Globalization and Manufacturing - Term Paper Example

 Globalization Globalization refers to international integration where people from different parts of the country are united in some way. Globalization allows expansion of linkages and flow of capital, goods, technology, ideas and culture across the border. Globalization can occur through political, economic, socioculture, trade, migration, use of technology forces. KFC in China, Spanish movies played in India are signs of globalization. For companies that serve multinational and different countries, the best strategy to be used is globalization. There are some basic features of globalization: Improved Technology: Communication and the technology are the biggest improvements that the people have seen. There are video phones, fax machines, video conferencing facilities which helps in connecting people with ease. Movement of People: There have been a number of people who travel for higher education and new job. There are number of people from the developing and under developed countries who migrate to different countries owing to the low standard of living, for higher education and better job opportunities. There have also been foreign investments in developing countries as there are ample opportunities for growth and development. Multinational Companies and NGO’s: There are a number of organizations who are making the general public aware of number of issues and health problems ,the role of non-governmental organization is to bring together the government, people affiliated. Some examples of NGO’s include the Amnesty International or Doctors without Borders. There are also many multinational corporations that are willing to diversify and open up markets in order to access new venues and markets. (Colin,2008) Positive effects of Globalization: Developing countries increase their standard of living Encourages innovation and new competition to the existing market and this helps in achieving healthy market Governments can work together towards achieving common objectives as there is an increased level of interaction and coordination Greater access to different forms of cultures, traditions, movies, food, music and more Negative effects of Globalization: Outsourcing of work can lead to unemployment in the home country There are chances of diseases spreading around the world and this can prove to be devastating There are chances of international fraud that can happen as there are very little international regulation Globalization in manufacturing sector In 2003, approximately 300,000 jobs were outsourced to foreign countries mainly India and China. Research states that by 2015, 3.4 million jobs will be outsourced to other countries from US alone. The main reasons for the shift are due of the following reasons: Reduce cost of manufacturing High volume Better quality of products manufactured Better profits Business continuity Productivity improvement Operational flexibility Improve consistency of product offerings The manufacturing employment is at 12% of the total workforce as compared to 32% in 1940. 73% of the total stocks at Wal-Mart are from other countries such as India, china, Far Eastern countries. Balancing risks and rewards are very important for the manufacturing company. There are some risk factors such as financial, business continuity, recovery, political and exchange rates that the manufacturing companies need to keep in mind before outsourcing. (Robert, 2004) The contributing factors to this trending business towards globalization are: The control on movement of international capital is lost Reduction of trade barriers and taxes, tariffs on goods imported and exported on goods and services between nations have reduced over the past Rise of the European super state model with the introduction of Euro currency and the dollarization of certain Latin American Nations currency Ascendancy of WTO Improvement and advancement in technology Propagation of business and knowledge equally to all parts of the world Standardized jobs are easy to be moved from developed to developing nations than high skilled work. These standardized jobs are the focus for off shoring business The proactive reasons for most of the companies going global are- 1. Growth opportunities 2. Economies of scale 3. Incentives 4. Cost savings The major reasons for the globalization of the manufacturing sector are due to a few reasons. ( Industrial and Automotive products: Globalization and Manufacturing) Access New market: Many companies prefer to invest their profits back into the market but are limited as the market is not matured. Hence the overseas markets prove to be a good option for growth opportunities and expand their markets. The companies also try to maximize the efficiency and effectiveness of the process by using the resources in management, administration, technology and in the process. Some of the developing countries also need capital, skills and technology. The companies also provide incentives such as subsidies, human capital and low wages. The companies also have direct access to cheap raw materials and low operational and financial cost which helps in cost savings. Some companies also have a head quarters in the overseas so that they can avoid taxes and other associated business costs. (Sidney, n.d) Lord Bhattacharyya of Warwick University’s manufacturing group has admitted that the main reason for globalization of the manufacturing sector is not for low costs but to explore new fast growing markets. Establishing production and distribution networks is expensive and time consuming. The best alternative for this is to enter into acquisitions and mergers with the target markets. Many companies are pursuing joint ventures with the other country companies. These strategies increase the rate of globalization. (Industrial and Automotive products: Globalization and Manufacturing, n.d) Low costs and improving efficiencies: The labor costs involved is an important deciding factor for the plant location. There are 3 costs involved namely lifecycle costs, total and manufacturing costs. The general tendency for any manufacturing company is to strengthen their core competencies by delegating sub activities to suppliers which increases the competition and the price fluctuations. The basis for outsourcing manufacturing goods is to use the advantage of the supplier and there are some manufacturing units who are also off shoring the production to a totally different country. (Mahendra, n.d) Improving Quality Globalization can improve productivity and quality and this can contribute to the profitability of the business. It is important to gain the competitive advantage in the market which also provides the ability to compete in the international market. The technological improvement and investment in research and development helps in improving the quality of goods and services rendered on a continuous basis. (Prit, 2007) Innovation Innovation and technological improvements are very important for economic development and social improvement. There is a close relationship between information technology, productivity and competitiveness for countries and firms. There have been 2 major changes in the last decade- increased globalization of the world economy and the second major change has been the role of technology and knowledge. US industries focused more on technology as there was