Impact of Globalization on General Motors - Essay Example

? Impact of Globalization on General Motors Task: Impact of Globalization on General Motors Introduction Globalisation has a very significant effect on every industry in the world. Currently, several industries are devising ways and means on how to deal with this phenomenon. Additionally, the automotive industry has been one of the most affected industries in terms of globalisation. Several economists have invested many resources in studying and providing findings on the impact of globalisation on the economy. However, globalisation is a process that is continuous it never stops. Similarly, it entirely depends on the approach in which you are looking at it (ijioui 2010, p.177). For instance, in this case we are looking at the impact it has on the automotive industry with particular emphasis on General Motors Company (GM). However if we look at a broader definition of the term globalisation, it is important to note that the spread and dissemination of technologies, philosophies and way of doing business across the world or globally is a fundamental aspect. However, the effects of globalisation have forced several companies including multinational companies to come up with measures of dealing with the effects of this phenomenon. Similarly, some of the measures include job cutting and stringent measures of cutting costs. Technology is one of the strongest tools that has shaped the direction and speed of globalisation. Currently, almost all industries in every sector are embracing technology to enable them cut down the costs that may be involved in production and development. Additionally, these industries are reengineering their processes and workflow to become efficient hence achieving profit maximisation. For instance, GM has heavily invested in technology for it to realise its vision and mission. Recently, it budgeted for over fifteen billion dollars to go to the development of technological infrastructure. This indicates that the company is looking for efficient ways to handle the effects of globalisation. Additionally, the competitors are also making efforts to develop efficient and more productive ways of doing business hence keeping GM on its toes. Due to this, it is inevitable for the company not to spend resourcesin more research and innovative ways of improving production. These include simplifying the process where possible, finding cheaper but high quality material to help with the manufacturing process (Reader 2006, p.7). Additionally the company believes that innovative technology will help it attain better production hence increasing output but the question is how globalisation in the automotive industry affects GM. Globalisation is a double-edged sword that cuts both ways in this case it has both the positive and the negative impact on any industry. However, the degree of managing these effects determines the success or failure of a company in a particular industry. When examining the effects of globalisation in a company for instance GM, we have to look at all the department, branches, plants and any subsidiaries of the company. The reason for this is that globalisation is a multifaceted phenomenon. For instance, we have to look at how globalisation has affected GM employees, the production process, the marketing aspect, the information technology aspect and the management aspect (Alias 2008, p.10). The complexity of the automotive industry demands that the company should effectively deal with the impact of globalisation because if the competitors are able to deal with it more effectively than the GM then this can be catastrophic or detrimental to both the company image and the market. The world is moving towards becoming a global village hence having a very fast rate of globalisation. As a result, companies should strategise and gear up for this cause to avoid eradication due to drastic changes. However, in dealing with the effects of globalisation on the GM it is important to separate all the sections and critically examining them individually ratherthat having a holistic view on the company. Globalisation impact on the automotive industry Increased globalisation has led to increased competition in the automotive industry with registration of new entrants who have better ways of manufacturing and production of vehicles. However, one of the biggest competitors to GM is the Japanese company Toyota manufacturing durable and affordable vehicles. Additionally, due to the persistent hard economic times more and more people are opting to buy fuel-efficient vehicle and vehicles whose spare parts are easily available (Shimowaka 2010, p.136). The Toyota Company has managed to tap into this market both locally and globally hence giving GM very stiff competition. Additionally, due to globalisation vehicles are becoming cheaper hence reducing the profit margin of GM. Because of this, it forces the company to seek ways of cutting down costs in order to increase the profit margin because they cannot increase the prices due to the demand and supply forces of the market. Globalisation has also made information readily available to consumers in the market. Additionally, the introduction of ecommerce solution has also cut down on the cost of business transactions. Customers are now able to purchase vehicles from another counter through the internet and go through all the relevant processes that will enable him or her get the vehicle at his or her disposal. GM has to deal with these globalisation effects in order to stay afloat in business. The distance between countries is closing up very fast due to the development of efficient ways of transportation and business transactions are becoming easier due to the technological development. Knowledge has tremendously increased in recent years as a result manufacturing companies have simplified the production processes and eliminating the redundant segments or any other areas that are not contributing the core processes. The automotive industry is one of the most competitive industries globally. Due to this, most of the companies have opted to find new ways of manufacturing high quality vehicles at a cheaper cost hence increasing the profit margin. However, due to the stiff competition that is in the industry the manufacturing companies cannot increase the selling price of the vehicles hence the only option they have is to reduce the manufacturing cost so that they can increase profit. The globalisation factor has greatly changed manufacturing operations in the automobile industry. For instance, the Toyota Company has replaced some metallic parts in the new land cruiser models in order to reduce the manufacturing costs but retain the stylish look of the vehicle. However, when one looks at the mass effect of this move, it translates to millions of dollars. Additionally, GM is also devising ways of bettering their vehicle while keeping the production costs low. Furthermore, globalisation has increased efficiency in transportation of goods to the target market. This is due to the development of infrastructure hence facilitating trade