"The State of Globalization in 2019, and What It Means for Strategists" case study deals with globalization as a phenomenon and its present state.
Pankaj Ghemawat; Steven A. Altman
Harvard Business Review (H04RLJ-PDF-ENG)
February 06, 2019
Case questions answered:
- What is the state of globalization? Is it a declining phenomenon?
- Has the deglobalization wave started to dominate?
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Case answers for The State of Globalization in 2019, and What It Means for Strategists
Summary – The State of Globalization
From 2016, globalization has been shaped by a war between policy threats and economic fundamentals. The world was more globalized in 2017. But in 2018, barriers from tariff tiffs have altered the playing field. In 2017, the proportions of people flow, capital, trade, and information across national borders increased significantly.
However, tariff increased and nations advanced localization policies, restricted immigration, and heightened screening foreign-corporate takeovers which affected the international flow and declined foreign direct investments. The new DHL Global Connectedness Index shows that the world was more globalized in 2017 and the wave of political uncertainty has led to the collapse of globalization. Therefore, these changes have presented both opportunities and challenges to the multinationals firms’ foreign operations.
The recommendation offered for multinational firms to succeed during these turbulences includes weighing on time-tested international strategies of adaptation, arbitrage, and aggregation. Markets should be prioritized by considering opportunities based on political, administrative, economic, geographical, and cultural distances. Companies should change their organizational architecture when geographical footprint changes either shifting towards adaptation or aggregation.
Globalization is a dynamic and complex phenomenon. It is a multidimensional phenomenon that incorporates social, economic, political, cultural, and technological dimensions. Globalization is defined as the process by which different societies and economies become closely integrated and interconnected. According to Mir et al. (2014, p. 611) globalization is the process of intensification of international interdependence, diffusion of technology, and growth of competition in the free-trade system at the international level.
Phases of globalization demonstrate that the phenomenon is sensitive and change in a single event can lead to an alteration in its process intensity.
The paper’s objective is to analyze if globalization is collapsing. The report research will be based on these four questions; has globalization collapsed, was globalization at the peak in 2017 based on DHL Global Connectedness Index, what impact does change in globalization present to multinational firms and how can business leaders navigate through the globalization turbulence.
Globalization in the past 25 years was considered an unstoppable process but in 2018 it looked more vulnerable and collapsing. The Ghemawat and Altman (2019, p.1) study found that the world was more globalized in 2017 but 2018 brought new barriers caused by policy threats and economic fundamentals. The obstacles of tariff tiff have shown that the globalization process is collapsing.
Witt (2016, p.3) support the argument that the end globalization is near to countries such as the United States moving away from Trans-Pacific Partnership and NAFTA organizations. The study finding shows that further trade liberalization negotiation has failed: the World Trade Organization debates in the last set was a failure, United State through Donald Trump leadership has disavowed trade agreements such as Trans-Pacific Partnership and NAFTA while economic uncertainties such as the Brexit has reduced economic integration in European Union.
For over three centuries, the world interconnection has existed through trade-globalization controlled by rule-based systems. New tariffs, economic aggressiveness, and trade restriction between China and the United States is a sign of a collapsed globalization (Stiglitz 2018, p.4).
The borderless world myth has crashed, with traditional pillars of open markets in the UK and the United States shaking (Ghemawat, 2017, 112). The multilateral trading system is weakened affecting global trade. unctad.org (2019, p.1) statistics show that China and the United States imposed around US$ 50 billion tariffs in 2018 on each other’s goods leading to a possible global economic downturn.
The global connectedness in 2017 focusing on people flow, breadth, and depth of trade, capital, and information reached a new record. Overall connectedness was over…