Global trade is on a growth trajectory that will see it shape the way both large enterprises and small startups do business in the next few decades. Aligning your business model and strategy to embrace and accommodate future global trends will help ensure you remain globally sustainable for years to come.
Meteoric growth of e-commerce
According to consulting giant McKinsey & Company, today’s digital form of globalization has made ecommerce more accessible for people in developing countries and for small and medium-sized enterprises (SMEs), enabling them to directly compete with larger multinational companies.
E-commerce is responsible for approximately 12 per cent of the global goods trade. Many e-commerce transactions are made between small local manufacturers and suppliers. As technology develops, it enables more people to conduct business online. According to a recent PwC report [PDF], Europe’s creative sector has experienced 1.2 per cent in annual growth since 2003, primarily due to e-commerce.
The 2015 Global Retail E-commerce Index by A.T. Kearney reports that the US, China and the UK lead the world respectively in e-commerce activity. According to Euromonitor, global e-commerce sales will reach US$1.5 trillion by 2018—a marked growth rate from US$695 billion in 2013. Electronic goods, clothing, and books are among the most popular products bought online.
The environmental cost of shipping goods around the world will have a long-term impact on global trade, as consumers increasingly choose to support environmentally responsible businesses.
According to Ernst and Young, climate change regulations, policies, and resource supplies will change the way many companies do business, including their transportation and manufacturing processes. Sustainable environmental practices also impact a company’s brand reputation and leadership values.
Shifting focus on different industries
The future of global commerce and trade will be shaped by emerging industries that embrace increased automation, digitalization, and sociopolitical awareness.
For instance, Ernst and Young forecast that, over the next 10 years, the sectoral contributions to trade will become “increasingly concentrated”, with machinery, transport equipment, and other manufactured goods making larger contributions. These sectors are expected to account for 57 per cent of the overall rise in global trade from 2010–2020.
Foreign direct investment in rapid-growth markets
Foreign direct investment (FDI) is set to play a huge role in the development of global business. While many businesses currently prefer models of local investment through resident shareholders, increased globalization will see FDI play a larger role in financing business.
According to Ernst and Young, FDI will likely be channeled to emerging markets over the next 10 years, raising the need for a local presence. Two-thirds of companies interviewed by the consultancy also said that their supply chain is increasingly servicing their business’ growth in emerging markets.
Some markets, naturally, will boom at a faster rate than others. EY predicts that the Asia-Pacific region will be the leader in world trade by 2020 and that nearly half of Asia-based companies will export more than 60 per cent of their output in five years time, compared with fewer than a fifth of companies in the Americas.