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Flat World -- or Globaloney?

Who Says the World is Flat? In his best-selling The World is Flat, Thomas Friedman argues that lowering trade barriers and increasing world connectivity has created a level playing field for individuals and businesses to compete on a global scale.

Harvard Business School professor Pankaj Ghemawat calls that vision of the early 21st century "globaloney".

In fact, Ghemawat argues in a new book, Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, that building a global strategy based on a flat earth assumption could send your company over the edge.

Ghemawat's expertise is in global strategy. So as he heard more and more voices heralding the arrival of a global economy with frictionless borders, growing interdependencies, and massive markets of hungry consumers just waiting to be served, Ghemawat decided to take a closer look at the current reach of globalization. And what he found surprised him.

In fact, he says:

  • The commonly quoted figure that international trade today represents more than 25 percent of most economies is wrong. Try 10 percent. In short, most economic activity happens locally -- so forget a one-size-fits-all approach.
  • Immigration rates peaked before WWI; the fraction of the world's population accounted for by long-term international immigrants was slightly higher in 1900 than 2005.
  • Although the Internet is touted as a global communications vehicle bringing us all together, the fact is that the percentage of Internet traffic within regions and localities is increasing.
The idea for managers here is not that globalization isn't happening (Ghemawat says the world is semiglobalized), but rather that national boundaries still matter today and will into the future. Business strategists must understand the specific landscape they operate in including differences in culture, politics, geography, and economy. "Discussions of globalization tend to overlook these factors," he says. And companies that wish to make headway need to deal with distance: adjust to it, overcome it, and exploit it.

Ghemawat talks more about his position in this interview. And you can read his blog, which has received some testy retorts, here.

Are the Flat Earthers painting an unrealistic picture of the global economy? Is Ghemawat right when he warns that the current pace of globalization could go in reverse, just as it did between the two world wars?