Digital Megatrend 6: Globalization drives centralisation

globalisation

Digital is accelerating the creation of global markets for products and services. Consumers in Milwaukee can buy products direct from manufacturers in Manila. Even if they don’t choose to buy this way, they can search for prices globally at the click of a mouse, putting pressure on retailers to match prices in other markets (or risk ‘grey market’ growth).  Small and medium sized enterprises (SMEs) are seizing the opportunity, using digital channels to increase their global footprint. McKinsey research suggests that SMEs with high digital adoption grow exports twice as fast as those with low digital adoption.

In business-to-business (B2B) markets, multi-nationals are putting pressure on their suppliers to create globally standardized and integrated offerings.  For example, a global consumer goods company now expects to see a consolidated picture of its cash position across all countries and currencies, and will ask its bankers to provide this.  The same company will want to create a consolidated and near-real time picture of its global supply chain, and will ask its supply chain providers (e.g., manufacturers, logistics companies) to provide a consolidated view of inventory and location.

Firms will need to react to these trends. Retailers will need to converge global prices for products and services that can be easily shopped cross-border. And they should create local differentiation where possible, for example by bundling local services (e.g., country-specific social networks) with global products. B2B providers may need to converge their service offerings towards a global standard.  For many multi-nationals, this will require a significant shift in the relationship between regions and the corporate centre. Global standards require a strong centre that can drive convergence where it is needed, but also a smart centre that can free regions to innovate and customize where it makes sense.

Look out for further Digital Megatrends soon.

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