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The Global Economy: an environment in change - Research Paper Example

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The countries which are increasingly considered for expansion opportunities in a global strategy are chosen on the basis of concepts of ‘Cost Drivers’ and ‘Government drivers. …
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The Global Economy: an environment in change
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Download file to see previous pages Globalization refers to the nature of global relationships that exist between people, cultures and economies. Today’s global economy is characterized by an increased assimilation of trade, capital flows and labor, to varying degrees. The trend of globalization went into expansion after the end of WWII with an increase of over 8% per annum in the global merchandise exports in the period from 1950-73. After a period of slow growth, advances in technology innovation renewed the process of globalization beginning in the 1990s- with the export expansion at an average rate of 6% p.a during early 2000s (WTO, 2008).
There have been some main factors which have led to the countries taking an increased part in the world global trade. Firstly the market drivers have to be taken into account, as countries are adopting the policies of open market economies due to mutual trade agreements or in accordance with WTO compliance, companies have gained an incentive to invest in previously untapped markets. A push is also provided by the Competitive drivers, for any company wanting a competitive advantage from its competitors moving into the global arena is an attractive option. With a potential for developing new markets as well as gaining access to fresh resources, globalization can be an extremely prudent decision for manufacturing firms. It is also sometimes the only way firms can come up to the level of their competition- with more and more firms entering the global marketplace the competition drive is stronger than ever. The globalization process is further aided by ‘technology drivers’- the enhanced communication transportation facilities, information exchange which are a marker of the 21st century make it easier for the average firm to move operations to other regions and make the transition into a global organization. The countries which are increasingly considered for expansion opportunities in a global strategy are chosen on the basis of concepts of ‘Cost Drivers’ and ‘Government drivers. Companies considering moving their operations have to keep in mind what is the cost of production, government facilities, resources, skilled and unskilled labor for any entering manufacturer or trader in that region. Often the developing countries provide a more viable cost structure. In relation to this are the government drivers, which refers to the governments attitudes and policies towards global trade generally and entering manufacturers particularly. These include trade tariffs, trade barriers, the policy and structure of exports and imports, privatization policies, corporate taxation, overall infrastructure, facilities provided and others. Supportive local governments are the strongest factor in introducing an economy into the global market. The adoption of market and business globalization for individual countries has become even more important in the face of the changing nature of the world economy. The nature of management of firms has gone through major modifications in the last few decades. From the pre oil crisis era of the 1969-1975 through the somber atmosphere of 90s in the aftermath of the oil crisis and to the eventual shift towards emergence of “globally distributed production organizations” (Eliasson, 2005). Firms are taking an advantage of the resources available in the different regions of the world and the aim of many is to establish a global presence. As our economies move into the knowledge era “advances in computing and telecommunication have created new and far less costly access to the large global supply of skilled, relatively cheap labor [ leading the local workforce to face an increased] level of competition from abroad” (Bernstein, 2004). The organizations and the overall economy has integrated the notion of a business environment which is unpredictable, prone to extreme changes and where decisions have to be made increasingly without the complete information. There are too many factors ...Download file to see next pagesRead More
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