The past five years have been a period of unprecedented turmoil for every company in the world. With geopolitical tensions, pandemic and armed conflicts, an environment of uncertainty and instability has hovered over the world generating a significant impact on globalization.
Together with the partner international institutions, we have produced a report on the new global business scenario. The first phase of this report presents the results of a survey on the impact that external factors have had on companies in recent years. The goal is to identify challenges faced by organizations and analyze their adaptation strategies. See a summary below!
External factors: globalization turmoil
The survey results showed that 87% of respondents reported a significant impact on their company’s activities. The interruption of production, price increases, change and internalization of input production were some of the various measures that companies adopted to deal with the challenges.
However, it is undeniable that organizations reacted in different ways depending on each sector, location and degree of internalization. Companies from developed countries were much more impacted by external factors, 94% according to the survey results. Companies from emerging countries had an impact of 84%.
In the industrial sector, the petrochemical sector was the most affected, with 94% impact, while the pharmochemical sector presented only 23% of the impacts, being the least affected.
According to the survey, the external factors that most impacted companies were the restrictions caused by COVID-19, with 90% of them indicating a medium or large impact.
Restrictions also affected imports, with a significant 82% experiencing medium or large impacts. Disruptions in operations had a medium or large impact for 78% of companies.
Geopolitical factors, specifically economic sanctions, demonstrate a real impact in recent years, with 71% of companies indicating medium or large impacts. Finally, military conflicts, especially the Ukraine War, generate a 51% impact for companies on their businesses.
It is noteworthy that, among the countries participating in the survey, the United States was the one that most reported difficulties due to armed conflicts, with an indication of 70%, while Nigeria had a lower impact due to this factor, with a representation of 46%.
Changes in companies due to global turmoil
Even after the pandemic was overcome, uncertainty on the international scene led companies to take adaptation measures. The war in Ukraine and geopolitical tensions between the world’s economies continue to have major impacts on business.
Most organizations have chosen to make all or part of the changes implemented in recent years permanent.
The structural changes implemented can have a major impact on international economic relations. Companies are adapting to a more complex and uncertain world.
Losing countries in globalization
With globalization, the search for suppliers and internalization of processes meant that some countries were excluded from the list of sources of productive inputs for companies.
China, a major global exporter, suffered significantly from reductions in exports due to the changes, 35% of companies reported a significant decrease or suspension in the country. Russia, on the other hand, lost ground in domestic transactions of 1%, a remarkable decline, since the country is the 11th largest exporter, according to the WTO.
Sub-Saharan Africa and Western European countries were the groups that considerably reduced their trade relations with Russia. 27% (Africa) and 20% (Western Europe) indicated that there were interruptions in imports.
Winning countries in globalization
By stopping their imports, several companies have chosen to seek new suppliers in other nations as an outlet. China stood out as the main destination, with an incredible 16% reporting it as a new supplier.
The United States and India also stood out, with an 8% and 5% share. The food and beverage sectors, along with distribution, did well, with an increase in imports of, on average, 13%. Intermediate goods industries lead the list in terms of trade relations with China with an index of 41%.
In regards to regions, LATAM stood out as the one that most strengthened trade relations with the United States, with a fascinating 33% increase.
The globalization scenario tends to face frequent changes, companies increasingly need to be prepared to adapt.
To understand more about the scenario that is shaping globalization and what are the trends that will shape the future, participate in Global Management Week 2023, which will take place on September 26, 27 and 28, where we will discuss Climate Change, Artificial Intelligence and the Future of globalization. Sign up here.