In the span of just 6 months, the pandemic has utterly transformed the world and how it operates. Although the health crisis is still a major issue that demands the world’s attention, business leaders are already trying to measure its current impact and forecast changes it may cause in the future.
In particular, entrepreneurs are taking a closer look at supply chains and how to make more manufacturing processes domestic. Why? Because coronavirus has severely affected global supply chains that connect industries and producers across borders and countries. As just one case study, data from the first months of 2019 compared to the first months of 2020 show a dramatic dropoff in trade between China with the EU and US.
Below, we’ll dive into COVID-19’s influence on globalization. Many countries are coping with broken and disrupted supply chains and dealing with reluctant international trading partners, for example. We’ll also discuss how businesses are overcoming and adapting to the new challenges the pandemic has brought forth.
What is Globalization?
Globalization is used to characterize the interdependence of the world’s industries, economies, cultures, and populations thanks to the exchange of services, technology, goods, and information. Companies, especially large corporations with a large reach, depend on globalization to expand their business efforts, increase growth, and increase profits. Globalization has taken a hit in the age of COVID, however.
The economy of the world at large was already in a fragile state in the beginning of 2020. This fragility was intensified when the health crisis arrived on the world stage. Because of the coronavirus, supply chains were thrown into disarray as manufacturing either totally shut down or was drastically reduced. The ripple effects were felt in almost every industry as a result. Businesses couldn’t get the parts they needed due to supplier and vendor issues. Events and product launches were canceled. Stock markets took a nosedive.
Because of this, many businesses have been re-evaluating their reliance on international suppliers and manufacturers and looking for a way to manage supply chains domestically. Many economists note that this is simply pushing the fast-forward button on a trend that was already happening before the pandemic.
Companies will likely always rely on international trade partners and suppliers in some capacity, but there has been a shift in focus toward creating domestic supply chains that are less likely to experience disrupted production during a crisis.
Why is China used as a Case Study for Globalization in the Age of COVID?
As the epicenter of the pandemic, China played a key role in how the international markets reacted to the virus. Exports from China fell by 17% in the first months of 2020 and imports to China from elsewhere slowed by 4%. This decline impacted some markets more than others.
China has undergone massive changes in the decades leading up to the pandemic and it’s a huge influence in the global markets. When something occurs in China that changes its production and manufacturing lines, there are repercussions on trading partners all over the globe as a result.
How are Businesses Adapting to COVID?
Businesses are looking forward to the future to determine how best to operate in light of the pandemic. Below, we’ve outlined a few of the ways businesses are tackling challenges and creating new opportunities.
Companies far and wide have had to adapt their business models to meet the challenges of the pandemic. Restaurants have moved to takeout only, for example. Businesses designed around in-person events like wedding planning companies or major conventions have moved their sales and promotion to the online world.
Some companies have even pivoted their production lines to support the creation and distribution of personal protective equipment and other products desperately needed during these times.
Better Worker Benefits
Whether businesses are offering work-from-home, flexible schedules, or estate planning — companies both large and small are grappling with the best ways to support their employees. The pandemic has created a human-centered need for change outside of profits, growth, and sales.
Instead of in-person meetings, presentations, conventions, workshops, and lunches, business networking has moved into the virtual sphere. Thanks to an influx of digital tools, companies can easily collaborate and coordinate workflows with employees, clients, and shareholders across different time zones and continents.
Businesses have managed to creatively solve the dearth of in-person events by substituting them with engaging online events to showcase new products, network with potential business partners, or discuss new initiatives.
Reliance on Automation
In order to accommodate the safety and distancing rules mandated by governments across the world, companies are beginning to turn to automation as a way to comply. Through the use of machines and computer software, businesses can focus on improving efficiency while keeping their human workforce safe.
Tons of industries will be affected by the transition to automation but the biggest effects will be seen in personal transportation, AI data tracking, public transport, consumer processes, and manufacturing.
Takeaways: Globalization and COVID
COVID-19 has certainly changed the business and industry landscape. Its impact will likely be felt for decades to come. With that said, businesses have shown resilience through this period of extreme hardship. Although international supply chains may falter in the short-term, the interdependency of global economies may grow in the future. Globalization itself might change as a result of the pandemic, too.
Regardless, it’s important for business leaders to take steps to build out the flexibility of their companies so they can weather future storms brought by international crises like the pandemic. There’s a reason why “adapt and overcome” is a popular turn of phrase — it’s because it reflects the resiliency necessary for business owners to have during these troubled economic times.
Many businesses have failed during the health crisis, while others have discovered new growth and new opportunities. Some businesses have been able to tweak their business model, products, and processes to answer to the new needs created by the coronavirus. One thing is for sure: the future is still full of potential for companies willing to take on challenges.
About the Author
Samantha Rupp holds a Bachelor of Science in Business Administration and is the managing editor for 365businesstips.com. She lives in San Diego, California and enjoys spending time on the beach, reading up on current industry trends, and traveling.