Deglobalization is Another Kind of Globalization

Deglobalization is Another 
Kind of Globalization. Lijun Song, MBA participant and Winner of the 2023 Student CSR Article Competition 
at School of Management Fudan University, sees deglobalization as an opportunity – despite the risks to business – and calls for firms to focus on three factors to help them innovate and improve their brands: digital, local presence, and a focus on ESG.

Lijun Song, MBA participant and Winner of the 2023 Student CSR Article Competition at School of Management Fudan University, sees deglobalization as an opportunity – despite the risks to business – and calls for firms to focus on three factors to help them innovate and improve their brands: digital, local presence, and a focus on ESG.  

Deglobalization is Another Kind of Globalization by Lijun Song.

What MNCs can do in the trend of deglobalization

Lijun Song, Fudan School of Management, writes on deglobalization as an opportunity

Deglobalization is a fact that people all around the world are facing. The United States, the champion of globalization over the past four decades, has shown prominent isolationist and protectionist characteristics in recent years in its foreign political and economic policies. In addition to the United States, most countries in the world also have their own political and economic policies about deglobalization. Moreover, deglobalization has been both an economic and political problem – which makes global business much harder than before. Parallel to this, MNCs are facing myriad risks from 3 years of Covid-19 impact, some of which are outlined below.

The 2022-2023 Global Risks Perception Survey (GRPS) chose Energy supply crisis, Cost-of-living crisis, Rising inflation; Food supply crisis, and Cyberattacks on critical infrastructure as among the top risks for 2023 with the greatest potential impact on a global scale. All of these have an effect on MNCs’ business worldwide. For example, from economictimes.com (Jan 28th, 2023), we see that ‘So far, 503 tech companies have laid off 1,39,165 employees in 2023, according to tracking site Layoffs. Twilio, LinkedIn, Zoom, Dell, Pinterest and Tinder owner Match are among the companies that have joined the layoff bandwagon more recently in a bid to rein in the costs amid a looming global economic downturn.’

Source: Global Risk Report 2023, WEF
Source: Global Risk Report 2023, WEF

What should MNCs do in the current situation? Deglobalization is inevitable – MNCs should seize the opportunity to do something for sustainability and the prosperity of their business. And there are some suggestions which can help MNCs to aim for another kind of globalization.

Firstly, be more digital

Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. Digitalization is a kind of globalization in deglobalization. Indeed, one positive impact from the Covid-19 pandemic is that the digitalization of the world has been accelerated. And in the trend of deglobalization, it shall be continually developed. Moreover, digitalization can help MNCs to increase efficiency, productivity and reduce operational costs. If MNCs can effectively utilize it, digitalization can also improve customer experience and employee morality, increase the transparency of communication, and hence improve the company’s competitive capability.  

There are more business potentials for MNCs in a digital era – basically because it means the world is a bigger place. Using digital marketing as an example, holding a marketing event in an offline exhibition, with a defined date period and defined location, limits the reach to potential customers. On the other hand, marketing activities online for 24 hours per day worldwide via the internet can normally have a much wider range of business potential. Online meetings with Teams, Zoom or other virtual meet up software help people to see each other in a timely way and talk to each other wherever you are.   Recently, ChatGPT made it to almost everyone’s screens throughout the world. With this AI incorporated into current operations, our world will be smaller, and the efficiency of many jobs and tasks will be incredibly increased or even totally changed.

Secondly, have more localization

MNCs would be wise to adapt and optimize their products or services to meet the needs of a particular language, culture or desired population’s ‘look-and-feel’ in the country or regions their branch companies are located. Moreover, this could help make the various divisions of a company more likely to be a ‘local’ company. What is the benefit of localization for MNCs? There are at least 3.  

1. More trust

Cultural differences can be a disadvantage for a company, but localization can turn culture differences into an advantage. For example, in a non-English speaking country, marketing events for customers tied in with their native languages could help win more of their trust and understanding than talking with them in the lingua franca of globalization – English. This would help companies increase both sales and customer satisfaction.  

2.  Better company image

The success of MNCs in developing globally and receiving support from local governments is largely due to their good corporate image and popularity. Take China as an example. The Chinese government, enterprises and people often regard localizing personnel, corporate culture, materials, marketing, etc. in China as a criterion for judging whether MNCs are beneficial to the country. For MNCs localize their operations in China, invest in projects, and use Chinese resources to improve the visibility of their business activity and improve their local image.

3.  Cost reduction

Reducing overall production costs are an important factor. Multinational companies can make full use of the advantages of low production costs, human resource costs and manufacturing costs in the middle market, as well as reducing total costs and improving total efficiency, so that they always occupy an important market share in the increasingly fierce market competition.

Finally, focus on ESG (Environmental, Social and Governance)

Different from traditional financial indicators, ESG indicators assess the sustainability of corporate operations and their impact on social value from the perspectives of environmental, social and corporate governance. There are at least two benefits ESG can provide MNCs:

1. ESG makes a company more competitive

According to one survey in the US by PDI technologies in 2022, 78% of consumers agree they want to buy from environmentally friendly companies, but don’t know how to identify them. 68% of those surveyed use labels or third-party certifications on product packaging to determine if a product is environmentally friendly, with that number jumping to 79% for Gen Z and Millennials. In addition, 66% say they would be willing to pay more for a product that is environmentally friendly—up 2% from last year. And the survey also showed that all generations are concerned about the environmental impact of the products they buy.

According to one survey in the US by PDI technologies in 2022, 78% of consumers agree they want to buy from environmentally friendly companies, but don’t know how to identify them. 68% of those surveyed use labels or third-party certifications on product packaging to determine if a product is environmentally friendly, with that number jumping to 79% for Gen Z and Millennials. In addition, 66% say they would be willing to pay more for a product that is environmentally friendly—up 2% from last year. And the survey also showed that all generations are concerned about the environmental impact of the products they buy.
Source : PDI Technologies

In a 2021 survey conducted by Accenture of more than 25,000 consumers across 22 countries, 50% reported that they realigned their priorities when shopping for brands as a result of the COVID-19 pandemic. These consumers are willing to pay extra for brands that are aligned with their values and are more loyal to companies that treat people well.

2. ESG makes company operation sustainable

On the one hand, companies that properly integrate ESG frame works into their business can help the company to reduce costs, lower energy consumption, and even total cost saving in their operations. And on the other hand, investors and lenders are more likely to spend their money on those companies who have an ESG strategy and, to a certain degree, who are certified by an ESG 3rd party certification body. With ESG certification, investors and lenders see these companies as a lower risk for them.

It must be said that Cyber incidents and Climate change are two fast increasing risks for business in 2022.

On the one hand, companies that properly integrate ESG frame works into their business can help the company to reduce costs, lower energy consumption, and even total cost saving in their operations. And on the other hand, investors and lenders are more likely to spend their money on those companies who have an ESG strategy and, to a certain degree, who are certified by an ESG 3rd party certification body. With ESG certification, investors and lenders see these companies as a lower risk for them. It must be said that Cyber incidents and Climate change are two fast increasing risks for business in 2022.
Source: Allianz

However, the world is changing every day. In 2023, no-code AI will enable any business to leverage its power to create more intelligent products and services.

Contactless autonomous shopping and delivery will also be a trend. All in all, it is essential for MNCs to always adapt their strategies according to the new world and new changes for their better development.

Lijun Song, School of management Fudan University
Lijun Song

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