between countries. However, the manufacturing industry uses these avenues to reach its target market. Several aspects of globalisation have facilitated the development of the automotive industry. Some of these factors do not contribute directly to the manufacturing process or strategy implementation in any way for instance political stability in the manufacturing countries is a major factor in fostering growth of the industry. There are several factors that contribute to globalisation and all these factors equally important in the automobile manufacturing industry. Several countries around the globe have developed policies to deal with the effects of globalisation in all the sectors because some of the effects cut across the board. Additionally, globalisation is a process that one cannot stop hence the best way is device ways of dealing with the negative impact created by globalisation. Some companies for instance the GM has improvised ways of dealing with the rising costs of production due to increased labour and energy costs. For instance, it has decided to cut up to 30,000 jobs in order to invest in information technology. The may not be the best move in the short run but it pays up in the long run because the installation of technological infrastructure may be expensive at the beginning of the process but when it becomes fully operational it will save the company millions of dollars that would have otherwise been wages and salaries. The automotive industry has forced company to redesign their ways of production in order to accommodate the changes that globalisation creates. However, in dealing with the impact of globalisation companies in the automotive industry must have a long-term vision on how their actions are going to affect the growth and development of the industry. Globalisation has also affected the economies of several countries both developed and developing as a result; they have developed economic policies that mitigate the effects of globalisation. Because of the saturation of the automobile market in the developed countries, manufacturing companies are looking for additional market in the developing countries. Furthermore, they take advantage of the easily available labour to assemble the vehicles in their local plants. The local plants act independently in terms of production and sales to the market but major decisions concerning the company come from in the headquarters or the parent company. However, some of the major challenges that the company encounters when setting up a local plant in foreign companies are legislation and taxation. Similarly, the costs involved in setting up the plant and making it operational are enormous. It is important to note that the emergences of new and faster growing manufacturing companies are driving out older companies from the industry due to globalisation. These smaller manufacturing companies have identified the need of the consumers and the market hence they are producing vehicle that suit the current market structure. For instance, the economic times are hard and consumers are shying away from buying very costly vehicle with high fuel consumption, they are opting for smaller sedans and fuel-efficient. Similarly, these vehicles are cheap and as a result, many can afford them. Smaller manufacturing companies are relying on selling many units to make profit as compared to the bigger companies that rely on both the high cost of one unit and selling numbers at the same time. Consumers are also cutting down spending and are working with a stringent budget. For this reason, the company that can effectively succeed in the industry must consider all these factors due to globalisation. Business processes have greatly changed from the previous years in relation to what is important and what is not because of globalisation. In the past, manufacturing a strong and durable vehicle was the best way for a company to grow its brand but currently it is about style, comfort, and price and fuel consumption. In the automobile industry, controlling the manufacturing costs is sometimes very difficult because of the different raw materials that the companies use in manufacturing the vehicles. These materials have independent forces of demand and supply hence making a clear prediction of the prices very difficult for the manufacturing companies. However, in order to mitigate this factor the manufacturing companies have to minimise the labour costs and costs of operations in order to make profits. Additionally, they have to concentrate on the core business and outsource other non-core activities. Globalisation has made several companies in the automobile industry to keep on developing new ways of doing business and cutting costs where possible. Furthermore, the market competition has become stiffer forcing some company to shut down some of their plants in order to cut down costs. Impact of globalisation on the General Motors Company (GM)’s technology Technology is one of the fastest growing sectors in the company and globally, in fact technology is the driving force behind the globalisation phenomenon. However, it depends on how well the company can execute or implement the rapid changes in this area in order to realise significant and desirable results. Similarly, the rate at which the world is making technological advancement is very high hence forcing not only GM but also every company in the automotive industry to adapt to these changes as quickly as possible. However, looking at technology, the rate at which it is developing poses a great opportunity or risk to GM. This is because if the don’t act fast enough in making significant changes in line with the current technology then the opportunity will be lost. Similarly, this will pose a risk of loosing the market share because of the dynamism of the customers (Koren 2010, p.3). As a result, GM opt to have a very vibrant information technology department which is in a position to pinpoint this technological development and devise ways of applying them in the company hence improving the workflow or enhancing the production process. Globalisation is the growth and spread of information, techniques, advancements, developments and improvements in any sector of an industry across the globe. However, technology is one of the greatest contributors to globalisation. Currently, GM is contemplating to spend over one billion dollar in developing the information technology infrastructure. Globalisation will never stop because it is a process for this reason if any company wants to survive and be able to see the future then it has to conform to the changes that come with globalisation. Additionally, in the process of globalisation, technology provides a great opportunity to companies in improving their processes, transportation and communication hence cutting costs and maximising profits. GM is taking very positive steps in improving the technological aspect of its business in line with globalisation. However, it is very cautious not to make a mistake hence it consulting widely in experts in the industry for instance IBM and other major information technology