World is not flat; slowbalisation will define the decade, says K M Birla

Kumar Mangalam Birla, chairman, Aditya Birla group
The rising tension between rising nationalism and globalisation is reshaping the world and will perhaps be the most defining trend as the world heads into a new decade, said Chairman of Aditya Birla Group, Kumar Mangalam Birla.

The conflicting forces of globalisation and nationalism are making governments and corporations rethink their priorities and are forcing them to come up with new constructs.

Writing in a web post, Birla, 52, talked about his learnings from the last few decades when the entire business ecosystem has changed. “This new world, for sure, is not for the faint hearted. One-third of Fortune 500 companies drop out every decade, and the average life of a company on the S&P 500 list has shrunk from 60 years in 1960 to under 20 years today,” said Birla.

The Aditya Birla Group recently celebrated the 50th anniversary of its globalisation journey when Aditya Birla set up a unit in Thailand in 1969, way before India started its globalisation journey in 1991. Since then, the group has not looked back, acquiring and setting up units all over the world.

Its latest $3-billion acquisition of Aleris by Novelis, a subsidiary of Hindalco, is awaiting clearance from the US government.  The recent trade war between the US and China impacted companies and economies all over the world, leading to a changed ecosystem.

Back in 2005, Birla said when columnist Thomas Friedman coined the phrase ‘the world is flat’, the world was a very different place. “Back then, he opined that technology and geopolitics were reshaping our lives while we were sleeping. Now that we are wide awake, I see a very different world, dealing with the consequences of globalisation and its discontent,” said Birla.

“A world where rules of commerce are being rewritten all around. A world where nationalism has surpassed globalisation as the more popular search term on Google. While the march of globalisation is perhaps inevitable, what is certain is that the world is no longer flat. As globalisation makes way for ‘slowbalisation’, the emerging pattern of trade is more regional. One needs to look no further than Novelis and Birla Carbon to appreciate this mega-trend,” said Birla.

Both these global businesses have a footprint spread across multiple countries. Birla Carbon’s network of factories spans 11 countries and five continents. Novelis’ range of operations extends to nine countries and four continents. Their long-standing regional structure has allowed them to effectively navigate a dynamic trade environment by serving customers, primarily at the regional level.

“They have been saved from being entangled in many of the trade issues ensnaring our competitors. Many of them, who import or export their goods across regional borders, have now found this trade unviable. The regional structure thus allows Novelis and Birla Carbon to function as truly global companies — local, yet global. This new trend of ‘slowbalisation’ raises some questions that challenge conventional wisdom on how businesses should distribute their capacities,” Birla said.

“Given that the traditional benefits of a single location operation are an obvious contrast to the resilience that multiple local operations provide. There may be no easy answers, but the reality of this new world is something we need to be very alive to. In a post-globalised world, communities and people will increasingly demand more from corporations. Perhaps our founding fathers saw it coming, 150 years ago, which is why community engagement is so closely embedded with our business values,” said Birla.

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