Since various enterprises and organizations spread worldwide to secure a client premise, the most rational scenario of globalization and de-globalization would be continued globalization. In 2050, this situation will likely increase family income and raise funds in developing countries allowing for more extensive commodity sales.
There will be a rapid shift in the global economic balance between now and thirty years to come. The global economy is expected to undergo a translation, shifting from emerging markets and developing countries to the E7 economies. These countries have the most superior economic performance in emerging economies, i.e. China, Mexico, Brazil, Russia, Indonesia, Turkey, and India. By GDP, China and India are the largest economies worldwide (Peng, 2021). Even though China’s economy is more significant than India’s, it is expanding rapidly, exceeding 9% annually. However, China will likely be defeated by the United States by 2050 and become the leading economy worldwide. Moreover, the United States GDP may fall by 10%, placing it third overall. As a result, the United States, India, and China will be the world’s leading economies.
In recent years, Brazil, Russia, and Mexico have initiated the process of global integration and implemented economic reforms. Therefore, they will begin to contribute to creating wealth globally as they continue to seek power. Moreover, this will be led by the increasing population growth and technology-driven advancements in economic productivity. According to past reports, more than half of the global population has internet access to the Internet, contributing to the nation’s economic expansion in the developed world. Therefore, the average incomes will be higher in advanced economies.
A company’s performance is determined by the resources it has at its disposal. Therefore, its usage and configuration determine if the company is ready for de-globalization or globalization. For companies to be prepared for globalization, their resources must be unique, valuable, and challenging to replicate and generate competitive difference and customer value delivery. The competitive advantages can help the organization gain more profits, especially in the future. For instance, a company like Apple has unique resources, such as software and hardware platforms, that have evolved from technological improvements and innovations. As a result, it has succeeded in adding profits and is one of the most valuable companies in the world.
If companies want to de-globalize, they should use resources that add value. According to Peng (2021), resources without value might be vulnerable to the organization and not a strength. As a result, organizations that have resources across all resource-based frameworks will sustain a competitive edge and succeed in the market. Thus, organizations should prioritize their reputation and brand to compete globally.
However, if a firm is prepared for the two events, its resources should be scarce. Companies with the highest performance have the unique expertise, insights, and opportunities to produce global economic value. By utilizing and building combinations, these unique resources should have distinct characteristics for the company and change, and companies should achieve and maintain competitive advantage. For instance, Amazon has vast book warehouses and online stores, challenging other companies worldwide to duplicate their resources. Organization’s cooperation should also add value, for instance, improved networks and interactions with other organizations in other countries. Nevertheless, resources may still need to be developed if other nations’ channel networks create economic value.
Global enterprises are affected by informal and official institutional restrictions. According to Peng (2021, informal institutions include ethics, norms, and cultures, whereas formal institutions comprise business regulations, property rights, and investment laws. According to bank reports, organizations should prepare for globalization based on government rules, including taxes, inspection, and licensing. Furthermore, based on the institution’s perspective, an organization should adopt policies and processes to emulate and be accepted in the international workplace. It should also ensure it is respectable to advocate for accessible and developing markets and reduce trade barriers and taxes on products and services.
In recent years, concerns about the impending global financial crisis led by weak productivity in emerging and developed companies have existed. Therefore, companies that opt to shift to globalization should reduce tariff barriers; no laws on investments and trades that are geographically and culturally close to the local market. As a result, companies can produce products locally for exports or abroad, raising productivity and output while increasing competition. Nonetheless, when trade barriers are limited, the competition intensity might prevent a company from utilizing markets. Additionally, informal institutions affect companies’ performance. Therefore, it is essential to understand their culture and norms in preparation for globalization (Peng, 2021).
On the other hand, organizations that want to shift to de-globalization should have higher taxes and trade barriers. However, these high rates hinder exporting resources to target markets. In addition, arbitrary challenges undermine economic efficiency, limit the choice of resources, force customers to pay high prices and hinder competition across nations.
The Automobile Industry’s Future
Utilizing the five forces concept requires identifying and gathering competitive knowledge on current and future rival companies. These five forces comprise competitors in the industry, the threat of substitutes, the bargaining power of buyers, the threat of new entrants, and the bargaining power of suppliers. In the automobile industry, the threat of new entrants is low due to the vast amount of required investment, legal requirements, difficulty in accomplishing economies of scale from small firms, and high competition from existing brands. For instance, in replacing internal combustion engine cars, new entrants like BMW and Tesla have already entered into electric vehicles (EVs), which are led by managerial and technical abilities to have reduced market shares of automobiles (Bagloee et al., 2016).
