The world changed a lot in 2020. Not only did businesses all over the globe have to deal with an international pandemic, but we moved into a new decade filled with potential and unique challenges.
According to the Organisation for Economic Co-operation and Development (OECD), the possibility of a global economic recovery is quite promising. Due to a fast and effective vaccine, they revised their outlook and projected a 5.6% gross domestic product growth for the worldwide economy.
This is about 1% higher than previously estimated. If the numbers prove accurate, the world output will return to pre-pandemic levels by the summer of 2021. Some other big changes are happening with the global economy that you can’t ignore, especially in the technology sector.
Each change changes international business relations and trickles down to even small mom-and-pop shops in little towns.
Trade War With China
Before the pandemic struck, the United States was in trade talks with China. The United States planned a 5% tariff increase on Chinese goods from 25% to 30%. Although the new administration changes the scope of trade talks, tariffs impact businesses across several industries.
One of the ways tariffs impact small businesses is via the cost of goods. Many countries acquire a large portion of clothes and shoes from Asia. Increased costs drive up prices and may impact sales.
On the flip side of the coin, industries such as agriculture may see a decline in orders from China as the country retaliates. The United States might suffer, while other countries take up the slack such as Brazil and Canada.
There are few industries not impacted by the trade war. However, not placing tariffs on Chinese imported goods also hurts domestic companies who have a hard time competing with the very cheap prices and slave wage labor some countries employ.
New Technologies
With so many travel restrictions in place for the immediate future, leaders can no longer jump on a plane and visit partners in another country. Instead, they must embrace technology and hold virtual meetings.
The demand for online meetings increased. Global Newswire estimates the web conferencing market will go from $2.1 billion in 2020 to more than $75 billion by 2030. With the demand for more virtual gatherings comes the need for higher resolution cameras, better microphones, and the ability to record conferences.
Some smaller businesses have also seen a boon. People who provide virtual backgrounds for Zoom meetings, green screen producers and microphone manufacturers all play a role and may see an increase in international orders as more and more people seek out better virtual options.
Changes in Consumer Attitudes
In one short year, attitudes have shifted by leaps and bounds. People have different priorities than they did in 2019. It doesn’t matter what corner of the world you’re from, you likely care a little more about family and little less about work than you did before.
Priorities of saving money also take center stage. People focus on practical elements during hard times. The construction and home improvement industry is in a boom with prices rising drastically for lumber, steel and other materials.
As demand rises, expect to see more international exchange of goods. If an American lumber mill can get three times the going rate by shipping 2 x 4s out of the country, they likely will. If builders save by importing steel, expect to see more foreign options.
Supply Chains Matter
In the last year, we saw supply chains disrupted on a scale never seen before. Manufacturers couldn’t get the materials to make their products. Small businesses then didn’t have the products to sell. The ripple effect of supply chain issues caused hardships around the world.
Due to these issues, expect to see companies go outside tradition and seek supply from sources never used before. They’ll seek out not only the best price, but reliable service. In addition, many companies will look for backup vendors and may buy from more than one place, so if one stops delivering they still have material or product arriving.
Microsoft reports small businesses are the most vulnerable to unanticipated events. However, the events of the last year will force many small and medium enterprises (SMEs) to put forth a plan of action for when the worst happens.
Cross-Industry Collaboration
You likely heard about the local distillery that changed course and began making hand sanitizer. Many restaurants started selling raw meat and vegetables when groceries were in short supply. Some even sold paper goods.
More people are shopping locally. In the Local Business Consumer Sentiment Study of 1,600 Americans, REM discovered 71.08% of consumers go out of their way to support local businesses.
Even though online shopping has boomed during the pandemic, as people go back to shopping in person, expect more and more to hit up local mom-and-pop style shops.
However, in order to meet consumer demand and stay afloat during difficult economic times, many of these companies are offering products and services they never did before. They may collaborate with other businesses they otherwise wouldn’t have worked with.
One example might be a local eatery that opens a small farmers market on one side. Some of these collaborations will require international dealings and some will be on a local level.
Ups and Downs
As with any year, 2021 will see ups and downs in international business relations. Small business owners would be wise to think outside the box. China isn’t the only country you can enlist to manufacture your product. Look for smaller markets not as popular with others. It may benefit you when your supply chains stay up while other companies’ go down. Be open to new ideas and new partnerships that stretch beyond your borders and around the world.
