Anyone interested on how the barriers of commerce are disappearing has read “The World is Flat” by Mr. Freidman (http://www.thomaslfriedman.com/). Some of the concepts presented in this book released in 2005, like the 10 forces that flattened the world (open-sourcing, outsourcing, digital, mobile, etc.) are familiar subjects to executives in the IT industry.
Meet Mr. Pankaj Ghemawat (https://www.ghemawat.com/), who authored the recent Harvard Business Review cover article “Globalization in the Age of Trump”. Mr. Ghemawat states that people overestimate the intensity of the global business, and that cultural, administrative/political, geographic and economic factors represent major globalization hurdles.
To highlight his thesis, Mr. Ghemawat has come up with a “Globaloney Gap” that shows the difference between actual data and what people believe for some globalization metrics. For example, Foreign Direct Investment, as a % of Gross Fixed Capital Formation, is less than 10% while people think is closer to 40%; and net actual Exports as a % of GDP, is 20% while people surveyed says it’s around 40%. (Net Exports data does not double count commerce between intermediaries’ countries).
Flat World or just Globaloney? Our take is that these two positions are not in contradiction as they initially appeared to be. Mr. Friedman, as a journalist, highlights some interesting trends and shapes a vision of a flat world. And, Mr. Ghemawat, an economist, presents how despite all the conversation on this topic, globalization and its potential benefits have a long way to go. Also, Mr. Friedman’s view is closer to reality for very large firms. The large number of small and medium-size business (SME), which represent an important percentage of a country’s GDP but have a lesser international presence, help drive the globalization metrics presented by Mr. Ghemawat down.
On this last topic, the Organisation for Economic Co-operation and Development (OECD) has studied the SME and their internationalization process. It has concluded that when trying to expand abroad, SMEs face critical constraints like identification of business opportunities, getting information on local markets, establishing business contacts, and acquiring managerial time, skills and knowledge.
LinkIT LATAM supports our clients overcoming the constraints factors identified by the OECD, making their international venture profitable and less challenging. And in the process, we contribute to make the world a bit flatter!