How can we maximize the benefits of globalization while minimizing its costs?
It is an economic tautology that, in a capitalist economy, companies that do not produce at the lowest possible cost will ultimately fail or to be acquired by companies that do. This Darwinian principle is at the heart of the concept of globalization in all business frameworks. Think of apparel industry. This is really surprising that the big ones in apparel business like Wal-mart, Sears, and J. C. Penney are manufacturers without factories.
Due to economically adverse atmosphere in home country, they have been compelled to outsource from countries like India, China, Vietnam, Indonesia, Pakistan etc. As consumers demand better value, retailers have increasingly turned to imports dissecting the marketplace into buyer-driven and producer driven industries. All clothing and fabric manufacturers have either closed their doors or moved to offshore to remain competitive. Because of the cost, an apparel maker cannot produce clothing at a price competitive with the prices of clothing produced by foreign operations.
Due to globalization the degree of import penetration has increased considerably. For example in EU countries it gone from 12% in 1990 to 23% in 1999 for textiles and 30% in 1990 to 46% in 1999 for clothing industries. It has other advantages too. An open economy spurs innovation with fresh ideas from abroad and unfettered capital flows give the developing countries access to foreign investment and keep interest rates low. Automobile industry is another major area which is enjoying the opportunities thrown in by Globalization.
Automobile growth seems to be stagnating in developed countries like US, EU and in response to falling profits and flat markets and therefore they are bound to expand in low-cost countries and turn them into a sourcing hub of sorts. This helps them achieve economies of scale by churning out cars in large numbers and spreading fixed costs over larger units and in turn price them competitively in their home market. In this way push and pulls factors finally creates a favorable platform to transmogrify the global market into monopolistic competition framework and also help companies to enhance their product life cycle.
Today all developing countries are flooded with opportunities and the investors in the developed world just cannot keep themselves away. Globalization is that tool which gives them access to these countries and to reach their huge population through their business. In return, host countries get an access to world-class technologies and further improve and evolve their product standards to meet global demands. It has been clearly observed that due to concept of globalization the technology has evolved rapidly with the help from all the nations together.
These way poorer nations are able to become more technologically advanced and self dependent. The key is that the countries that have successfully integrated into the global trading system are enjoying much faster growth and better living standards. In addition, global economic integration eventually makes it easier for companies to shift or expand operations in countries where market conditions are most attractive. This way they can reduce risks by sales diversification.
A major credit for tremendous technological improvement in the field of information technology is due to globalization. It has generated the need of quick communication and created enough reason for the evolution of information tools in the form of e-mails, videoconferencing system, teleconferencing system and others. It has also made an impact on entire technologies affecting the free flow of information or people or goods. Globalization has enabled countries to understand the cultures otherwise it will be much more difficult to run their company in that country.
For example pay your attention to below culture comparison between few countries with respect to business meetings: Thailand: Process is slower than Westerners. Speak clearly and slowly. Mexico: Contractors prefer to do business with people they “know”. India: The process is also slow. Meetings involve small talk, many debates, and approval from senior management. China: Bring an interpreter. Speak clearly and slowly. The colour gold is a significant cultural importance. Patience is a virtue. Turkey: Landing the contract can take a few days; patience is the key.
In a nutshell, globalization has benefited the world by creating a symbiosis between developed and developing countries wherein developed countries provide opportunities and developing countries fulfill them by using resources of cheap labor and cost competitive raw materials. It has induced strategic responses in the marketplace like shrinking of supply chain, allocation of more responsibilities to contractors and inculcation of an attitude, “if you can’t beat them, join them and help them to earn profits”.
Industries with most labor-intensive frameworks have relocated their manufacturing to the countries which are having lowest wages. Where a computer programmer in Silicon Valley may cost his or her company $70,000 per year plus benefits, the same work performed by a computer programmer in India may cost only $7,000 per year plus some relatively minor administrative costs, leading not only to much lower development costs for the company, but also to a lower price for the company’s ultimate consumers and to a higher return to the company’s stockholders or other owners.
Anti globalists has an opinion that millions of Americans are loosing jobs due to imports or production shifts abroad. But the lesson is, if a job can be exported profitably, it will be; and if such a job is not exported, the job will vanish anyway when the company goes out of business. Strictly speaking, international trade can explain only about 20% of the increased inequality between high- and low-skilled workers in either wage or employment terms.
In the same way, production relocation accounts for only a small proportion of the jobs constantly being created and destroyed in industrialized countries which can be easily made up by the demands for other jobs in bigger businesses. To keep the wheel rotating at a speed, the world has to be flat and frictionless with the able lubricant of globalisation and this is the only way to approach to the way of future for all and sundry in the business world of 21st century.Sample Essay of UkEssays