Opportunities and Challenges for Businesses With Globalization - Essay Example

 1 Introduction Over the past few years competition in manufacturing and commerce has intensified all over the globe due to deregulation, the emergence of new trade zones, the volatility of currency exchange rates, improved transportation and sophisticated information technology. This situation leads to shift the traditional trade, mainly patterns between nations. Reducing tariffs and the homogenization of foreign investment and trade policy provides manufacturing companies with new opportunities. We can see this atmosphere of globalization of manufacturing mainly attributes to the Peter Drucker’s SMART test which hold the five goals for a successful business i.e 'Specific', 'Measurable', 'Achievable', 'Realistic' and’ Time-Related'. (Peter Drucker, 1993) (1)Here the goals of helpful to think ‘achievable’ as ‘possible’ and ‘realistic’ as ‘probable’. Working through the 'realistic' criteria identifies the tension between the current state and desired state. Moreover the organizations which aim for the globalization of manufacturing should have an aggressive expansion strategy and wants to fund this expansion debt free by freeing up capital tied up in other assets. Impact of globalization to manufacturing logistics The definition of globalization itself manifests its impact on the manufacturing logistics. To most economists,’ globalization’ means the closer integration of economies via trade and factor flows. But this permits many interpretations of how this can be measured. Economic geographers define the globalization as the shifts in the location of economic activity subsequent upon shrinking economic distance. On the other hand the critics take the view on globalization to be synonymous with capitalism, big business and multinational corporations. (Crafts and Venables (2001, p. 2)(3) The relationship which is generated through the globalization is reflecting particular ------------------------------------------------------------------------------------------------------------1. Peter Drucker,(1993) the Practice of Management ,Collins, ISBN-10: 0887306136 2. Crafts, N. and Venables, A. J. (2001) ‘Globalization in history: a Geographical perspective’, London School of Economics, paper prepared for the NBER conference on ‘Globalization in economic perspective’. 2 interactions in each economy between the external facets of globalization like e.g. shrinking economic distance, greater trade or the spread of international production that apply to the economy and internal factors that affect its employment response. The major impact of globalization as follows. 1. Globalization causes to manufacturing companies the converging of product prices between exporting and importing countries, a good indirect measure of economic distance between economies. Globalization is also manifested in rising flows of products, intermediate inputs, equipment, services, finance like loans, FDI and portfolio investment, information, technology and skills. But here the companies has to face challenges in interpreting outcome measures when the measures reflect other factors than globalization and when the closer integration of economies does not result in greater trade or other flows. 2. Globalization enables the manufacturing companies to a vast Policy liberalization .This includes policies to facilitate freer trade, direct investment, borrowing and portfolio investment, privatization etc. And also it ensures measures of ‘openness’ ,most often trade/GDP ratios and of trade liberalization like nominal tariffs, relative exchange rates, black market premia on exchange rates or qualitative indices of liberalization 4. But here also there are some challenges as the indicators of openness may be arbitrary, nominal tariffs may not capture the true incidence of barriers and other measures may be misleading. 5 In any case, it is not clear that they measure ‘true’. (Sachs and Warner (1995))(3) Some analysts take particular forms of globalize manufacturing and production as its manifestation. An important one is integrated production systems where an activity 'fragmented' and processes or functions located in different countries, measured by the ------------------------------------------------------------------------------------------------------------ 3. Sachs, J. D. and Warner, A. (1995) ‘Economic reform and the process of global integration’, Brookings Papers on Economic Activity, 1, 1-118. 3 flow of parts and components for further processing.( Yeats (2001),)(4) Global manufacturing outsourcing has been increasing for several years; it already has been adopted in the apparel, electronics, and automobile industries. The economic benefits have been quantified extensively; and, although sometimes challenged, the financial initial analysis is compelling given the less expensive skilled and unskilled labor costs in countries like China, India, Mexico, and Eastern Europe versus the U.S. If we take Information Technology, it has also gone global. For instance, when it was developing the highly successful iPOD, Apple Computer worked with up to 10 firms and independent contractors around the world to find the right ideas and components. Even during the product design and customer requirement definition phases it used two countries: Japan and the U.S.