| | A report by Ernst &
Young in cooperation
with the Economist
Intelligence Unit (EIU)
highlights how
globalization slowed
during the financial
crisis and the
subsequent downturn. But
as the economy recovers
in 2010 the growth of
globalization will once
again resume, although
at a slower pace than in
the past decade, the
report predicts.
Redrawing the map:
globalization and the
changing world of
business draws on three
sources of original
research: a
Globalization Index,
created by the EIU, that
measures 60 countries
according to their
degree of globalization
relative to their GDP;
an online survey of 520
senior business
executives worldwide,
conducted in late 2009;
and a program of
in-depth interviews with
30 senior executives and
high-level experts.
The Globalization
Index, which runs from
1995 to 2013, gives an | |
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| | overview of how the
drivers of globalization
have evolved and will
continue to develop. The
index has five criteria:
openness to trade,
capital movements,
exchange of technology
and ideas, labour
movements and cultural
integration. Each of the
criteria’s weighting was
validated by the
business leaders
surveyed.
Globalization and
economic growth
James S. Turley,
Chairman and CEO of
Ernst & Young, comments,
“The long-term trend
toward increased
globalization has,
unsurprisingly, paused
in the last couple of
years. Countries and
corporates have been
retrenching while the
recessionary storm blows
over.”
The index measures
the relative level of
global engagement of a
country. It does not
measure the absolute or
relative impact a
country has on global
commerce or the global | |
| |
| | all the major emerging
economies becoming more
globalized. Also, the
contrast between 2010
and 1995 is even more
significant for certain
smaller countries like
South Korea and those
from Eastern Europe like
Romania. Both have seen
major advances in the
past 15 years.”
What does it mean
for business?
The temporary halt to
the trend in the last
two years does not alter
how significant the
longer-term implications
of globalization will be
for business. Companies
based in emerging
markets are looking to
compete more and more
with established
corporates from
developed markets. This
competition is playing
out not only in the
emerging markets
themselves but also
increasingly in Western
markets.
Turley explains that
to be a long-term winner
in this new globalized
world, “Companies must
rethink many aspects of | |
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| | their overall strategy
ranging from capital
raising to how they
source their products.
And as companies deepen
and broaden their
presence in
international markets,
the need for culturally
diverse management teams
becomes all the more
pressing.”
To fully maximize the
benefits of more open
global markets, business
will also have to make a
more concerted effort to
engage with governments
and other policy makers
on global issues such as
protectionism,
regulation and trade
As Turley concludes,
“Whether you like it or
not, globalization is
here to stay and will
deepen further over the
longer term. It can be
painful – but the
exchange of ideas,
culture, people and
capital is a force for
good from which the
majority of the world’s
population will see an
economic upside.” | |
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| | economy. This means that
countries that have
large domestic markets –
such as China, India and
the United States –
appear towards the
middle of the table.
Small countries that
rely heavily on exports
and world trade – such
as Singapore and Ireland
– appear at the top.
More closed countries –
such as Iran and
Venezuela – are at the
bottom.
Many of the same
countries that sat at
the top of the index in
the 1990s continue to do
so. Where there has been
significant change is
with the emerging
economies in the bottom
half of the index.
John Ferraro, Chief
Operating Officer of
Ernst & Young, explains,
“Although the index
questions whether the
degree to which a
country is globalized
correlates with its
subsequent economic
growth, it clearly shows | |
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