International business

1. The state of Globalization:
What Is Globalization?
Globalization is the process of interaction or integration among people, companies, and
government over the world wide.
It is also a policy to collaborate with world to open its restrictions on trade.
As the coronavirus swept the world, closing borders and halting international trade and
capital flows, there were questions about the pandemic’s lasting impact on globalization.
 But a close look at the recent data paints a much more optimistic picture.
 Global business is not going away, but the landscape is shifting, with important
implications for strategy and management.
 The Covid-19 pandemic is not likely to send the world’s level of globalization below
where it stood during the 2008-09 global financial crisis. According to the 2020
edition of the DHL Global Connectedness Index, which we released in December.
 The index measures globalization based on more than 3.5 million data points on
trade, capital, information, and people flows.
 The only part of the index showing an unprecedented collapse due to Covid-19 is
people flows. Trade has rebounded strongly, capital flows are recovering, and digital
information flows have surged.
 Trade Flows: Trade in goods dropped faster in March and April 2020 than during
the Great Depression and the global financial crisis.
 But it started growing again in June and rocketed all the way back to its pre-
pandemic level by November.
 Despite early disruptions, trade turned out to be a lifeline for economies and health
care systems.
 Trade in medical products and electronics (for working from home) soared, as social
distancing shifted spending from local services (e.g. restaurants) to imported goods.
 Capital Flows: Cross-border investment flows were hit even harder than trade by
Covid-19.
 Investors withdrew record amounts of portfolio capital from emerging markets at
the onset of the pandemic, but these flows quickly stabilized and then rallied in late
2020.
 International corporate investment, however, is still subdued going into 2021.
Foreign direct investment (FDI) flows, which involve companies buying, building, or
reinvesting in operations abroad, fell 42% in 2020, to a level last seen in the 1990s.
 Firms are understandably cautious about investing in new “greenfield” expansion
amid a fragile and uneven economic recovery.
 However, international mergers and acquisitions (M&A) started to show signs of a
pickup in late 2020, and the international share of M&A activity held steady last
year.

2.  Corporate dealmakers do not appear to have become more averse specifically to
international transactions.
 Due to the lockdowns and pandemic the investment should brighten But tighter
screening of foreign takeovers on national security grounds will remain in place, and
supply-chain diversification and partial reshoring will boost prospects for some
projects while making others less attractive.
 Information Flows: Before the pandemic, there were signs of a slowdown in
the globalization of information flows. The growth of international internet traffic,
phone calls, royalties, and scientific collaboration had all diminished.
 But then digital flows surged as the pandemic sent work, play, and education online.
 International internet traffic soared 48% from mid-2019 to mid-2020, and
international telephone call minutes rose 20% in March versus the same month the
previous year.
 According to one study, cross-border e-commerce sales of discretionary goods
spiked 53% in the second quarter of 2020.
 But the 2020 digital flows boom will have accelerated two longer-run shifts in the
business environment.
 First, it expands possibilities for services trade. The Covid-19 crash course in remote
work is teaching companies ways of working that can enable them to tap more into
foreign talent pools.
 Second, the expansion of cross-border e-commerce can help smaller companies go
global, but it also means that companies of all sizes need to be on the lookout for
new competitors riding this wave into their markets.
 People Flows: While trade, capital, and information flows all had positive roles
to play in the pandemic response, personal mobility had to be restricted to curb
transmission of the virus, prompting this year’s unprecedented decline in people
flows.
 The number of people traveling to foreign countries fell 74% in 2020. International
travel is not expected to return to its pre-pandemic level before 2023.
 Business trips were just 13% of international travel before the pandemic, but they
play key roles in facilitating trade, investment, and the management of global
corporations.
 Many governments have also taken major steps to open markets over the past year.
The Regional Comprehensive Economic Partnership (RCEP) was signed in November,
promising to simplify trade across a swath of the Asia-Pacific region that
encompasses almost one-third of the global economy.
 These moves are supported by public opinion data. Majorities across several
countries want more international cooperation, to support for globalization in
general and for immigration specifically.
 The bottom line for business is that Covid-19 has not knocked globalization down to
anywhere close to what would be required for strategists to narrow their focus to
their home countries or regions.

3.  Corporate globalization was never easy, but if international opportunities and
competitive threats mattered for a company before the pandemic, they will surely
continue to matter in 2021 and beyond