5 impacts of globalization on the workplace11/10/2022 ![]() Known as sovereign wealth funds (SWF), these vehicles are often established with seed money that is generated by government-owned industries. Visualized: The World’s Largest Sovereign Wealth Fundsĭid you know that some of the world’s largest investment funds are owned by national governments? Policy makers and business leaders must understand how the trade landscape is shifting so they can prepare for globalization’s next chapter and the opportunities and challenges it will present. The window is narrowing for low-income countries to use labor-intensive exports as a development strategy Strengths in innovation, services, and highly skilled talent put advanced economies in a strategic position to benefit from changes in globalizationĭeveloping economies with close proximity to large consumer marketsĪs production moves closer to consumers, developing economies in close proximity can take advantageĭeveloping economies that are less connected What types of countries are likely to benefit from these shifts, and which will face headwinds? Type of economy – McKinsey Global Institute Why These Changes Matter The mix of countries, companies, and workers that stand to gain in the next era is changing. Since 2013, intraregional trade has increased by 2.7 percentage points – a reverse from the longstanding trend. The geography of global demand is changing as emerging markets consume a higher percentage of total goods. Trade is becoming more concentrated within regions ![]() This spending has increased from 5.4% to 13.1% of revenue over the period of 2000-2017.ĥ. ![]() R&D and innovation are becoming increasingly importantĬompanies are spending more on R&D and intangible assets such as brands, software, and IP as a percentage of overall revenue. However, in value chains today, only 18% of the goods trade is based strictly on labor-cost arbitrage.Ĥ. It’s a common perception that trade flows are driven by companies searching for low-cost labor. Labor-cost arbitrage has become less important However, services are becoming increasingly important to the global economy – and if accounted for properly, it’s possible that the value of services is closer to $13.4 trillion, which is higher than the total goods trade.ģ. When we think of trade, we often focus on the trade of physical goods (i.e. Services trade is growing 60% faster than goods trade More specifically, during the span of 2007 to 2017, gross exports as a percentage of gross output decreased from 28.1% to 22.5% globally.Ģ. Trade is still growing in absolute terms, but a smaller share of the physical goods made worldwide is now being traded. A smaller share of goods is traded across borders The report looks into 23 different industry value chains in 43 different countries, representing 96% of global trade.įrom that comprehensive data, five major structural shifts have been identified:ġ. Even a minor change in this paradigm could affect the list of countries, corporations, and workers that stand to benefit. ![]() The impact that these shifts could have on the global economy is substantial: international trade already adds up to $22.4 trillion each year, or about 28% of global GDP. “Globalization in transition: The future of trade and value chains” The findings of the report show that globalization is not static or constant, and that structural changes in the nature of globalization have been occurring in the background over the last decade or so. Today’s infographic highlights the most recent research about globalization from the McKinsey Global Institute, the business and economics research arm of McKinsey & Company.īelow are five major shifts that have gone mostly unnoticed, as well as the countries and companies that could benefit: That’s because there is growing evidence that globalization itself is quietly transforming – and how it ultimately evolves may be markedly different from what most business leaders might expect. The world economy has become increasingly connected and interdependent over recent decades, and conventional wisdom suggests that this will only continue in the years ahead.īut while it’s tempting to extrapolate the past effects of globalization into the future, such a leap may also be a mistake. Globalization has been a powerful force in shaping modern human history. ![]()
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