How companies are getting with the glocalisation programme

Has globalisation peaked? Or is international business just changing? You could be forgiven for having the impression that the decades-long trend of companies expanding their sales and supply chains across borders is in retreat because of mounting protectionism and geopolitical tensions.

Yet international trade continues to expand. The International Monetary Fund projects total global trade volumes to grow 3.5% in 2024, up from an estimated 0.9% in 2023.¹ And a recent HSBC survey found that many businesses are increasingly optimistic about international growth: businesses from nine major economies expect sales in Southeast Asia to grow by 23.2% over the next 12 months – up from 20.1% from the previous year’s survey.²

Growing in overseas markets holds an enduring attraction for many companies, then. But a different model for cross-border business is emerging under the catch-all term ‘glocalisation.’

Firms have long tailored global products or services to consumers in a particular market. Now they are also restructuring supply chains to make them more local, sustainable and flexible, as well as resilient to potential shocks ranging from extreme weather to global pandemics. For some, an approach that is more differentiated and localised, but still internationally connected, offers an attractive alternative to the ‘borderless’ integration of traditional globalisation.

As the world’s largest manufacturing centre, and home to the biggest and fastest-growing pool of wealth and consumer spending, Asia is central to this shift.^3,4 The balance that businesses in the region choose to strike between global integration and local adaptation will have significant influence on the landscape of international trade in the years ahead.

Towards shorter shipping

The global shipping industry stands as testament to this shift. After the disruption of the Covid-19 pandemic exposed the fragility of extended supply chains, a greater proportion of maritime trade now travels along shorter, intraregional routes. Container shipments between East Asia and the United States declined significantly in 2022, according to the latest United Nations Conference on Trade and Development (UNCTAD) data, while the share of global container traffic using intraregional routes increased to 27.6%.⁵ Intra-Asia routes recorded the highest growth rates in container shipping from 2021 to 2022.

The spate of attacks on major shipping lines in the Red Sea has again focused companies on the risks embedded in long global supply chains. Alternative transit routes avoiding the Suez Canal add around 10 days to journeys connecting Asia and Europe, resulting in delays and higher shipping costs for customers.⁶

Global trade is also evolving, and challenging businesses to adapt. While corporates are still expanding into new markets, they are also rationalising their supply chains and re-aligning them to be closer to their headquarters. HSBC’s Global Supply Chains study in late 2022 found that 60% of respondents outside Asia Pacific – and 67% in the region – were planning to reduce their number of supply chain partners.⁷

Reindustrialisation and nearshoring

This is a relatively recent shift. For much of the past century, globalisation seemed an unstoppable force, as measured by trade openness⁸. The free movement of people, goods, services and capital across national borders surged from the end of World War II in 1945 until the 2008 Global Financial Crisis. This fuelled growth in many economies and reduced average costs for consumers, but was also connected with abrupt change in traditional manufacturing centres in developed economies as well as greater inequality.

Today, increased levels of digitalisation and automation have allowed companies to make their supply chains more local and facilitated the ‘re-industrialisation’ of some economies where manufacturing had been in decline. This trend accelerated with rising labour costs in China, the world’s biggest manufacturer, as well as the outbreak of the Covid-19 pandemic.⁹

Some international companies that source goods from China have diversified their supply chains as part of a China +1 strategy, benefiting economies in places like South and Southeast Asia.¹⁰ This is again born out in global shipping data: Vietnam’s share of United States container imports doubled from 4% in 2017 to 8% in 2022, while the percentage coming from India increased from 3% to 5%.¹¹ Multinational businesses have also chosen to ‘reshore’ or ‘nearshore’ manufacturing, bringing it home or at least closer to hand.

Supply chain localisation offers numerous potential benefits, including lower transport costs and emissions, shorter lead times, improved quality control and better understanding of local cultures and regulations. All of these factors can help improve customer engagement and competitiveness in a home market or region.

Glocal banking

One of the key challenges with glocalisation is that it requires businesses to have local operations in numerous locations.

That makes global banks crucial facilitators of glocalisation, since they provide the cross-border financing that supports international trade and as well as supporting domestic operations. HSBC’s Supply Chains study shows that nearly half of corporates (46%) are looking for bank support to better visualise transactions across their supply chains.¹²

Hong Kong-based Geek+ makes smart autonomous mobile robots. The firm has grown quickly on the back of both globalisation and glocalisation by providing warehouse automation. Geek+ operates in over 30 countries relies on HSBC to enable it to make cross-border payments quickly and efficiently.

HSBC likewise supports businesses from beyond Asia as they expand in the region. The bank’s support was critical to enabling EVOTEK, an enabler of digital business, to manage transactions with its US parent while ensuring compliance with Indian laws and regulations.¹³

“HSBC has been a valued partner in our global operations,” said EVOTEK’s Chief Financial Officer, Mari Rodish. “It is uniquely positioned to understand the global nature of our business, yet help us in plethora of compliance and guidelines across individual local markets.”

French food and beverage firm Danone, which describes itself as “multi-local”, worked closely with HSBC to digitalise and automate its treasury processes across Asia Pacific.¹⁴

As these examples show, companies continue to be ambitious about international growth and running businesses more efficiently across borders. It is clear that the traditional model for globalisation has been challenged, and that businesses are responding by pursuing more nuanced alternatives. HSBC is supporting clients as they grow and operate internationally through its distinctive combination of cross-border expertise and domestic presence. Whether globalisation has peaked – or glocalisation stands the test of time – the bank will be there for international businesses.