companies. Globalisation impact on the employees Globalisation has developed competition among employees due to increased availability of labour employees of GM feel insure about their jobs hence providing labour at a minimal cost as a result the employees have lower living standards than expected. Additionally, globalisation has greatly availed options to GM Company hence an advantage to the company because it can easily find labour. In the recent times, GM has cut jobs in order to minimise operating costs hence increase profit (Blanpain 2008, p.5). This is a negative impact on the side of the employees because they do not have any form of job security the company can lay them down anytime. Additionally, the company is seeking new way to mechanise its operations by use of technology hence bringing the labour cost to the very minimal. Additionally, the company will lay off all unskilled labour due to the increased globalisation hence having a negative impact on the employees. Furthermore, the company is installing massive systems of mechanisation to increase efficiency and speed and as a result, several people are losing their jobs. Globalisation has also greatly contributed to the low labour standards and as a result, it has a negative impact on the employment rate. However, this has also not spared GM because they also have to paly by the rules of the industry. Additionally, when the labour standards are low it contributes to exploitation of workers whereby they may be working in very poor conditions and getting minimal wages. However, the positive effect of globalisation in the automotive industry is that it has now enabled worker to work abroad away from home and earn. This was not possible in earlier years. It has increased mobility of labour hence benefiting both the company and the employees who would have otherwise not got the opportunity to get employment. Globalisation impact on production The production section has had the greatest impact of globalisation in GM. The reason for this is that production of vehicles is their core business hence they need to put all their efforts in improving the process and developing or installing sufficient technology to improve speed and efficiency. Currently, the company has make greats strides in developing the infrastructure and diversifying in the development of automobiles. Additionally, the company has established several plants globally the manufacture and assemble vehicle ready for the market. Due to the increased demand in some parts of the world, the company opted to establish assembly plant near to the market to enable it cut on costs of transportation of finished goods hence increasing the profit margin significantly. Some of the regions include East Africa where the company established an assembly plant that assembles off-road vehicles and other four-wheel drive vehicles (Reader 2008, p.102). Because of globalisation,the company is outsourcing several processes in the production process to improve on quality and consistence of production. Trade restrictions are one of the major contributors of production globalisation. The stringent rules and regulations that different countries have on importation of goods from other countries has frustrated GM and forced it to establish local production plants in foreign countries hence avoiding exportation. However, this has had a negative impact on the company in that the running and production costs have shot up. When the company is running several plants local in foreign countries, it incurs several costs that it could have otherwise avoided. For instance, the number of employees has to go up in order to sustain production. However, foreign countries have welcomed the move because the establishment of local production plants has provided employment opportunities to the citizens. Additionally, it provides tax revenue to the country hence increasing the revenue of the country. However, in mitigating the increasing cost of doing business, GM has heavily relied on technological advancement to improve its production process. Globalisation impact on management Globalisation has a great effect in the management of any organisation or company because the management is the organ that is responsible in the running of the organisation or company. Additionally, the company mandates the management to undertake decision-making duties, strategy development and implementation of these strategies. The growth and development of the company depends on the management. Additionally, in order for the company to realise its vision and mission, it has to consider the impact of globalisation in its decisions because a small mistake in the decision-making process can cost the company a lot of money. Focusing on GM, globalisation has led to the repositioning and realignment of key positions in the management. As much as the management of the company is responding to the global changes in form of changing policies and restricting the company there are some negative effects that the employees face due to these changes. For instance, GM has lay off over 30,000 workers in its ongoing process of downsizing and cost minimisation. However, it is redirecting these funds to information technology and telecommunication infrastructure. The management of GM has concentrated all its efforts on the core business and has scrapped out all other areas, which do not contribute directly to the core business. Additionally, it has gone ahead and outsourced other services that are not core. In conclusion, globalisation is a process that no company can stop hence the only way is to deal with the negative effects that arise and embrace the positive ones. Additionally, several companies in the automobile industry are making great strides in light of mitigating the effects of globalisation on their business. For instance, GM has embarked on a major project of installing vital technological infrastructure in order to cut down the running and production costs of manufacturing vehicles. Additionally it has shut down some of its plants that were not registering impressive performance. However, this change have come with a heft cost of approximately one billion shillings and massive job cuts of up to 30,000 employees in order to make the new technology a reality. References Alias, C 2008, the impact of globalization on the United Mexican States Globalization is good for Mexico, yet not for all Mexicans, GRIN Verlag, Mu?nchen. Blanpain, R 2008, Globalization and employment relations in the auto assembly industry: a study of seven countries, Wolters Kluwer Law & Business, Austin. Cooney, S &Yacobucci, B 2007, U.S. automotive industry: policy overview and recent history, Novinka Books, New York. Faulconbridge, J 2011, The globalization of advertising: agencies, cities and spaces of creativity, Routledge, London. Ijioui, R 2010, Globalization 2.0 a roadmap to the future from leading minds, Springer, Heidelberg. Koren, Y 2010, the global manufacturing revolution: product-process-business integration and reconfigurable systems, Wiley, Hoboken. 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