Case Study 1

Trade wars and the tit-for-tat tariffs between the U.S. and China have contributed to a slowdown in global trade (Donnan 2019, para 7). Is globalization really slowing? Maybe, if you only look at the trade in physical goods. But that doesnt take into account an explosion of the digital economy. Thats important. Increasingly, the digital realm is where the 21st-century economy lives (Donnan 2019, para 6).

As economies mature, were selling the rights to produce something to someone in another country rather than shipping it to that country. Those changes also mean less physical trade in goodsno CD crosses a border if youre streaming the latest Ariana Grande song. Yet that doesnt mean globalization is slowing. It means it is maturing and evolving (Donnan, 2019).

Remarkably, digital flowswhich were practically nonexistent just 15 years agonow exert a larger impact on GDP growth than the centuries-old trade in goods, according to a new McKinsey Global Institute (MGI) report, Digital globalization: The new era of global flows. And although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well.

The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.

In this increasingly digital era of globalization, large companies can manage their international operations in a leaner, more efficient ways. Using digital platforms and tools, they can sell in fast-growing markets while keeping virtual teams connected in real time. This is a moment for companies to rethink their organizational structures, products, assets, and competitors (Manyika, 2019).

Donnan, S., & Leatherby, L. (2019, June 23). Globalization isnt dying, its just evolving. Bloomberg. Retrieved from https://www.bloomberg.com/graphics/2019-globalization/

Manyika J., Lund S., Bughin J., Woetzel J., Stamenov K., Dhingra D. (2016). Digital globalization: The new era of global flows. McKinsey & Company. Retrieved from: https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/digital-globalization-the-new-era-of-global-flows

Since the 2008 crisis, there has been a slowdown in foreign direct investment (FDI) yet the share of revenue companies derive from countries outside their home market is far greater than it once was. Can this be attributed to the explosion of the digital economy? If so, how?

Has digital globalization already surpassed conventional global trade? If not, when might that happen?

Can this digital form of globalization open the doors to developing countries, small companies and individuals? If so, how?