Automobile companies aim to ensure that people can commute with no challenges. Despite multiple means of transport such as buses, taxis, planes and transport, no company provides the accessibility and convenience of having an automobile. As a result, the threat of substitutes becomes weak. Third, the competitive rivalry force in the industry is high. Aspects such as prices, quality, design, and technology influence the competition between existing firms (Griffin, 2020). For example, there is high competition between the US, Japan, Europe, and South Korea.
Based on the bargaining power of buyers, it is moderately high. According to Griffin (2020), since the automotive design development, this industry has concentrated on the most purchased EVs and UVs. For example, in the cost of ride-sharing, the driver accounts for approximately 60%, whereas AVs can lower expenses since the driver is not required. Moreover, the bargaining power of suppliers could be more substantial since there are large suppliers in the industry. For example, before 2017, Tesla launched a luxurious Model 3, selling approximately 320 000 cars.
The emergence of foreign competitors with the required technology, management skills, and capital has started to threaten the market share of various automobile firms. Thus, using the five-force concept, the industry will likely appear different in the next thirty years. For instance, the development of electric vehicles can result in a decline in the world’s oil consumption by 24%. Therefore, new entrants in the industry are encouraged to create a lasting presence as electric manufacturers and make decisions to overcome market challenges.
Rather than companies focusing on customers purchasing other vehicles, it is essential to look at the use of buses, aeroplanes, and trains. The higher vehicle operating costs by 2040 will have many individuals seeking alternative transport options. In addition, with firms investing in technology, research and development (R&D), and marketing, there is high competition between automobile companies and nations such as India, the USA, and China. As a result, it is predicted that there will be intense competition in 2040.
The suppliers in the EVs market have a low bargaining power since manufacturing EVs is costly, and there is a wide range of recent technological advancements. There are many suppliers in the industry, and manufacturers have multiple options. Therefore, suppliers that use advanced technologies specializing in eco-friendly materials and quickly adapt to changing consumer demands will increase their bargaining power of suppliers in 2040.
Based on the bargaining power of buyers, consumers may be dissatisfied with products provided by certain firms and look for other alternatives. However, by 2040, electric vehicles will likely be widespread, providing a wide variety for buyers; technological advancements will make vehicles more affordable and accessible.
The advantages of the innovation of autonomous vehicles exceed its drawbacks. First, many car accidents in the past years have been caused by human errors such as distractions or being drunk. Thus, using advanced systems and algorithms, computers will eliminate human errors and reduce accidents by 90% (Bagloee et al., 2016). The other benefit is savings costs for society. Reports show that reducing accident-related costs, more efficient transportation, reduced strain on health, and better fuel savings will result in societal cost savings.
The other factor weighing the pros and cons of autonomous cars is reducing greenhouse and environmental carbon emissions (Bagloee et al., 2016). These cars will likely be electric rather than use internal combustion engines. In addition, the consistent speed of the vehicles will reduce continuous accelerating and braking. These factors will result in reduced emissions and becoming environmentally sustainable. Lastly, that traffic could be controlled more quickly in urban areas, thus preventing traffic jams, reducing emissions, and reducing commute times.
Although ride-sharing has various drawbacks, such as negatively affecting repair shops, car dealerships, and parts manufacturers, its advantages exceed these cons. One of its advantages is reduced accidents since they have a global positioning system (GPS) and driver ratings. In addition, since most private cars are parked around 95% of the time, it becomes difficult to decrease the amount of urban area lost for parking. Therefore, private ownership is no longer critical if a shared vehicle can transport individuals to their destinations. Moreover, it is cheaper than public transport; individuals can commute anywhere easily and conveniently, reducing traffic congestion and emissions since people can share cars together.
Bagloee, S. A., Tavana, M., Asadi, M., & Oliver, T. (2016). Autonomous vehicles: challenges, opportunities, and future implications for transportation policies. Journal of modern transportation, 24, 284-303. https://link.springer.com/article/10.1007/s40534-016-0117-3
Griffin, M. (2020). The future of work in the automotive industry: The need to invest in people’s capabilities and decent and sustainable work.
Peng, M. W. (2021). Global strategy. Cengage learning.