What factors drive global business trends?
A number of significant paradoxes are occurring. The first is that the power distribution has shifted substantially. Currently, the world’s total output is around $40 trillion, with one-quarter of that generated in the U.S. The United States used to generate two-thirds of the world’s output and was viewed as the global economic power in the 1950s.
Thus, the rules that govern the world markets have changed from a predominantly U.S.-centered model to a model centered around multiple countries. Businesses need to understand that the sociopolitical dimensions underlying economic markets are fundamentally different now.
Another paradox is the shift from free-market, open-economy models that create wealth to state-directed economies. The notion that government-directed markets are inefficient is being directly challenged as countries such as China, India and Russia rapidly move up the global economic ladder. As a business, you will need to align your future around these markets that grow in newer economic systems.
There’s also data that show that substantial wealth has shifted from the West to the East over the last 20 years and that this trend is not abating in the near future. This is usually a predictor of where future demand will be. U.S. businesses need to emotionally accept this, even though it is hard to give up years of legacy and history. Once you accept it, you can implement your practices around this new phenomenon.
How can business leaders help their companies stay competitive and win in the global arena?
Stay vigilantly aware of the rate at which globalization is happening. Leverage every global development on the supply and demand sides of your business. Track customers and understand how they make choices in this global marketplace. Watch your suppliers and vendors closely and align your business with those who have the flexibility and scale to extract maximum global supply-side gains.
A contrarian way to success in this relentlessly globalizing world is for businesses to stay strong in their own corporate character and business model. This helps your customers and shareholders understand who you are and provide that all-important confidence in your products and business practices, and what you stand for.
The challenge for businesses is to either keep riding the powerful globalizing waves, with the ups and downs, or set their own standards and character, and choose the less-trodden path to success.
Paul Prabhaker, Ph.D., is the associate dean of Graduate Programs in the College of Business at Northern Illinois University. Reach him at (815) 753-6176 or [email protected].
