What does Peak Globalisation mean for smaller businesses?
In 2011, Gunter Pauli, author of the Blue Economy and entrepreneur, wrote the article After Peak Oil, Peak Globalisation. In it he stated that “the drive towards globalisation has left the giants of industry extremely vulnerable. And unlike companies listed in the Fortune 500, few entrepreneurs aspire to replace the giants; rather they are happy with the 2-3 percent market share each can nibble off their formidable opponents. This new paradigm will facilitate the arrival of decentralised production and consumption systems that are now technically and competitively viable in all sectors of the economy. including mining, forestry, agriculture, metals, chemistry, energy, paper and pulp and so many more.”
Global vs regional
The points in the article seem to find increasing support.
In 2013, the IMF published the working paper Regionalization vs Globalization, which found that “since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.”
More recently, the US-China tensions, which escalated under Trump, and then COVID-19 appear to have accelerated the ‘Regionalisation’. Which we like to define as a world that becomes less interconnected, with a stronger regional focus, strategically and economically.
In economic terms, for us the main regions of the world include: the US, China, the EU and the ASEAN. We expect that most businesses will focus on one of these regions.
The change for smaller businesses
The transition to more relatively independent regional economies involves the development of *regional supply chains* rather than global ones. A report on Covid-19 and the regionalisation of global supply chains published by The Economist Intelligence Unit suggests that multinational organisations can respond to global risks by implementing solutions such as scenario planning, digitalisation and better risk management. Although these are solutions for larger businesses, we believe that smaller ones can benefit from them as well.
Nowadays, Small and Mid-sized Businesses (SMBs) can relatively easily either digitise (or digitalise) and run their business online with an international presence and no physical office. Technology enables them to become “mini-multinationals”. New digital platforms, beyond Amazon, eBay and Alibaba, help SMBs supply their goods and services, focusing on a particular niche or economic region. These are supported by digital payment solutions that allow small companies in developing countries not served by banks to operate not only nationally but also within an economic region.
And companies like ours can help SMBs with scenario planning, risk management and other practices that used to be the preserve of large multinationals, by combining new business thinking with technology.
In this post-Peak Globalisation world there are duplications of platforms, payment systems, etc. But COVID has forced us to realise that this is a more robust system, because it does not depend too much on any one region for the supply of goods and services. And it is a better one at slowing down the spread of new viruses.
However, global challenges like climate change require *global coordination* of the economic regions to avoid a catastrophe. We will cover this in a future blog article.
To learn how we can help your business become a mini-multinational trading across one or more economic regions: