The expansion of trade has existed for millennia. Academics and economists contend that globalization, which has only gained relevance as a concept in the last decade, is as old as civilization itself. The concept of exchange, the underlying basis of market dynamics, was founded in primitive human societies. Markets began to merge as trading networks expanded and access to resources was made easier. As the Mercantilist and the Industrial revolution took place, growth and productivity continued to escalate. However, the a new commercial reality sparked by the digital age has emerged , characterized by widespread, and readily accessible sharing of information. This new era has transformed the commercial landscape into one which allows for unparalleled acceleration of globalization like never before.
According to a study conducted by Mckinsey, one in three goods now crosses national borders, and more than one-third of financial investments are international transactions. Time and geographical boundaries cease to be limiting factors in today’s business environment. The tremendous technological advances in transportation have reduced the barrier of distance a main catalyst in the development of global economics over the course of history. Over time, this has also steadily decreased the cost of distribution. A second major force shaping today’s economy is the internet, which has reduced barriers to communication. Through focusing on the online market and SEO, business is now borderless. Sales, inventory, competitor’s prices and new products now no longer have to rely on physical and unpredictable means of communication. More recently, is information communication in real-time.
One great example is the Internet of Things (IoT) which gives businesses the ability to monitor and manage objects in the physical world, digitally. This has remodeled logistics and supply chains, increasing efficiency. The technology of which the IoT is founded on, is Radio-Frequency Identification (RFID). RFID is now widely used for tracking and collecting information about a product, place, time or transaction. RFID uses electromagnetic fields to automatically identify and track tags attached to objects. Manufacturers and oil and gas companies, among others have improved their operating efficiency and reduce costs by implementing IoT technologies in their operations.
The development of information technology has also given rise to different digital platforms that makes cross-border production and exchange a lot more possible than they previously had been. In 2014, global e-commerce sales reached over US$1.3 trillion—nearly 2 percent of global GDP. About 40 percent of Amazon’s net sales in 2014 came from sales outside North America, and China’s leading e-commerce platform that includes marketplaces for business to business (B2B); business to consumer (B2C); and peer to peer (P2P) e-commerce, declared gross merchandise value of a whopping US$370 billion during the same year. These platforms allow smaller companies to participate in exporting and importing, and even compete with the largest multinationals. An MGI survey revealed that 86 percent of tech-based startups report some type of cross-border activity. Even global labor markets are being impacted by online marketplaces. Websites like freelancer.com and UpWork reduces yet another barrier in today’s unified global community by bringing jobs to talents abroad without requiring them to relocate or go through immigration.
The growth of the digital trade has thrusted us into yet another different era of knowledge economy, characterized by increase in high-technology and intangible investments, high-technology industries, more highly-skilled labor and associated productivity gains, rather than on the means on production and tangible capital (oecd.org). This has led to the emergence of new technology giants in industries where they had not previously been viewed as competitors. Consider Airbnb’s entry into the hospitality industry. The multi-platform technology platform has served over 30 million guests since its inception in 2008. Its current value of $10 billion now exceeds well-established global hotel chains such as Hyatt.
Today, over 2.3 billion people have access to the internet and this figure is expected to grow to five billion in the next few years. Some of the most valuable companies in the world have been underpinned by its existence. In developed countries, availability of the internet results in increased standards of living and job creation. The innovation of digital technology has become a key contributor to economic growth in developed countries. The potential for digital and information technologies is limitless, and will play a key role in the development of humankind’s potential.