Between a relatively efficient global transportation system and the constant expansion of the internet, the world is shrinking at an accelerated rate. Of course, globalization is driven by the state of the international community and commerce where nation-state players, such as the United States, help bring about stable global commerce. As such, business trends are directly impacted by diplomatic relationships while business trends help shape globalization in terms of diplomatic relationships. The result is a changing dynamic in how the world conducts its business.
For the past few decades, a push toward a quasi-free market approach to international commerce has shifted many investments away from the wealthier nations to developing countries in the third world. This has most clearly been seen in the manufacturing sectors where, for example, US capacity has diminished as Chinese growth has accelerated. Due to economic stability in years surrounding the Great Recession, this has created some serious issues for the developed world. On the flip side, rapid growth in demand has brought on a need for cheaper operational costs while increasing the price of raw materials and other commodities like energy.
The blow back of business globalization is increased demand and increased transportation costs. Consequently, many businesses are discovering maintaining operations all over the globe can be very expensive. For producers, this has meant an emerging trend toward reopening factories in Western nations like the United States or outsourcing to closer developing nations like many found in South America. At the same time, quality issues, especially when considering China’s reputation for tainted products, are also pushing businesses back home. In the long run, a return to more traditional marketplaces may be a good trend for certain industries.
If the Great Recession has taught corporations anything, it is that rapid growth is not necessarily stable growth while debt and instability can undermine global commerce as it hinders the operations of even governments. Meanwhile, the international community is experiencing mass democratization away from US oriented relationships and the ensuing resovereignization of many nations is creating instability. As such, businesses, which are overextended in developing nations, may be fatally hurt when nation-states undergo painful transitions as was seen in the second half of the twentieth century with takeovers by socialist regimes in South America.
Economic instability throughout the world has forced many corporations to redevelop their global business strategy. While government debt is a pressing issue, especially in Europe, traditional markets like the United States do offer some degree of stability. With Asia, minus Japan, looking as though it offers the best opportunity for growth, geopolitical shifts in power and consumer demand can lead to devastation. The trends in global commerce seem to be pushing businesses toward safety nets, such as the certainty of growth in Asia, yet what many see as a save choice may not actually be the best bet.
