GLOBAL FORCES
One of our first classes in this course introduced us to the McKinsey Global Forces report. This report set a great foundation for the rest of the semester by providing a contextual framework of how our world, and, consequently, the global business environment, is changing. Furthermore, the global forces explain the challenges and opportunities companies will have to face in the future if they are to be successful.
The first force, the great rebalancing, describes the growth of emerging-market countries. As an International Development and Conflict Management minor, this prospect excited me. As declining dependency ratios and large scale urban migration increase the labor force and disposable incomes in developing countries, companies need to innovate in order to reach these markets.
The second force, the productivity imperative, illustrates the need for developed-world economy to significantly step up their economic productivity. Very surprising to me was the paradoxical relationship between productivity and employment; as productivity increases, so does employment.
The third force, the global grid, references the increasing interconnectedness of physical, technological, and hman capital across the world. This is evidenced by the increasing globalness of supply chains, the simultaneous collapse of financial institutions around the world, and the growth of internet tecnhologies and social networks. One interesting point to me was the directionality of these global flows; I did not realize that trade between China and Africa was so prominent (growing by 30% annually, the article mentions). I was also initially surprised that (relatively) fewer executives believed this trend would have a positive effect on profits. While globalization is often touted as a driver of efficiency and economic growth, we discussed how the global grid poses the risk of causing negative events to have a more widespread impact.
The fourth force, pricing the planet, discusses the intersection of rising demand and dwindling supply of resources in the context of economic growth.
The fifth force, the market state, addresses the role of the government in driving economic growth. This trend also piqued my curiosity given my international development background. As we discussed, policy makers are under overwhelming pressure to foster economic growth and meet citizens needs.
These forces all contained very important insights about the future of global business.
The Takeaways
This session and the accompanying reading not only educated me on what the five global forces are, but also illustrated how forces can present both challenges and opportunties. For example, while the great rebalancing poses the challenge of addressing the demands of emerging markets, it also presents the opportunity of millions of new consumers. Accordingly, an overwhelming 85% of executives surveyed indicated that this trend was important for business and 48% of executives believed this trend would have a positive effect on profits.
Further, this session highlighted the connectedness of business and international development. As a student in both of these fields, the overlap between the two always interests me. The great rebalancing addresses the socioeconomic trends, some of which I've studied in my IDCM courses, that underscore the growth of emerging markets and then disccusess how businesses can meet the needs of these populations. The market state refers to how businesses can play a role in addressing some of the government's most pressing issues, and how both entitites can work together to create innovative solutions.
Finally, the report highlighted the importance of trends. As stated in the report, trends matter. "Systematically spotting and acting on emerging ones helps companies to capture market opportunities, test risks and spur innovation." Therefore, in order to act on an emerging trend requires the ability to first identify the trend. In developing my global mindset and understanding of international business strategy, I can position myself to be a trendspotter in my industry and firm such that my organization can make the best choices going forward.
