Globalization and Business IT - Essay Example

Globalization Reflection Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecture Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date Globalization and Business IT The forces of IT are making the integration of businesses across transnational boundaries possible. Information technology is among the one the ten major forces that led to the flattening of the world. When Netscape went public in September 1995 the world had reached a new age of connectivity. According to renown economist John Maynard Keynes, globalization enables a resident in London to order an item from anywhere in the world from the comfort of his home. Notably, this ordering of items cannot take place without using Information Technology devices such as telephones or computers. Contrary to my earlier opinion that globalization can proceed at the same pace in each industry, the pace of globalization is greater in the retail industry. Characterized by ease in transfer of knowledge and insignificant economies of scale, Global retailers are spreading their operations all over the world. In my view IT is one of the most profound factors that has assisted the likes of Tesco quickly establish a dominant market presence in South-Asian countries. I think IT has facilitated the expansion of global retailers in a number of ways. First, IT assists retailers develop new store concepts by enabling the modeling of store environments. Secondly, IT is enabling the retailers engage in online direct selling and help the retailers customize their product offering to fit their clientele. Through information technology services like home deliveries can be offered by the global retailers in the new markets they have entered. Information technology also enables the retailers to maintain a customer relationship management system which is able to rise to the challenge of handling customers from diverse cultures. Previously, I underestimated the impact of IT as an enabling factor in the global expansion of retailers. Through, this IT enabled processes Tesco is generating sales of over 1 billion pounds in its Thailand operations. Tesco plans to open 200 new stores in Thailand as a result of the phenomenal success it has been able to achieve through information technology. Through IT commercial ventures are able to understand the economic, political, and cultural environment of potential markets. Communication has eased the way commodities, ideas, culture, technology and people move across national boundaries. However, the movement of goods has mainly become more efficient in developed countries while other countries lag behind. The difference in ICT in developed and developing economies is creating a digital divide where developing countries continue to lag behind their developed counterparts. IT and other forces of globalization are erasing traditional geopolitical boundaries, racial, ethnic and religious differences. The example of people criticizing Qantas for doing away with pork and alcohol is an example. The people who are resisting Qantas move aim to erase a culture that prevents the consumption of alcohol and pork. People from across the globe are identifying with others from diverse areas of the globe. Through globalization and particularly IT a new generation that is free of the old prejudices is likely to emerge. Business IT has enabled most businesses outsource non-core services to offshore sites. Through the advances in IT many American companies are offshoring their accounting function to Indian workers. In my opinion companies should not outsource such a major function as IT to contractors. However, the IT outsourcing trend continues to grow, with most companies preferring it to be handled by Third parties. Accenture, IBM, Hewlett Packard and Dell have set up their services arms in India, a country that is renowned for its talented engineers. In the west, especially Canada and the US, one hears of companies cutting down staff. Recent employment data show that the US has smaller home-based population than it did several years ago. Canadian retailer, Sears recently announced that it was laying off 245 workers mainly drawn from the IT sector. Apparently, Sears has entered into an agreement with IT giant IBM to outsource its IT functions. Filipino workers will now take over the work of the discharged Canadian workers. Sear is also negotiating with Wipro another IT service vendor to outsource more of its business function to the firm. This shows that IT is enabling companies avoid paying expensive salaries to workers in their home country. However, the net benefit of this outsourcing trend is the big multinational that are able to cut costs by paying peanuts to qualified workers in developing countries. However, a group of scholars are skeptical and think that information technology is creating a more unequal world. They view equity, empowerment and access for all as forces for the electronic colonization of the developing world by the developed world. Global Trade Global trade is increasingly moving from commodities to services oriented trade. On the other hand the volumes of commodities traded every year keep increasing. In 2008 alone over $16 trillion in commodities were traded in the globe. In recent year, electronics have overtaken minerals with electrical equipment accounting for 14.8 percent of exported commodities; minerals were second with 14.4 per cent. This underlines the fact that relative advantage in global trade can be created. Creation of comparative trade advantage can be seen in the case of major exporting economies. Japan has created and held the relative advantage over other economies in the Car industry. Japan produced over 11.48 million cars in 2007 making it the largest automaker in the industry. However, at its peak Japan produced over 13. 