Doing Business in a Flattened World: Are You Ready for the Ride?
We started this series of blog posts on globalization with the goal of shedding light on the topic, as well as offering insights on its impact on our business and how it could impact your business as well. We have discussed what globalization means and why it matters to businesses, described the characteristics of emerging market economies and discussed the strengths, weaknesses, opportunities, and threats that U.S. businesses will need to manage in this Post-American World.
So as we wrap up the series, we want to explore what lies ahead for the global markets. Are the BRIC’s facing a “BRIC” wall? Which countries, if any, are likely to be the next Brazil, Russia, India or China?
In his book, Breakout Nations, Ruchir Sharma gives a quick overview of more than two dozen of what could be the world’s most interesting economies in the coming decade. Sharma, who is head of Emerging Market Equities at Morgan Stanley, referred to South Korea and Taiwan as the “the gold medalists of global competition,” because their economies continued to grow at a rapid pace even after they became wealthy, when expansion became much more difficult. He also forecasted that the Czech Republic, South Korea, Turkey, as well as Poland, Indonesia, and Turkey could be the next phase of emerging market candidates attracting investment dollars.
In an interview with CNN’s Fareed Zakaria, he laid out three factors why the U.S.’s potential for growth remains high in the global market: the U.S. dollar exchange rate, the closing of the wage growth differential, and the incredible rate of technological innovation in America. According to Sharma, the U.S. dollar today, even after it has been adjusted for all inflation against its trade-weighted partners, is the most competitive that it’s ever been. This means that products sold by American manufacturers and exporters will be cheaper, which gives them a big advantage. And while Americans’ wages are still much higher compared to workers in emerging markets, the difference is becoming smaller.
Meanwhile, the lead that the U.S. has over other countries with regard to technological innovation is getting even bigger and more significant. Even though the factories are overseas, most of product design and development still takes place in America. “[Technology] is what makes many emerging markets remain only emerging,” said Sharma.
In spite of these advantages, however, U.S. companies will have to adopt a global view as they grow in order to be successful. As mentioned in a previous blog post, we intentionally included “international” in the name when we first started BioResource International 13 years ago, in anticipation that there will eventually be an international component to our business. We are now here. BRI is working with venture investors and suppliers from all over Asia, and through our partnership with Novus International, we are starting to see sales of our products increase in many parts of the world.
What we have learned is that success in entrepreneurial businesses, like emerging markets, requires experimentation and risk-taking, while success as mature businesses, like mature markets, rely more on process and efficiency. For business to succeed in global markets, they will have to master both sets of skills and capabilities. Indeed, doing business in this flattened world can be as much of a rollercoaster ride as it is an education. Are you ready for the ride?