Business leaders are scrambling to adjust to a world few imagined possible just a year ago.

The
myth of a borderless world has come crashing down. Traditional pillars of open marketsthe
United States and the UKare wobbling, and China is positioning itself as globalizations
staunchest defender. Countries throughout North America and Europe have experienced waves
of anti-globalization sentiment.

In the face of such uncertainty, leaders of multinationals wonder whether they should retreat,
change strategy, or stay the course. In making that decision, they need to understand two things.
First, the world is less globalized than even experienced executives realize. Second, history tells
us that even in the face of a trade war, international trade and investment would still be too large
for strategists to ignore.

Todays turmoil calls not for a mass retreat from globalization but for a more subtle reworking of
multinationals strategies. This article examines common misperceptions about what isand
isntchanging about globalization and offers guidelines to help leaders decide where and how
to compete in a complex world.

To understand why this is, consider the three parties that made the boom possible: investors; the
headquarters countries in which global firms are domiciled; and the host countries that received
multinational investment. For their different reasons each thought that multinational firms would
provide superior financial or economic performance. Investors saw a huge potential for economies of
scale. As China, India and the Soviet Union opened up, and as Europe liberalized itself into a single
market, firms could sell the same product to more people. And as the federation model was replaced by
global integration, firms would be able to fine-tune the mix of inputs they got from around the worlda
geographic arbitrage that would improve efficiency

From the rich world they could get management, capital, brands and technology. From the emerging
world they could get cheap workers and raw materials as well as lighter rules on pollution

I just read Globalization in the Age of Trump, by Pankaj Ghemawat. This is an update on Ghemawat's
thoughts of semi-globalization. According to the article, nationalism is on the rise, but globalization is
not very much affected. Nonetheless, national differences and the intensity of local competition have
led some companies to disproportionately privilege an adaptation strategy. As good as it is, this may not
be enough to fight local competitors and it will probably just help to level the playing field.

Global companies need to use other global strategies, not available to locals, such as aggregation and
arbitrage. With aggregation of some of some functions, global companies can get some scale, scope and
knowledge economies. With arbitrage companies can shop for resources or capabilities in those
geographies where they are more inexpensive or conditions are more favorable, using the corporation
as a conduit, in the hope that this will be more efficient than to procure those resources in the open
market.

Of course, this poses a challenge to global companies, as sharing resources requires international or
regional cooperation, which creates interdependencies that may slow response to local needs. In my
consulting experience serving 3 of 4 most globalized Colombian companies and 5 of the top 10 country's
largest, I have found that a good framework or logic to allocate decision rights and responsibilities
between corporate functions and local companies, which is known as managerial governance, these
companies can progressively create an environment where working as a global team is effective and
companies can act more as locals and the same time get the benefits of being part of a global company.