Globalisation – big solution that we need for today’s big problems

Globalisation – big solution that we need for today’s big problems


Vivek Sood




May 19, 2020

No matter which country you look at today – you see big problems. Emerging problems are currently grappling with massive monetary expansionism triggered by a need to keep currency stability in face of periodic bouts of Quantitative Easings. For example see the article “Rajan Warns of Policy Breakdown as Emerging Markets Fall”. China is grappling with its own issues – including commodities stockpiles and shadow banking – Copper Caps Longest Fall Since 1995 on China Industry Use. Europe continues to be a basket case and US recovery is in doubt – both are well documented in financial press and tweetosphere. It appears that these problems are so massive that there is no way out of them. At national and even regional level – being close to the problems – it appears that there is no resolution is sight. Again, this type of thinking is well document in the financial press and tweetosphere – hence I am not giving any specific links. My key point for this blog is that ‘a problem cannot be solved with the same mindset that created it’. A local, or regional mind-set with never solve the problems that were created with this mind-set. If you look at it from a global perspective the problems do not look as big. Before your biases make you stop reading let me reiterate what I wrote in my book The 5-STAR Business Network“.

Whatever be the reasons, or the outcomes, of this current global economic scenario, it cannot be denied that eventually only the business will lead recovery in the economy. The failures of command economies in the erstwhile Soviet bloc have demonstrated beyond doubt that statist policies, while good short term band-aid solutions, can rarely lead to true economic prosperity.

Globalisation has been blamed by both the extreme right and extreme left for a host of economic ills facing various nations. Having seen the effects of globalisation at close quarters in more than 100 countries, I cannot disagree more. In my view the results attributed to globalisation are more attributable to other factors such as human malfeasance, institutionalized corruption even in the highest places, laziness, a sense of entitlement to riches without working for them and herd mentality leading to action without thinking and many such factors – all part of basic human nature.

It will be fair to say that one of the most alarming trend has been the continued shifting of the global manufacturing capacity to China. Just like a giant vacuum cleaner, China has sucked in the manufacturing capability from rest of the world at an intense pace over the past 15 years. Isolated stories of reversal of this trend apart, China continues with its policy of government aided industrial expansion far and wide beyond what might be good for Chinese or global economy. Its companies invest even in industries where labour provides little competitive advantage, and China has little capability advantage. This sets up a scene for an international showdown either on economic front or on a military/political front – either of which scenarios will be an unwelcome backlash against globalization leading to a reversal of global economic fortunes.

In the midst of this macro situation, business continue to suffer from intense uncertainty and anxiety. Investment decisions are delayed for months, if not years due to inability to project cash flows and the expected rate of returns for the investors. Waiting for consumer spending to pick up has been futile so far.

The intense volatility in the commodity prices is leading to speculation and perhaps even manipulation in the commodity markets on a global level. At a micro level, this volatility in the prices of raw materials has made it nearly impossible to make and keep budgets, make any price promises, and stabilize customer-supplier relationships in a stable manner professed by traditional supply chain management pundits.

Yes, I have seen the impact of globalisation on ground in more than 100 countries. And yes, it is largely positive. Does Globalisation mean doing away with the rule of law? Obviously, no. I cannot imagine today’s big problems will be solved any other way. That is why Globalisation is inevitable and good. Companies, institutions and governments will do well to prepare for it, and position their constituencies appropriately.

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Vivek Sood

Our Quick Notes On Five Flows Of Supply Chain Management

Part of our new “Quick Notes” series – this report answers your most pertinent questions of the topic.

  • What are the five flows of SCM?
  • Why are they important TO YOU?
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  • What is the importance of difference between "Supply Chain" and "Value Chain"?
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  • There is going to be a rising concern about the negatives of globalization, while the world economy is heading into a much tougher period

    The new rallying cry for the anti-capitalists is “globalization”. And you can see their point. Even people who have zero sympathies for the May Day protesters ­ who see them as the spoilt children of two generations of post-war peace and prosperity ­ must feel uncomfortable about some aspects of what has come to be called globalization.

    We all have our own very different concerns: for example, the exploitation of decent people in the sweatshops of China making trinkets for the West; the rewriting of history by Hollywood to suit America’s jingoistic tastes; or the destruction of wildlife habitat by logging and farming, often subsidized by taxpayers. All these ills are by-products of globalization. If we did not have so much trade with China, or have a global film distribution system, or were not able to buy wood products from countries that wreck their forests, then these unhappy effects would be much diminished…[]

  • I agreed with the sensible topic globalization in business. All countries suffering from Up & Down in demonetization. Your input into it is appreciable.

  • Globalization has enabled firms to specialize – and to increase the intensity of R&D, innovation and capital in their output. Globalization has made it easier for new companies to start competing with old incumbents. The trade sector has increased the number of people that it employs, both through exports and imports. Globalization helped to reduce high inflation rates in Western economies, giving consumers more “bang for the buck”. Globalization has increased real wages by lowering the cost of consumption. Many goods that previously were affordable to only the few, e.g. a mobile phone or sewing machine, are now common in most households.

  • In the past few decades, China has grown to become a major economic power. It is not surprising, then, that even the biggest most reputable brands in the world have for a long time now been shifting manufacturing to Chinese factories. They get the benefits of low production cost and, in many cases. Direct market access to Asian consumers. Much has changed for the country since the government decided to allow international trade and embrace the global market. China’s economic wheel began to turn very fast. These days, China is a giant, not only in terms of manufacturing but also purchasing power.

  • A big issue facing companies considering manufacturing in China is quality control. China can appear very impressive on the surface in that many products look good, but the many standards and regulations differ from American ordinances. That’s why it’s important to have an agent in China that can make sure everything is up to par. When you have your manufacturing base in China, you have to be very careful regarding copyrights, trademark and plagiarism. Ip law is very different in Asia, and you should work that into any contract that you and your business associates sign.

  • One challenge all companies face today is the need to get new products to the market as quickly and as efficiently as possible. While outsourcing is an attractive proposition, companies using outsourcing services should be aware of the pros and cons. Putting your manufacturing unit in China can be advantageous in many ways. To maintain international competitiveness, be strategic. Strategies can be positioned around reducing component costs in existing or future product lines. For American companies the emphasis should be on strategic engagement in manufacturing with Chinese partners, making the investment into people and structures and determining involvement based on indirect as well as all direct costs.

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