extensive investment in R&D by the government. Improving technology has been a very important factor for job creation and also the main reason for unemployment rates in Europe. Lack of Long term employment led to insecurities of work. Increased wages also led income disparities and work insecurities. (Orhan & Emine 2009) To stay competitive in the business, it is essential for the manufacturing business units to adopt policies that can foster innovation. The policies must be able to improve education, knowledge and retaining the best talent in the business. For improving the innovation, there are a few aspects that are very essential: 1. Sustaining the technical competences, training and education system in the country 2. Increasing the investment in Research and development 3. Government policies to be kept in place to eliminate the barriers. (William Frank ,Moshe,2006) Some companies also have strategic operational movements so that they interact with different people; different countries and they form a strategic alliance to ensure competitive advantage. The other advantage of globalization is that it helps in sharing knowledge, learning, best practices and focus more on company management, profit engineering, process re-engineering, business strategy and research and development. Most of the companies are in the process of shifting their market to other countries and companies take this decisions based on number of different reasons. Some companies adopt defensive approach so that they are ahead of the competition in that field. While other companies take proactive approach towards have globalised companies which will help them be ahead of the other companies and secure a strong position in the market. Some of the defensive reasons for the companies going global are- 1. Trade barriers 2. Customer demands 3. Globalization of competitors 4. Regulations and restrictions Some companies move their production to other developing countries to evade tariffs, quotas and other restrictions that are too expensive in the foreign consumer market. Most of the customers would want accessibility to suppliers and would require them locally so that it can enhance the flow of production. The companies also realize that if they are not leaving the home country, it will be very difficult for them to face competition and challenges. This is one of the main reasons that the companies are trying to go global. The companies also face restrictions in the home countries regarding the trade regulations which are very expensive and limiting them from expanding. This also results in increasing the cost and reducing the profits. These are the main reasons why the companies look at different market environment with very limited government intervention. (Sidney, n.d) Globalization has affected me in personal ways. Outsourcing is a new form of economic globalization. Although globalization in the form of outsourcing has increased the prosperity, increase the welfare of the people across all the regions of the world, the moving of companies and businesses to different countries allows exposure but at the same time causes family members to lose their jobs. It also provides an opportunity to interact with different cultures and experience other countries. Cultural globalization is also one of the ways that has affected me as it is a process of expressing culturally spreading across global networks. There are many foreign made movies and television shows that form a part of the global media network. Listening to international music is also one of the ways of globalization of culture. Music like hip-hop, salsa, European techno are all made available to all sections of people. Playing international video games, chatting with different people around the world, reading international blogs are all electronic forms of globalization. (Sidney, n.d) Political globalization is a process of political action becoming international. Globalization also helps people come together for good causes and provides the ability to become global citizens. The Tsunami that hit Southeast Asia in 2004 got the Canadians, Americans into a global communication network. The Canadian citizens alone contributed approximately $137 million towards the Tsunami victim’s donation fund. There were many active global citizens who had emailed, phoned and contacted many political parties, collecting and donating funds, food and clothing. The quick reaction of the people in different countries and coordinated working of the various the governments was a political globalization of work. Globalization of communication also has a direct impact on societies and the people. Communication tools such as Radio, televisions; CD’s, internet, blogging and magazines help in communicating with different people, interact with different cultures and traditions and share ideas. This also trades the ideas of art, architecture, music and film. This is also another form of globalization- cultural globalization which helps in spreading different cultures across global networks. (Sidney, n.d) Conclusion: Restricting imports from countries will deprive them from good living and better standard of living as we aid them the poor countries. There must be free flow of goods and services and also free flow of information. When people are being informed about how much freedom they have in other countries, they would also want the same for themselves although the process of globalization has generated some protests in some countries. It is a fact that no all the countries have gained equally from globalization. Globalization without doubt extends sustained progress and improvement around the world. Literary References Colin Stief (2008) Globalization: An overview of globalization and its positive and negative aspects,[online] available from http://geography.about.com/od/globalproblemsandissues/a/globalization.htm, accessed 11th April 2010 Industrial and Automotive products: Globalization and Manufacturing [online] available from http://www.kpmg.ba/dbfetch/52616e646f6d49564e3eb02933d9d0648f90ad03114a14f1/global_manufacturing_surv_2006.pdf, accessed 11th April 2010 Globalization and its impacts;[online] available from http://www.ilo.org/public/english/wcsdg/docs/rep2.pdf, accessed 11th April 2010 Mahendra Hundal, Implication of Globalization on Design for Cost;[online] available from http://www.cems.uvm.edu/~hundal/Global_DFC.pdf, accessed 11th April 2010 Orhan Aydin, Emine Erol Zeytinli (2009) The effect of Technological Production and Usage of High-Tech Goods to the Welfare of a Country: comparison of Finland and Turkey, 2009 (14), p 842-852 Prit(2007) The factors affecting Competiveness of Companies [online] available from http://bizcovering.com/business-and-society/the-factors-affecting-competitiveness-of-companies/, accessed 10th April 2010 Robert N. Liptrot (2004), Understanding the Effects of Globalization on Manufacturing Strategy: A case study of VIASYS Healthcare, 3rd annual Manufacturing Excellency Conference Sidney Okolo, reasons for globalization [online] available from http://ezinearticles.com/?Reasons-for-Globalization&id=1132215, accessed 10th April 2010 William Aspray, Frank Mayadas, Moshe Y. Vardi, (2006) Globalization and Off shoring of software, ACM Job Migration Task Force,[online] available from http://www.acm.org/globalizationreport/pdf/shortv.pdf, accessed 10th April 2010 Read More