The purpose of this learning material is to review the global business context within the future business leader needs to operate. This is therefore not a historical overview of globalization as much as it is a manual for managing a business in a global economy.
The role of management is to:
- optimize shareholder value,
- ensure continuation of the going concern,
- take care of the real, material, financial, intellectual and human resources assets entrusted to them by the owners.
In order to do this, business leaders need to evaluate resources, anticipate outcomes, plan activity and process as well as mitigate risks that could result in negative impacts. There are number of possible situation-sets and scenarios, some more likely to happen than others. Your role is to be prepared for the high probability scenarios and anticipate others that may demand new plans. Understanding of the nature and scope of forces of change allow management to limit the negative impact, and in many cases, turn these challenges into opportunities.
Powerful forces are driving change on a global scale and managers need to be prepared to respond to these. These forces include, but are not limited to:
- 1) The global megatrends of urbanization, accelerating technological change, and aging population and increasing connectedness.
- 2) Growing data flows on a global scale,
- 3) Changes in the manufacturing and service economies as a result of innovation and productivity growth,
- 4) The novel and innovative ways in which entrepreneurs and inventors are harnessing their changing circumstances to create value.
There are certainly other forces at play, some of which we can identify and address and others that emerged unexpectedly. As the manager, your role is to anticipate that the former and to be prepared to come to terms and cope with the latter.
Technology and open borders together are the two major forces that changed the world over the past 50 years. Modern supply chains and open borders offered companies the opportunity to move production around the world to take advantage of labor and other arbitrage opportunities.
Transportation, communication and computing technologies transformed much of our lives and how we do things. Over the same period, free-trade regimes between nations allowed companies to take advantage of enormous economies of scale, thereby reducing the cost of many products. At the same time, digital marketing and mass media created opportunities to target consumers with products and services adapted to their specific needs. Communications technology allowed technology work-tasks to be shipped around the globe.
During the period between 2007 and 2016, manufacturers like the Ford Motor Company benefited from a low inflation, low interest rates, rapid technology development and open borders. This allowed the company to focus on expanding its brand presence around the world, capturing economic Gaines from manufacturing arbitrage by using reliable global supply chains based on free-trade. The main drivers in the industry included the development of early-stage autonomous vehicles, development and manufacturing of hybrid electric vehicles. Increased pressure on companies to reduce carbon footprints and apply renewable energy greatly pushed the company into the development of more fuel-efficient and alternative fuel vehicles. The election of Donald Trump in 2016 brought the unexpected and unanticipated threat of tariffs and other impediments to free-trade, resulting in an anticipated $1 billion impact on the company as a result of steel tariffs.