Globalization Recedes from Its Prior Dominance

Corporate executives believe that consumers will increasingly prefer locally or regionally produced products.
David McCannAugust 16, 2019

It wasn’t so long ago — just a few years — that globalization was a dominant business theme. Today, many companies are creeping in the opposite direction.

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In a survey of 444 C-suite executives by management consulting firm A.T. Kearney, almost half (46%) of them said it was “likely” that over the next year more consumers will prefer local, sustainable, and personalized products.

A third (33%) of the participants found that trend to be “unlikely.” The 13-point spread between the two responses was the greatest among 10 potential trends the survey probed.

The finding “reflects the escalating pressures facing multinationals and the broader retreat over the past decade from the rapid globalization of the years prior to the Great Recession,” A.T. Kearney says in its survey report.

It adds, “A variety of economic, political, and technological forces have undermined the pace of globalization and generated an age of multi-localism — a period characterized by heightened preferences for local communities, industries, products, cultures, and customs.”

Likewise, 43% of survey respondents said it was likely that mayors and cities will play increasingly important roles over the next year in solving key policy issues.

Many national governments around the world are in a state of dysfunction, A.T. Kearney observes. In that environment, decision-making power is devolving to the local level.

For example, since President Trump pulled out of the Paris Agreement, the mayors of more than 400 U.S. cities have signed up for the Climate Mayors movement. And separate research by A.T. Kearney found that two-thirds of companies are engaging more with city-level stakeholders than they did in the past.

Indeed, the report notes, “as political leadership decentralizes, expectations are that companies will assume a more significant role as agents of broader social change. Executives anticipate that their role in tackling societal challenges will expand.”

Additionally, the rise of digital nationalism and more challenges to the free flow of information across borders are fueling uncertainty, according to the report. Among the survey participants, 44% thought it likely that regulatory restrictions on cross-border digital commerce will become more common over the next year.

“This expectation clearly tracks with recent events,” A.T. Kearney says.

For example, political leaders in the United States and Europe have ramped up calls for antitrust actions against major global technology companies and launched various initiatives for digital taxation.

Also, China and Russia are demanding internet sovereignty. And the European Union’s Global Data Protection Regulation is imposing strict rules on the international transmission of personal data within the EU.

On the other hand, executives still point to globalization as their most significant external opportunity. But while such a reaction might seem counterintuitive in the current environment of trade tension, it’s likely the result of opportunities associated with bilateral and regional agreements, A.T. Kearney observes.

Recent such deals include the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the EU-Japan Economic Partnership Agreement, and the pending United States-Mexico-Canada Agreement.

“Executives are likely seeking ways to capitalize on and adapt to these regional agreements by adjusting their global footprints,” the report says. “They increasingly see opportunities in a transformed external environment defined by local and regional — rather than global — dynamics.”