It’s hard to pinpoint many other tumultuous periods throughout history – bar two world wars – that have severely affected international business than what we’ve experienced this past twenty-four months. A perfect storm of unrelated incidents has taken place that has put global business under severe pressure.
In hindsight, the 2016 Brexit referendum can be seen as the beginning of pressures facing the UK and EU business relationships. The arrival of Covid-19 in the first quarter of 2020 saw a shutdown of global business seemingly overnight. Adding insult to injury, the Suez Canal Blockage lasted six days and put global trade on the ropes.
A perfect storm
As businesses started to dust themselves off from these three unprecedented events, the Russian invasion of Ukraine began, causing worldwide chaos and a mass exodus of Western companies from Russia.
As a result, companies worldwide face spiralling energy costs and an unprecedented cost-of-living crisis that shows no sign of abating.
In essence, Covid-19 has significantly accelerated massive changes in the way the world does business. Those changes can be seen in every industry, both public and private and in businesses and organisations of all sizes.
Optimism for the future
OCO Global works with clients in various sectors and across regions.
Over the last two years, we’ve heard from clients about what they’re currently experiencing and the opportunities they’re exploring. And far from being pessimistic about the future, many recognise new opportunities and are optimistic about the future. In some instances, things have gone full circle; hotspots from a decade or two ago are now reemerging as potentially attractive investments.
Because those locations can facilitate new opportunities and are, invariably, closer to home for the world’s biggest companies. That facilitation of new opportunities is due to being more agile thanks to the significant impact they’ve previously experienced, and, consequently, easier to deal with.
Clear patterns of opportunities are emerging, trends that we can’t afford to ignore:
Changes in global supply chains offer unique opportunities.
After twenty-four months of enormous upheaval, there has been a clear shift in the form of many new FDI opportunities for emerging economies. Sustainability, which helps achieve environmental, social and economic ambitions, is an increasingly important focus.
Sustainable FDI means a better energy mix, lower carbon emissions, moving away from ICE production to EV, more local content and better-quality jobs. The need for sustainability isn’t a direct result of the global pandemic, but it certainly has hastened the focus on sustainable operations.
Globally, we’re still smarting from our extraordinary circumstances, forcing many companies to reassess how their business operates and how sustainable it is for the future.
Renewed focus on sustainability
Every organisation – some, unfortunately, having to learn the hard way – are now focusing on sustainability. That laser-like focus takes the form of sustainable supply chains and an emphasis on sustainable routes to market. The main driver of sustainable FDI is regulation.
Companies are also patently aware of the climate crisis and consumers’ changing attitudes towards companies who aren’t actively playing their part. As a result, sustainable operations help them meet sustainable environmental targets and showcase their commitment to contributing to international ambitions on global warming positively.
Companies showcase their green credentials
With global attention on the climate crisis, companies are making considerable efforts to showcase their green credentials. Local government is also helping with the transition to sustainable operations by providing subsidies for green operations.
A knock-on effect is improved credentials for business partnerships and networks, enhancing their profile as leaders in their space. Sustainable operations have a direct effect on recruitment, too – particularly amongst millennials – who expect companies to be committed to sustainability.
A re-shaping of FDI’s sustainability requirements
Foreign Direct Investment is re-shaping regarding sustainability requirements, fostered partly by government requirements. For example, the EU taxonomy is likely to trigger massive changes in investment strategies and forms. .
As a result, new sustainability requirements offer many companies and Economic Development Organisations various opportunities. An obvious change is a need for better visibility for companies throughout their supply chain, including upstream and downstream.
While this applies to most companies we’ve spoken to, the need is much greater in industrial and consumer goods companies. This has led to renegotiating contracts with key suppliers as companies try to improve visibility.
Data analytics growth continues
In the last two years has seen companies investing heavily in data analytics. Industrial and Consumer goods companies are unquestionably the most affected by this trend.
That investment is vital for these companies to achieve two main aims:
- Better predict demand variations and evolution: Companies want to improve their business planning through strategic data analytics, such as using the data to better plan forecasts and efficient operations.
- Better respond to demand through greater control of their supply chain: These companies want to improve their entire supply chain predictability capabilities, removing guesswork and replacing it with quantifiable data.
Diversification of supply base
Another significant change our clients have undergone in recent years is the diversification of their supply base. We recently covered the significance of the European semi-con industry and how the shortage of semiconductors affected industries such as automotive companies.
Whilst this diversification started pre-pandemic, it has accelerated hugely in the last twenty-four months. Industrial and Consumer goods companies are also undergoing a diversification of suppliers, focusing primarily on securing access to products that they rely on in the manufacturing process of their products.
Process Automation provides many opportunities
OCO Global clients have also reported a renewed focus on process automation. The aim of this is to, firstly, improve business processes and, secondly, to address critical shortages in labour.
Those companies are accelerating the phasing in of automation processes. As a result, according to our clients, there’ll be fewer jobs, but better jobs when this comes to fruition.
Automation will help companies in other ways too. The more you know about your customers, the more you can make qualified assumptions to aid operational planning, forecasts, and recruitment.
Services-oriented companies say they’re being affected by automation too. Increasingly, they’re working towards being less reliant on human labour – and everything that goes along with it – and more towards what they describe as ‘hyper-automation’.
Has the JIT (Just-In-Time) model had its day?
Another significant change is a gradual move towards a hybrid just-in-time/just-in-case model. Just-in-time (JIT) logistics is an inventory management system that aims to “deliver goods immediately before they’re needed”.
For example, the considerable shocks to supply chains suffered by the pandemic, the Suez Canal Blockage, and to a lesser extent, Brexit have cemented in the company’s psyche that just-in-time logistics is too risky to rely on wholly. Warehousing doesn’t escape the changes either, with warehousing now becoming strategic.
Where once warehousing might have been seen as a secondary asset that was outsourced for just-in-time logistics players, it is now coveted as a strategic asset owned by those companies who want better control over the supply chain. So, while local, national, and international media are rightly focusing on the developing crises in energy, cost-of-living and the war in Ukraine, many potential opportunities are available for businesses that are well-positioned to take advantage.
After all, every crisis is also an opportunity in disguise.
Or, in our case, crises.
Get in touch to discover how OCO Global can help you with bespoke research for actionable insights.