ATLANTA, GA / ACCESSWIRE / July 6, 2021 / Over the past decade, and particularly in more recent years, globalization has started to look different in the business world. The COVID-19 pandemic, for example, exposed the flaws in this global supply chain when reliance on a foreign supply chain and sales to numerous countries were impacted, requiring what some would call a need for a "new globalization."
Travel restrictions, quarantines, national lockdowns, high unemployment, and business closures -- the impacts of COVID-19 can be felt all over the world. For multinational companies, the question became: does globalization still work in its original form? Strategic advisor, entrepreneur, and investor, Deepak "Dee" Agarwal, has spent his time during the pandemic reviewing ways that globalization has been impacted by the coronavirus, and what that means for its future.
"Everything from the behavior of governments to consumer preferences to global economic patterns has changed," says Dee Agarwal. "The debate is not whether globalization is effective, it's whether it needs to be or can be adapted over time."
See below for several of Dee Agarwal's thoughts on how globalization attitudes have shifted and how data and localization are becoming of particular interest throughout the pandemic.
The Complicated Pieces of Globalization
Despite its broad, overarching concepts, globalization consists of many more detailed, rather than complex, pieces. Many of these pieces find themselves dependent upon specific environmental and economic circumstances, many of which the pandemic has disrupted.
"Globalization means relying on global supply chains and understanding the cross-border nature of regulation, the speed and need to rely on technology to facilitate your business," says Dee Agarwal. "You can try all you want to manage these, but the reality is there are some pieces that depend completely on the environment, be it politically, technologically, economically, etc. What we're seeing with COVID-19 is an unstable global environment, which permeates into global activity."
The Global Virus
As countries closed their borders at the height of the pandemic, efforts turned more inward. If COVID-19 exposed anything from the worldwide supply shortages and the classified efforts toward vaccine development, it's that globalization hit a roadblock when every country is left to fend for itself. Basing itself entirely on the premises of international dependence, the pandemic put significant strain on globalized relationships.
Several statistics reinforce the idea that a shift is taking place as well. Current forecasts show a 13-32% decline in merchandise trade, and a 30-40% reduction in foreign direct investments, causing the largest and fastest decline in international flows seen in modern history.
But does this call for the downfall of globalization as a whole? Not necessarily, says Agarwal.
"There are a lot of things that are intangible, such as R&D and data that don't move the same way physical goods do. If anything, we saw an expansion of this kind of ‘data globalization' when everything moved virtual in the pandemic, because these kinds of things can be delivered instantaneously and without traditional border regulations. Now when we think of globalization today, we have to include these kinds of intangible goods as well", says Dee.
Looking towards localization
As borders closed around the world, many countries turned their production and supply activities inward, with some countries finding themselves pleasantly surprised at their efforts. A recent report by McKinsey surveyed 60 senior supply chain executives and found that 53% plan on increasing dual sources of raw materials, and 40% plan on expanding nearshoring and increasing their supplier base.
"A big focus of localization is minimizing disruption. While many of these efforts might be more costly in the short term, you minimize the risk of long-term losses, exactly like what we saw throughout this pandemic," says Deepak Agarwal. "It's not foolproof, of course, but it's much easier to contain risk at home -- you don't have to wait on, and more importantly depend on another party to move forward with your activities."
The increase in interest toward resiliency, capability building, and sustainability post-pandemic all point to greater integration of localized logistics.
The debate lives on
Though there are some who argue that globalization is becoming obsolete, most agree that it will just look different.
Globalization isn't going to magically disappear, nor should it necessarily. All we're seeing is turbulence -- some shifting attitudes and a growing need to adapt to the circumstances. Good multinational companies will recognize these shifts and monitor them and decide for themselves whether or not tweaks need to be made in their global strategy. For some, that will be moving things back home, for others, it might just look like more resilient global practices. The important thing is that we need to recognize that the pandemic is creating change, and we need to transform with it.
The pandemic has changed the way we do everything, and global business is no exception. For more business insights and the latest trends, consider reading Dee Agarwal Discusses AI for eCommerce in 2021.
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SOURCE: Dee Agarwal