Running head: ARTICLE SUMMARY

Article Summary- Trade Winds: Shaping the Future of International Business

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Article Summary- Trade Winds: Shaping the Future of International Business

In the last 150 years, there have been significant changes in the operation of businesses

and trade. The waves of globalization have been a significant catalyst to the transformation in the

business world. The markets have already experienced two waves of globalization, and the third

one is on course. HSBC Commercial Banking has been there for those 150 years and has

witnessed the trade and business transformation brought about by globalization. In observing the

facets of change in business and trade, four factors, which are denoted as trade winds, have been

of significance presence. These factors include the march of industrialization, the falling cost of

logistics and transport, the liberalization of trade policy, and the development of organizational

operating models. The trends in these trade winds have been analyzed as they progress through

the three waves of globalization.

The first wave of changes in the business world was documented between 1865 and

1913. Britain was the dominant powerhouse across the globe, owing to its pioneering industrial

revolution. The value of goods trade rose fivefold but was eventually slowed down by the two

World Wars and the Great depression. In this wave, the cost of transport and logistics fell while

industrialization rose to its ever high. The face of world trade began changing as a shift from

agricultural products to industrial goods became apparent. The cost of transatlantic transport

reduced by a third to significantly reduce the barriers to international trade. Liberation was also

evident as gold became the standard of the exchange, offering exceptional stability to traders.

While the UK remained dominant at the end of this wave, other nations such as Germany and the

United States had risen and surpassed the UK in terms of economic output (HSBC Commercial

Banking, 2019). The first wave of globalization was halted by World War I as it devastated the

global flow of goods and international relations.

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The second wave of globalization was witnessed between 1950 and 2007 after the world

recovered from the effects of the World Wars and the Great Depression. Global trade expanded

beyond the industrialized states to developing nations. It had become so significant that 26

percent of the global GDP was trade merchandise by 2007 in contrast to the 1950s when it was 6

percent. There were four distinct phases of trade development within this wave, and these

included the golden age of prosperity, the industrialization of Asia, the age of hyperglobalization,

and the maturation of the global supply chains. Following the end of World War II, isolationist

policies were abandoned, and multilateral institutions were developed to facilitate international

trade. By 2007, the global supply chains had matured, and companies were adjusting their

operating models to replace the unavailable domestic inputs with foreign inputs (HSBC

Commercial Banking, 2019). After that, the global economy significantly collapsed with trade

volumes falling by 20 percent.

Speculations on the third wave of globalization place it between 2015 and 2050 with the

advancement in the four trade winds moving favorably. As the global population continues to

increase, consumables would be in high demand, thereby increasing the global GDP. The drive

for sustainability and digital innovation will reclassify trade with the trade of services being the

future (Gerber, 2018). Through the development of the internet and data analytics, companies

can analyze large volumes of customer information and use sophisticated artificial intelligence to

understand the requirements of customers. As a result, there is mass customization and reverse

innovation where companies develop products for emerging markets rather than then developed

economies (HSBC Commercial Banking, 2019). Further reduction in the cost of transport and

logistics is expected expansion of shipping lanes, larger ship containers, improved energy
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efficiency, and new airports. Global trade is expected to continue shifting to the East as countries

in Asia continue to dominate in terms of exports.

Analysis of the history of global trade indicates that it has always been on progress

despite the short periods of collapse. Consequently, there is a consensus that the world economy

will be more tightly integrated and more extensive by 2050. Companies will, therefore, be able to

expand their businesses with the location being less significant. Data will be critical to the

growth companies while the operation model stands to shift from purchasing to leasing. The

third wave of globalization stands to transform global trade in the most unexpected ways,

especially with the advancement of the digital age.

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References

HSBC Commercial Banking. (2019). Trade winds: shaping the future of international business.

Oxford Economics

Gerber, J. (2018). International Economics. 7th edition. Pearson Education.