5 million cars in the 1990s. Even though comparative advantage in world trade can be created, unlike mineral wealth it can also decline. Due to the 2009 global economic slump and a strong yen Japan has lost ground to other vehicle manufacturers around the world. In 2009, Japan only produced 7.9 million cars, far behind China who manufactured and 13.79 million vehicles. The threat to a country’s comparative advantage mainly comes from trade liberalization which ensures other producers can access formerly restricted markets. Global trade has been changing with the increasing pace of global liberalization. For example, Australia’s main trade partner in the 1950’s was the UK, however with the opening of markets in South Asia the country now trades with many other countries. In 2010, Japan was Australian top trading partner closely followed by China, Korea, India and the US. As with other economies Australia has diversified its exports away from agriculture which dominated its export trade in the 1950s. Although Australia has relative advantage due to its mineral wealth, Australia has recognized that acquired comparative advantage is the mainstay of global trade. Nowadays, Australia exports agricultural products, manufactured goods and services alongside minerals. Australian trade statistics reflect the sharp increase in the variety of tradable commodities over the past 15 years. One of the features that make it easier for countries with no natural resources to survive in a globalised business environment is the increasing volume of trade in services. China and Japan are leading exporters of services in the globe. In 2005, over 400,000 US tax returns were done in India, a sharp decrease from the 25,000 made in 2003. China on the other hand exports call centre services to their Japanese neighbors. In the Chinese city of Dalian, Chinese youngsters learn Japanese as a second language with an aim of taking data centre work outsourced by the Japanese. China now holds a comparative advantage in the service industry as it has a highly ambitious well educated population. Most business are now off shoring their business to China to take advantage of the country cheap and highly skilled workforce. Barre case study shows how a Taiwanese shoe manufacturer was able to create comparative advantage for his nation in the shoe manufacturing industry by applying knowledge transferred from American shoemakers, Nike. In the case study Bally also loses their comparative advantage the Substitute Taiwanese products underlining the challenging task of remaining ahead in a competitive trading environment. Reflection on Social Media The rise of social media is changing the way business is conducted all over the world. The most profound effect of social media in business is associated with a company’s marketing activities. Blogs, Wikis, Microblogs, Mashups, Social tagging, Information sharing, Visual information sharing are an integral part of contemporary society. Social media have a profound effect on the marketing activities of a company as they influence, word of mouth advertising; the most effective way to convince customers to purchase your product. Social media thus demands an immediate change in the marketing philosophy of most companies. Social media means that marketers have to move beyond offering product features to the market by offering product experiences. Sharing experiences is the mainstay of social media, the main method of communicating to customers in contemporary society. A product that is devoid of product experience will receive little interest on social media, were advantages due to product features are lost rapidly. Nowadays marketing is all about customer engagement, businesses have to create an inspiring mission and brand experience to motivate the audience to contribute ideas to the brand. Indeed the brands that have used social media to create and engage their customers in a brand experience are reaping huge benefits. Lucky Charm cereals ask their target audience to create movies about their favorite cereal on Millsberry.com and vote for the best movie. This trend of using user generated content to advertise products is referred to as viral marketing. Viral marketing has several advantages including the fact that its costs the company nothing to make ads that reach hundreds of consumers. Secondly, the authenticity of a company’s marketing communication is enhanced as people are more likely to pay attention to product communication if they are referred by friends. The superior reach of social media advertising has been shown in several successful advertising campaigns. In 2007, over 10 million people viewed the extreme diet Coke and Mentos Experiments. The television show, Myth busters created a unique user experience when they recorded the highest soda jet of over 9 meters. The attention and engagement gained for these products through social media is not possible through other forms of advertising. On the other hand, the criticism of company’s products or practices on social media can damage a company’s reputation. Nestle for example has suffered a significant decline in customer loyalty when social media report allege the company product contain palm oil obtained from deforested areas of Indonesia. On the hand, Dell is pioneering in using Social media as an effective advertising tool. Dell actively searches social media for complaints and comments about its services and solve them. The success Old spice Viral marketing campaign underline the huge potential social media holds as the future of advertising and indeed marketing as a whole. Read More