Coca-Cola CEO Roberto Goizueta’s motto was “Think Global, Act Local.” Confused by this message, one of his successors, Doug Daft, changed it to “Think Local, Act Local.” Does either apply now?
In 1965, media philosopher Marshall McLuhan coined the term “the global village.” That was 40 years before New York Times columnist Tom Friedman celebrated global interdependency in his 2005 book, The World Is Flat. In fact, in 1996, Friedman even more optimistically proclaimed that no two nations that both had McDonald’s franchises would wage war. Sadly, that wasn’t true in Africa, the Middle East or Central Europe back when he wrote it, and the 110 McDonald’s restaurants in Ukraine and 860 McDonald’s in Russia underscore just how naive the sentiment remains today.
BlackRock CEO Larry Fink recently remarked on the fizzling of the era of globalization in his firm’s annual report. “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades,” he wrote.
This sudden shift in sentiment has come as something of a shock to business leaders and CEOs, given that the promotion of business economic interdependence beyond simple mercantile colonization has been a steady drumbeat since economist David Ricardo’s theory of comparative advantage. His 1817 classical treatise formalized the theory of comparative advantage. Ricardo argued that free trade between two or more countries can be mutually beneficial, presuming all bring their most efficiently produced goods and services to global markets—not anticipating predatory tactics, wars, political restrictions and pandemics.
A backlash was most dramatically demonstrated in the mass street protests at the 1999 World Trade Organization’s conference in Seattle, called the Battle of Seattle. That 60,000-person protest was a coalition of labor organizations, media activists and NGOs. Now, in the aftermath of supply-chain disruptions, the loss of access to secure energy supplies, semiconductors, antibiotics, battery components and other vital materials, business leaders like Fink are calling for a return to more self-reliance. At a Yale CEO Caucus held in March, 73 percent of multinational CEOs agreed with the statement, “I am rethinking my company’s global strategy given geopolitical turbulence.” Seventy-six percent agreed with “I am concerned about my company’s dependence on global supply chains.”
At the same time, the importance of global markets and the dependence upon natural resources outside this nation cannot be denied. Stanley Black & Decker CEO Jim Loree complained this fall that supply chain clogging almost tripled his trapped in-transit inventory.
Thus, the implications are:
• Regional free-trade pacts: “Engage with your allies,” advises Lance Fritz, CEO of Union Pacific. “Trade supports 41 million jobs in the U.S., a great source of economic might for us and a great counter [to the] global behavior of China and Russia… The Indo-Pacific economic framework is a great starting point.”
• Redundancy: With just-in-time source moving to just-in-case with both duplication and flexibility for rerouting paths, Yale operations expert Sang Kim warns, “Since most supply chains are optimized for efficiency, there is not much room for significant errors, which are magnified in the stretched, globalized supply chains that we have today… Building flexibility, such as rerouting production capacity to certain goods at the expense of others, is a more cost-effective solution.”
• Reconceptualizing realities: To generations who did not lead during Cold War times, it may be hard to recognize that global brands may no longer be the bridge to world harmony, as economic globalization advocates once proselytized.
At the 1997 funeral of Coke CEO Goizueta, a fervent globalist, the recessional featured the Grammy-winning song “I’d Like to Teach the World to Sing (In Perfect Harmony),” recalling smiling young people of different nationalities, each holding a Coke. Their chorus chants, “It’s the real thing.” Really?