focuses on Globalization and a two of the change drivers it generates:

Free Trade

Global free trade is fundamental to increased and increasing global standards of living. Since the end of World War II, international economic history records a succession of moves to facilitate multinational trade by removing tariffs and other barriers to trade. One result is truly multinational companies, like GE or Nestle. Another is globalized value chains, even for small companies. Consumers everywhere benefit from the lowest prices available anywhere in the world.

But it isn’t all good. Employees in some nations suffer is lower cost competitors abroad take business and jobs. Some nations import much more than they export, resulting in escalating debt. Some nations use access to resources as an economic means to political ends, like the recent Russian cuts natural gas supplies to Europe or the OPEC oil embargo in the 1970s.

So, the benefits of free trade are widely spread, but difficult to recognize or quantify. The negatives, on the other hand, are localized and specific – those who have lost their livelihoods to free trade are not happy. And that unhappiness has resulted in political resistance to new trade pacts and movements in several countries to revise or rescind existing agreements. [1]

Since even small manufacturers have international value chains, with suppliers and / or customers someplace between raw materials sources and product end users, disruptions in the international trade system very likely affect your business, for better or worse.

Migration, People and Capital

In 2013, author and investment banker Dan Alpert wrote:

“The past twenty years have seen a transformation of the global economy unlike any ever witnessed. In the time it takes to raise a child and pack her off to college, the world order that existed in the early1990s has disappeared. Some three billion people who once lived in sleepy or sclerotic statist economies are now part of the global economy. Many compete directly with workers in the United States, Europe and Japan in a world bound together by lightning – fast communications. Countries that were once poor now find themselves with huge large surpluses of wealth. And the rich countries of the world, while still rich, struggle with monumental levels of debt – both private and public – and unsettling questions about whether they can compete globally”

Alpert’s thesis is that the world suffers from gross over-supply of labor, capital and productive capacity. Capital moves readily across national borders seeking higher returns – meaning productive investment opportunities. When excess productive capacity exists, businesses don’t invest in more. Excess labor, looking for work and stimulated by numerous local wars and conflicts, has begun to migrate from developing world countries toward developed countries. [2]

The circumstances that Alpert describes do exist and significantly define world economies and the businesses that drive those economies. These conditions will continue until fundamental global imbalances change. That change may be gradual, spanning years, or quite rapidly, like the economic equivalent of an earthquake.

For smaller manufacturers, the answer lies in innovation and in picking one’s spots. There are opportunities to be found in cheap capital and available labor. And innovative production capacity is never in over-supply.


These are only two of many fundamental changes already occurring in response to Globalization. There are many more. Because of the scale of these matters, the resulting conditions as they specifically affect your business may prove to be surprising. In the 21st century, it is absolutely necessary for even small businesses to follow and understand these zoomed-out, big picture change drivers, so that proactive steps can be taken.

Chuck - Austrian AlpsThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about surviving and thriving in the 21st century … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] For more on this, see “Trade, at what price?” in The Economist, April 2nd – 8th edition, page 27

[2] Dan Alpert’s The Age of Oversupply, Penguin Group (USA) LLC (2014) is offers much more on this.