Impact of Economic Globalization on Business - Research Paper Example

The Impacts of Economic Globalization: Maritime Group vs. Chrysler List of Tables and Abbreviations Maritime Grp: Maritime Group UK: United Kingdom SA: South Africa US: United States Wgt: Weighted Percentage LPG: Liquefied Petroleum Gas CEO: Chief Executive Officer DFI: Direct Foreign Investment List of Tables Table 1: The performance of Maritime against other top players in the market Table 2: Comparing the performance of Maritime Group against the industry Index Characteristics Figure a: The organizational structure at Maritime after aligning to the changes brought by economic globalization Figure b: LPG prices across five years from 2010 to 2015 Figure c: Graphical representation of the performance of Chrysler within the economic globalisation context Figure d: The performance of Chrysler on the stock market Table of Contents List of Tables and Abbreviations 2 List of Tables 2 Figure c: Graphical representation of the performance of Chrysler within the economic globalisation context 2 Figure d: The performance of Chrysler on the stock market 2 Introduction 4 Background: Maritime Group & Chrysler 4 Chrysler is a US based automobile manufacturer. Walter Chrysler founded the company in 1925 when the original company Maxwell Motors changed the name. It ranks as the third largest among motor manufacturer in the US benefiting from economic globalization partly. The company continues to face a myriad of problems over the past few years resulting from effects of economic globalization. Threats faced by giant automobile manufacturer contribute largely to the problems. Comparatively, the company strategy performs poorly in comparison with the other two leading manufacturers (Joseph, 2003, p. 126). The company ignores the fact that clients prefer fuel-efficient vehicles. The problem relates closely with lack of innovation in the company. The management does not have structures in place to encourage and embrace innovation form from employees (Eichhorn, 1997, p. 28). The situation remains unique considering the fact that other competitors give special attention to innovation. 5 The performance of Maritime against other top players in the market 5 Table 1 5 Comparing the performance of Maritime Group against the industry 6 Table 2 6 Index Characteristics 6 The organizational structure at Maritime Group after adapting to the impacts of globalisation 8 Fig a 8 Oil Prices from Dec 2010- Jan 2015 9 Fig b 9 (Mullaney, 2007, p. 4) 9 Gas and oil remain expensive with no signs of prices coming down because of the increasing stability in the producing zone in Asia and other parts of North Africa. Consumers now prefer smaller cars, yet Chrysler does not major in their production. In addition, Chrysler does not have an established international network to sell its products abroad. The biggest market is domestic (Mullaney, 2007, p. 4). 9 Graphical representation of the performance of Chrysler within the economic globalisation context 10 Fig c 10 (Silva-Risso, 2008, 17) 10 Statistics shows that sales continue to decline from 2008 where the company recorded a 22 percent drop in auto sales. Furthermore, the price of steel continues to rise steeply. Reports from the consumer survey agencies ranked Chrysler one of the fifteen countries with the worst quality. The other threat emanated from the decision by Daimler-Benz, a German automobile company acquiring Chrysler in 1998 developing a new company dubbed DaimlerChrysler (Silva-Risso, 2008, 19). The aim was to develop a new plan of action that focuses on improved product quality, better design, and higher productivity. The two companies wanted to achieve these through sharing parts and design models (Ebling, 2001, p. 72). By the end of the 2006 trading period, the performance of the company disappointed shareholders with the shares falling to ten percent. The fall generated from a threat developed by the company by choosing on a manager without the qualities of managing the company in the current contemporary market. Poor and obsolete shape of the factory adds to the poor quality of the products and lack of innovation at the company. The CEO failed to bring together a team of engineers from the companies to work as a team (Evans, 2007, p. 203). In the end, the design models became extremely difficult for Chrysler engineers as those from Daimler refused to cooperate. 10 The performance of Chrysler on the stock market 11 Fig d 11 (Evans, 2007, p. 203) 11 Successful companies depend on proper marketing. To get the right results, the company must ensure an excellent mix of all the elements besides the efforts directed to marketing (Armstrong, 2009, p. 61). Silva-Risso (2008, p. 23) posits that, price as a marketing mix element, exerts important effects on the performance of a service or a product. Scholars define the price as the amount paid by the client for a service or a product. Many factors determine the pricing of a product. Among other factors, Chrysler considers the demand for their product, the production cost of the product, and the response the product receives on the market. In most case, Chrysler uses the price to execute strategic changes because it is a factor used by price-sensitive customers to choose between two or more products on the market. Chrysler Corporation marketers remain in the lead in terms of placement of their products when compared to other automobile manufacturers. 11 Conclusion 11 In the presence of economic globalisation, marketers use various outlets to campaign and boost the brand name for their companies including print adverts, television spots, as well as engaging in sponsorship of various social activities including sports. Chrysler was the pioneer car manufacturing company to use science in making pricing decisions. The company contracted J.D. Power Associates to execute a planning model based on incentive. The technique depends on a random-effects vehicle model. Other features of the approach include relying on program-type and acquisition. Transaction covering data sales collected daily from more than 10 000 dealers across the globe help experts using the same model. The experts capture customer feedbacks in a heterogeneous way using the hierarchical Bayes framework. 12 Bibliography 14 Bank for International Settlements, 2006, BIS Quarterly Review a journal, p. 29. 14 From remarks at an UNCTAD conference in February 2000, in Johan Norberg (2003), In Defense of Global Capitalism. Washington: Cato Institute. 