Trends that will shape the future of global trade

 

The 2008 global financial crisis was a whirlwind of disaster that impacted trade and commerce across the world. Since the recovery, many trends have come to light that will help determine the future of global trade. Being aware of these four key trends can help you steer your business strategy and goals in a profitable and sustainable direction.

 

Meteoric growth of e-commerce

 

According to consulting giant McKinsey & Company, today’s digital form of globalization has changed the game for developing countries, small and medium-sized enterprises (SMEs) and individuals, enabling them to directly compete with larger multinational companies.

 

Thanks to e-commerce marketplaces such as Alibaba.com, e-commerce is now responsible for approximately 12 per cent of the global goods trade. Many of these deals are made possible through small local manufacturers and suppliers. Moreover, digital technology continues to develop, creating access to more regions and individuals. According to a recent PwC report, Europe's creative sector has experienced 1.2 per cent in annual growth since 2003, primarily due to e-commerce.

 

The 2015 Global Retail E-commerce Index by A.T. Kearney additionally reports that the US, China and the UK lead the world respectively in e-commerce activity. According to Euromonitor, global e-commerce sales will reach US$1,506 billion by 2018 – a marked growth rate from US$695 billion in 2013. Electronic goods, clothing and books are among the most popular products bought online.

 

The results are clear: more business is going online, and the marketplace will become more democratized as the internet significantly reduces the barrier to entry for entrepreneurs.

 

Environmental sustainability

 

Our global footprint on the environment is a heavy concern today, and will eventually impact the future of global trade as consumers increasingly choose to support environmentally responsible businesses.

 

According to EY, climate change regulations, policies and resource supplies will change the way many companies do business, including their transportation and manufacturing processes. Sustainable environmental practices also impact a company’s brand reputation and leadership values.

 

Alibaba.com creates online opportunities for businesses to reduce their overhead costs and carbon emissions by joining an online marketplace. Creating local networks of suppliers and distributors can also reduce transportation costs and unnecessary carbon emissions.

 

Shifting focus on different industries

 

The future of global commerce and trade will be shaped by emerging industries that embrace increased automation, digitalization and sociopolitical awareness.

 

For instance, EY forecasts that over the next 10 years, the sectoral contributions to trade will become "increasingly concentrated", with machinery, transport equipment and other manufactured goods making larger contributions than during the preceding decade. Collectively, it predicts that these sectors will account for 57 per cent of the overall rise in global trade during 2010–20.

 

Researching these emerging industries helps businesses create a sustainable business model to accommodate future trends.

 

Foreign direct investment in rapid growth markets

 

Foreign direct investment (FDI) is set to play a huge role in the development of global business. While many businesses currently prefer models of local investment through resident shareholders, increased globalization will see FDI play a larger role in financing business.

 

According to EY, FDI will likely be channeled to emerging markets over the next 10 years, raising the need for a local presence. Two-thirds of companies interviewed by the consultancy also said that their supply chain is increasingly servicing their business’ growth in emerging markets.

 

Some markets, naturally, will boom at a faster rate than others. EY predicts that the Asia-Pacific region will be the leader in world trade by 2020 and that nearly half of Asia-based companies will export more than 60 per cent of their output in five years time, compared with fewer than a fifth of companies in the Americas. The report also quotes a global chief economist saying that being in Asia “is a must if you want to survive”.

 

 

Global trade is on a growth trajectory that will see it shape the way both large enterprises and small startups do business in the next few decades. Aligning your business model and strategy to embrace and accommodate future global trends will help ensure you remain globally sustainable for years to come.  

 

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