Firms in a tough global environment

Strategy thinkers have to redesign firms

The scaling back of cross-border restrictions on the movement of goods, services, capital, labour, and ideas - was a central source of high economic growth in the post-war period. There are four concerns or problems roiling this global environment. Just as greater integration creates growth in gross domestic product (GDP), de-integration creates a decline in GDP. It is in the interests of policymakers everywhere to grapple with the problems of protectionism to better contain China, and to engage in unilateral liberalisation. Strategy thinkers in financial and non-financial firms need to critique and correct organisation designs to fare well in this evolving landscape.

1. From about 2018 onwards, we have been in "the third globalisation", where economic engagement into the advanced economies is now more restricted for the countries which have poor alignment on foreign policy and military affairs. The second globalisation argument that giving access to globalisation to countries like Russia or China would work out in the end because these countries were groping their way to freedom - has been proven wrong.

Each undeveloped country has a rough struggle over many generations in its journey to prosperity and freedom, and there is merit in the third globalisation strategy. Along the way, it involves the destruction of tangible and intangible capital such as factories in China, oil extraction in Siberia, and justin-time production chains involving China. This decline in capital stock is a one-time negative level shock to global GDP.