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New globalization: steadiness between effectivity and resilience

Economic

New globalization: steadiness between effectivity and resilience

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Great creativity knows no bounds, but several outside forces defining the 2020s have threatened to hurt the success of an idea. From the stagnation of the global trade agenda to shifting geopolitical forces, digital and technological advances to worries about inequality and climate change, the world is inherently riskier and more complicated than ever – and consumers are demanding more from the brands they deal with engage and buy from.

A brand’s reputation is only as good as its supply chain – the foundation on which it is built. And while the Covid-19 pandemic took many brands and companies by surprise early on, modern multinational companies are no stranger to shocks and disruptions in the supply chain. Trade disputes, cyberattacks, commodity price fluctuations and natural disasters often test the complexity and interdependence of global supply chains, which in turn has an impact on marketing.

A study conducted by Economist Impact found that Covid-19 was the most significant disruptive impact on supply chain operations in the past three years, according to 45% of senior supply chain and procurement executives in the US and Europe. Global cyber attacks (36%), strong fluctuations in the price of raw materials (33%), deviating standards and regulations (32%) and stricter environmental regulations (29%) are also among the top 5.

These recent supply chain disruptions have resulted in a myriad of business costs – not just operations, but reputation as well. When a business struggles to keep the supply of goods and services up, it translates into customer complaints and can damage a brand’s reputation. Against this background – as well as the increased expectations of consumers for more transparency about where the articles come from and how they are obtained – a turning point has been created for globalization.

Companies need to adapt their business and marketing methods in the age of “new globalization”.

Globalization initially focused on creating greater efficiencies across the supply chain and marketing function. But in this increasingly complex world, public and private decision-makers trade efficiency for resilience; 60% of respondents to the Economist Impact survey agreed that redundancy (overcapacity) and resilience in their supply chain are more important than speed and efficiency (32%).

A shift from “just in time” to “just in case”

“Everyone wants resilient supply chains; The idea that supply chains can withstand shocks and recover quickly is a key concern for both governments and businesses, ”said John Ferguson, Global Practice Lead, Globalization, Trade & Finance, Economist Impact. “With benefits that households and consumers also feel, few would argue against the resilience of the supply chain and its effects on the brand itself. Many companies are examining different strategies to regionalize and diversify their supply chains and find a balance between resilience and efficiency. “

When everything is simple and straightforward, companies don’t have to worry about resilience, but in an increasingly uncertain global trading environment, where shocks are more common, companies need to move to resilience – from a “just in time” approach to a “just” one in ‘approach case’. And while that may seem like a more costly investment now, it will pay off in the long run.

“Nobody would want Covid-19 or business demand / supply shocks in the world, but companies have learned a lot in this terrible time and that will benefit all of us over the next decade as they get better.” Adjust future shocks, ”says Ferguson. “Whether it’s food on our grocery shelves or fuel for our cars, it’s about ensuring a more consistent supply of the goods and services consumers need in their lives, so they can get them when they need them. That is one of the small but important advantages of this crisis. “

Renewed confidence in world trade

In order to create a safer operating environment for companies, a concerted approach between companies and governments on these issues would be beneficial and would go a long way in improving the resilience of global supply chains, argues Ferguson.

“Trust in world trade is essential if we are to maximize supply chain resilience. Supply chains that are increasingly being relocated onshore or along geopolitical borders are neither efficient nor resilient. Rather than directly or indirectly stimulating these changes, governments should work to restore confidence in world trade and to set a new agenda for progress in this direction.

“We need to create a favorable trading environment for global corporations because trade and Foreign Direct Investment (FDI) are so beneficial to the global economy, and developing countries in particular, because all of these vital forces have the potential to be left behind.”

To achieve a more resilient economy for the benefit of all parties – consumers, manufacturers, businesses, brands and citizens – everyone around the table needs to recognize what is happening and start discussions that focus on solutions to solve this problem.

In the age of “new globalization,” companies should seek and build more resilient and diverse global supply chains to withstand the impact and adapt to ever-changing market changes, but they should also be sustainable and efficient. Finding the right balance is not an easy task, but it needs to be tackled as quickly as possible.

“If the ultimate goal is to strike a balance between efficiency and resilience, we are still a long way from finding that comfortable position,” concludes Ferguson. “Companies are still working on finding the right tradeoff between investing in future shocks and using that money in other ways. The sooner you find this balance, the sooner you will benefit from it. “

John Ferguson will be joined by a global panel of marketing directors later this week to discuss the implications of new globalization and why it matters to marketers. Hold on for more.

To learn more about Economist Impact, visit here: www.economistimpact.com

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