(5) From the above it can be seen that the globalization helps the organizations to expand its manufacturing and production all over the world, to find out a new business horizon. But these organizations, in fact, face many challenges in their business affairs. The Challenges The challenges may be in the form of the operation sources from overseas production facilities that service global demands, and some products have a minimum order quantity constraint. Some times Domestic operations will find it increasingly difficult to remain competitive, responsive and efficient. In such cases, businesses may find it difficult to survive at all if these issues are not successfully addressed. The challenge may arise even in the case of innovations and technologies.(mhd ,2003)(6) ------------------------------------------------------------------------------------------------------------ 4. Yeats, A. J. (2001) ‘Just how big is global production sharing?’ in S. W Arndt and H. Kierzkowski (eds.), Fragmentation: New Production Patterns in the World Economy, Oxford: Oxford University Press, 108-143. 5. Association of Computing Machinery, UK 6. mhd,(2003),Impact of the globalization ,mhd ,Supply chain and solutions 4 Implementations Apart from continuous and drastic cost reduction or constant innovation, to effectively tackle these pressures and constraints, and to profit from the opportunities created by globalization, the following implementations/improvements may be helpful. 1. The organizations need to develop new business strategies which combine innovation, research and technology, a highly skilled workforce and their overall operational effectiveness in ways which competitors find hard to copy. 2. Develop the appropriate business culture and acquire the skills, knowledge and tools required to manage the risks effectively. For e.g.: In the case of manufacturing field, when used appropriately, the statistical tools can make a significant contribution to the improvement of quality and productivity in medical device manufacturing. In the design phases of a product’s life cycle, for instance, such tools as risk analysis can be used to evaluate potential problems with a particular design approach, saving vast amounts of time and effort by eliminating faulty approaches from further consideration. (Rockville, 1995)(7) Fast companies out perform big companies and smart companies out perform all others. 3. Dramatically improve long range demand and supply planning capabilities in order to better match supply to demand and consistently achieve the ‘4 Rights’ – right item, right location, right quantity, right time. A manufacturer might strive for a ‘produce to demand’ model, but this model has obvious limitations for an importer/distributor with three month supply lead times. 4. Dynamically optimize manufacturing costs, constraints, risks and customer service levels, Exchange appropriate and meaningful information with suppliers and customers. ------------------------------------------------------------------------------------------------------------ 7. Rockville, “Working Draft of the Current Good Manufacturing Practice (CGMP) Final Rule,”, MD, FDA, Center for Devices and Radiological Health, Office of Compliance, July 1995. Many organizations have a general understanding of their manufacturing cost structures but are unable to specifically quantify the impact of disadvantage. Identifying the cause and effect relationships and financially quantifying the impact is absolutely necessary for taking the right action. Costs, constraints, risks and service levels must be dynamically optimized to ensure that the business is consistently achieving its service level targets at the lowest possible cost. (Rockville, 1995)(8) 5. The business compensates with avoidable inefficiencies and costs. Here it is important that the appropriate disciplines are understood and adopted in order to extract the maximum benefit possible from capital employed.(mhd ,2003)(9) Conclusion Globalization creates both opportunities and challenges for businesses. Our success will depend on how successfully we adapt to this changing environment. Here the major question to answer is ‘how do we motivate our people to improve themselves continuously, and to generate new ideas for innovation?'. Companies that are not able to answer this question will also be unable to keep up with the competition. ************************** ------------------------------------------------------------------------------------------------------------ 8. ibid 7 9. ibid 6 References Books and Authors 1. Crafts, N. and Venables, A. J. (2001) ‘Globalization in history: a Geographical perspective’, London School of Economics, paper prepared for the NBER conference on ‘Globalization in economic perspective’. 2. Rockville, (1995) “Working Draft of the Current Good Manufacturing Practice (CGMP) Final Rule,” MD, FDA, Center for Devices and Radiological Health, Office of Compliance, July 1995. 3. Yeats, A. J. (2001) ‘Just how big is global production sharing?’ in S. W Arndt and H. Kierzkowski (eds.), Fragmentation: New Production Patterns in the World Economy, Oxford: Oxford University Press, 108-143. Journals and Publications 4. mhd,(2003),Impact of the globalization ,mhd ,Supply chain and solutions. 5. “Quality Systems—Model for Quality Assurance in Design, Development, Production, Installation and Servicing,” ISO 9001-1994, Geneva, International Organization for Standardization, 1994. Read More