China must embrace an offshoring strategy to capture new markets and spur innovation, Ivey Dean Bob Kennedy told alumni and guests at two Ivey Idea Forum events in the Greater China Region in May.
Dean Kennedy presented Services Shift: The Next Wave of Globalization on May 22 at the Four Seasons Hotel in Shanghai and on May 28 at the Asia Society Hong Kong Center.
Kennedy told the audience that for two decades the offshoring of manufacturing transformed the global landscape and helped China develop into an important manufacturing hub. Today, the offshoring of services, such as financial or information technologies, is driving an even more profound transformation in the way we think about the Asian economy.
Drawing on research from his book, The Services Shift: Seizing the Ultimate Offshore Opportunity, he explained the five main drivers behind this new shift:
- Digitization of business processes so that information can travel anywhere in the world
- Fewer tariffs and restrictions on direct foreign investment so that it’s easier for companies to transact across their countries’ borders
- Improvements in computing power and telecom so that training can be offered through videoconferencing
- A rise in a global business culture where more people speak English as a second language; and
- Growing capabilities around the globe due to investments in secondary and post-secondary education.
Although there may be high transition costs to take a business offshore, he stressed the rewards are worth it. Advantages include labour cost savings and improved workflow management systems.
“International trade creates value for both sides,” he said. “It’s very good for the world economy because it makes companies in the developed world more productive and efficient and it helps generate employment and wealth in developing countries.”
For future presentations of Services Shift: The Next Wave of Globalization, please see the Ivey Idea Forum website.