Going Local To Survive Creeping Protectionism

Despite the whiplash most of the world felt with such largely unexpected developments like Brexit and the election of Donald Trump, we still all too often fall into comfortable decision traps in thinking about the future.  Just below the surface of these “shocks” are some fundamental tectonic shifts in the assumptions on which way the global business environment operates.  A few years ago, I presented findings at the World Economic Forum annual meeting in Davos that foreshadowed a more protectionist and less integrated world. Many observers expressed skepticism, believing that globalization was an immutable, irreversible force of nature.

Now, more than two years later, the notion that globalization should no longer be taken for granted is a broadly accepted truism. Indeed, results from A.T. Kearney’s 2018 Foreign Direct Investment Confidence Index, released on May 2, indicate that investors have accepted that globalization is being challenged and are seeking practical ways to ensure continued access to key markets. 89 percent of investors surveyed in the report, for instance, indicate that their company is pursuing or considering implementing localization practices. When asked why, 34 percent of investors indicated that they were doing so because it was required for market access. Another 29 percent reported doing so because of government incentives to localize. Localization—the practice of shifting a company’s management, operations, production, or marketing to local markets—has therefore emerged as a popular hedging strategy that allows businesses to better avoid the pain of sudden trade and market disruptions.

By: Paul Laudicina

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