Diversification is a key priority as economic models change
Diversification is a key priority for multinational companies, with implications for investment patterns and corporate structures, according to a report from global banking institution DBS and FT Longitude, the Financial Times’ research division.
Business diversification – of market presence, products and supply chains – was cited as a strategic priority by 64% of respondents in a survey of senior-level executives.
In recent years, many have raised concerns about whether the widespread disruptions caused by Covid-19, increasing geopolitical tensions in Asia and Europe, and the ongoing effects of climate change could hinder global trade and investment. Although economic growth has continued, the intense globalisation of previous decades – marked by the deep and rapid integration of national economies – is no longer as dominant.
Multipolar economic structure
According to the report, the new phase of globalisation is as much driven by digital innovation and data-centric business models as it is by manufacturing and logistics. It relies on a multipolar economic structure and is more aligned with sustainability and net-zero objectives compared with earlier globalisation models.
“A rebalancing of trade and investment on this scale does not occur without market disruption and discontinuity,” the report reads. “As opportunities for growth and innovation emerge, so do new complexities as businesses adapt and diversify their operating models. In parallel, a series of supply chain shocks have made volatility and uncertainty a near-constant reality.”
Business leaders surveyed for the report indicated a strong commitment to enhancing productivity and operational performance, focusing on four key areas of transformation: diversifying revenue sources; embracing digitalisation; pursuing net-zero goals; and restructuring supply chains.
More resilient and agile supply chains
With a heightened awareness of risk and the pandemic’s lessons still clear, many companies are striving to tap into new revenue streams to protect themselves against localised economic downturns and supply disruptions. Companies are also focusing on building more resilient and agile supply chains. To achieve this, they are forming strategic partnerships with new suppliers, exploring nearshoring options, and enhancing supply chain transparency.
Asia seems to be the primary beneficiary of these changes. Approximately three-quarters of executives state that driving growth in the region is a top priority for the next two years, supported by broader efforts to diversify and innovate in their business transformations.
The survey included 570 participants from nine industry sectors across 15 global markets. The respondents comprised 75% executive leadership and 25% senior managers reporting to executives, with 75% representing treasury and finance and 25% from corporate strategy roles.
Most respondents (85%) were from companies with revenues in excess of $1 billion.
