A fridge that texts you where to buy the cheapest milk; a washing machine that orders washing powder online when it runs out; and a jet engine that tells engineers when it needs repairing and lists the parts to order: It sounds futuristic, but these intelligent machines already exist.
Technologies are helping to change the way businesses operate — and altering the way we trade goods and services around the world.
Over the next few decades a rising global population, new trade agreements, better logistics and improvements in business operating models to fuel a sharp rise in exports are expected. Technology, too, is to play an increasing role in a new phase of globalization.
Across the world, companies are investing in technology to reduce waste and cut costs. They are looking to reduce their impact on the environment by redesigning products, streamlining processes and switching to renewable energy sources.
The Internet, meanwhile, is paving the way for companies to gain a global audience at a speed that was not possible in the past. It took radio 38 years to achieve an audience of 50 million — a target achieved in just three years by the Internet and in a single year by Facebook.
The Internet has created an environment in which “micro-multinationals” can thrive. In the past, companies generally had to reach a certain size to expand overseas.
However, thanks to the Internet, it is far easier for small companies specializing in niche products and bespoke services to go global too. According to a recent eBay report, 95 percent of the small and medium-sized companies that sell on the US e-commerce site export their goods.
The Internet and free movement of data are changing the way trade occurs. Some goods that were previously shipped are now delivered digitally. In Britain, for example, more than a third of video entertainment is now downloaded or streamed on-demand, rather than bought in physical format, according to the British Video Association. An increasing proportion of international trade will be in such services, ordered and delivered using just an Internet connection.
Of course, demand for physical goods is to continue. However, here too, technology is playing a greater role, helping to make the distribution of products more efficient, and easier and quicker to transport goods to new markets. It is enabling engineers to design more fuel-efficient ships and planes, cutting transportation costs. Meanwhile, ports and airports are investing in automated customs and documentation to speed up shipment of goods.
There will be huge changes in the way businesses source and supply raw materials and parts for complex products. Technological improvements mean that each element being shipped can be tracked online, helping to reduce inventory and waste in the production cycle.
Currently, goods are often produced where energy is cheapest. As renewable energy technologies improve and society increasingly moves to non-fossil fuels, this is likely to change. Production would be possible anywhere and is increasingly likely to happen closer to the end consumer.
Today, many of the goods we consume are mass-produced in huge factories and then shipped around the world. However, the development of devices such as the 3D printer means that, in the future, goods could be “mass-customized.” One-off designs could be sent digitally to small, local factories that would make customized products for delivery straight to consumers. As we enter this next phase, business leaders would need to consider where items would be produced, what new markets would open up as result of falling transport costs and how new trade agreements would help their businesses.
These changes are foreseen in our new report, Trade Winds: Shaping the future of international trade, an HSBC-commissioned report conducted by Oxford Economics. It is not just the shape of trade we expect to change — we think the volume is to increase significantly too. By 2050 we forecast the value of merchandise exports globally could hit US$68.5 trillion — nearly four times the value of exports this year and 150 times that traded in 1950.
Just as trade has enabled massive social transformation in the past 30 years, we think it can continue to lift people out of poverty, help economies grow and promote investment in sanitation, education and healthcare. The conclusion of new regional — and, perhaps, global — trade agreements could power the rise of new trade corridors, including south-to-south trade between fast-growing nations in the southern hemisphere.
Finally, our report raises questions for companies. As trade patterns and consumer behavior change, some businesses would have to adjust the way they work or be left behind by competitors. Others would see opportunities to reach new markets, specialize in new areas or revolutionize the way they design, make and market their products. Those who plan ahead and react would ultimately flourish.
Stuart Tait is the global head of trade and receivables finance at HSBC.
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