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| | Brought to you by Alex Panas, global leader of industries, & Axel Karlsson, global leader of functional practices and growth platforms
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| | | | The business impact of tariffs and changing trade dynamics remains a top concern for organizations across industries—and especially for large multinational companies (MNCs). The leaders of global organizations are seeking to both protect against disruptions and create value in today’s evolving business environment. This week, we look at a few ways that MNCs can navigate tariffs and global trade developments—and the challenges they present—to survive and thrive in an increasingly fragmenting world. | | | | | | | |
| | | More and more, the decisions that MNC leaders make will be informed by ten geopolitical issues that affect global business, including tariffs, import and export controls, and geopolitical conflicts. With those factors in mind, leaders can prepare for various scenarios by evaluating three fundamental elements: the value at stake for the MNC, the company’s governance structure, and its organizational structure. “One truth spans all scenarios: The MNC model will need to move beyond enabling growth and efficiency to also embedding the adaptability to capture opportunities and the resilience to withstand geopolitical shocks,” say McKinsey Global Managing Partner Bob Sternfels, Senior Partners Brooke Weddle, Cindy Levy, and Shubham Singhal, and their coauthors. They advise MNCs to test their strategic plans by examining the geopolitical value at stake, both company-wide and by business area, as well as their appetite for risk. With respect to governance, global companies can make their legal and capital structures more flexible to either pursue emerging opportunities or pull back from certain markets. They also can reorganize to centralize or even separate business units, functions, and shared services in response to geopolitical shifts. | | |
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| Amid the ongoing uncertainty around US–China trade, companies are considering how they might rearrange trade of thousands of products, from T-shirts and fireworks to semiconductors and rare earth magnets. A new McKinsey Global Institute analysis establishes a “rearrangement ratio” to help leaders answer this question. McKinsey’s Olivia White, Chris Bradley, Michael Birshan, Sven Smit, and their coauthors note that rearrangement can take many forms, such as reducing purchases, replacing imported items with similar ones, or accelerating domestic production. The ratio finds, for example, that US firms would have more difficulty replacing consumer goods from China than they would its business input imports, and that Europe would play a key role in trade rearrangement as both an exporter and importer. | | | Lead by adapting to global change. | | | | | — Edited by Eric Quiñones, senior editor, New Jersey
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