14 Growth is Good for the Poor, 2004, Journal of Economic Growth (2002), and "Trade, Growth, and Poverty”, The Economic Journal (2004). 14 IMF Discussion Paper, 2007, Reaping the Benefits of Financial Globalization, , (http://www.imf.org/external/np/res/docs/2007/0607.htm). 14 Joseph, S., 2003, Globalization and Its Discontents. New York: W.W. Norton & Company 14 Lim, L, 2001, The Globalization Debate: Issues and Challenges. Geneva: International Labour Organization. 15 Silva-Risso, J., 2008, Chrysler and J. D. Power: Pioneering Scientific Price Customization in the Automobile Industry. California: University of California Press. 15 Wolf, M, 2005, Why Globalization Works. New Haven and London: Yale University Press. 15 Introduction Globalization is central in the entire process of driving economic development. Globalization centres on the actors within the economy. In the process, it continues to have huge influences on labour relations as well as social partners dealing with existing, new, and contemporary situations. This papers aims at shedding light on the influences of economic globalization on Maritime Group, a shipping company as well as a focus on the effects of the same on Chrysler, a US based automobile manufacturer. Chaffey (2009, p. 19), defines economic globalization as a process that enhances economic integration across nations, resulting in the growth and development of a single world market or a global market centre. It is possible to view economic globalization both as a negative and as a positive phenomenon depending on the paradigm. Economic globalization started during the emergence of trans-national trade with increased occurrence dating back three decades. Growth is Good for the Poor (2004, p. 112) notes that companies felt the effect of the same during the thirty years that globalisation started expanding rapidly. Background: Maritime Group & Chrysler Maritime is a leading logistic provider in the UK. It remains the company of choice for cost effective and flexible solutions in maritime transport. The case is deeper where interregional and international trade drives prosperity. Along with global standardisation, communication, and liberalization of trade, Wolf (2005, p.63) holds that transportation constitutes the four cornerstones of globalization. It is difficult for any country to keep isolated from the rest of the world because of increasing economic, technological, and sociological forces. People herald or disclaim economic globalisation coming either as detrimental or beneficial to the stability of the world, peace, environment, and sustainable (Kotler, & Keller, 2012, p. 253).This section discusses the influences of economic globalisation on Maritime Group. Furthermore, the paper demonstrates that shipping (in general) remain in a symbiotic relationship with Maritime Group. According to Edwards (1998, p. 34), the industry is central to the entire process of economic globalisation whereas, the company remains under the influence of the process. Chrysler is a US based automobile manufacturer. Walter Chrysler founded the company in 1925 when the original company Maxwell Motors changed the name. It ranks as the third largest among motor manufacturer in the US benefiting from economic globalization partly. The company continues to face a myriad of problems over the past few years resulting from effects of economic globalization. Threats faced by giant automobile manufacturer contribute largely to the problems. Comparatively, the company strategy performs poorly in comparison with the other two leading manufacturers (Joseph, 2003, p. 126). The company ignores the fact that clients prefer fuel-efficient vehicles. The problem relates closely with lack of innovation in the company. The management does not have structures in place to encourage and embrace innovation form from employees (Eichhorn, 1997, p. 28). The situation remains unique considering the fact that other competitors give special attention to innovation. Maritime Group operates in Marine transport, a relatively less visible sector to the public, but remains integral to the economy. The company ships operate in a network of specials vessels. Ports visited by company ships, through to the framework of transportation, as well as terminals to centres of distribution where they dock. The company is a crucial complement to and sometimes a substitute for other forms of transport. The performance of Maritime against other top players in the market Table 1 Player Country ICB Subsector y MCap (SGDm) wgt % Maritime Grp UK Commercial Veh.& Trucks 2,621 57.98 Neptune Lines Singapore Marine Transportation 910 20.13 Cosco Corp Singapore Commercial Veh.& Trucks 496 10.98 Totals 4,027 89.09 It is essential to note that goods must reach the markets after docking (Bank for International Settlements, 2006, p. 29).Due to the influences of economic globalisation, trade routes and commodities lack direct substitutes involving waterborne trade. Changes in Information and Communication Technology because of economic globalization put the company in a better position to provide substitute mechanisms of transport for rail and roads through short sea shipping and within Inland River systems (Asia Business, 2010, p.10) .The Company owns cruise ships and ferries that offer passenger transportation. Comparing the performance of Maritime Group against the industry Table 2 Index Characteristics Attributes FTSE ST Maritime FTSE ST All-Sharet Quantity of elements 8 179 Net MCap (SGDm) 4,520 375,550 Yield of Dividend % 3 3.26 Average 556 2,908 Major 2,261 35,348 Least 41 20 Median 116 451 Weight of major element 57.89 (%) 9.41 Top 10 Holdings (% Index MCap) 100 53.43 3 1 M3Development in technology is an essential product of economic globalisation as such; Maritime Group supplies naval vessels for the national defense for many countries, resource and fishing extraction and navigational services (Bank for International Settlements, 2006, p.29). Navigational services are maintenance of harbour vessels and vessel-assist tugs among many more. Recognition of facts such as failure to collocate available goods and other resources with the population motivates the whole process of globalization. Therefore, services provided by Maritime Group within global transport remain important especially that economic perspectives justify the need for the same. Economic globalization continues to identify labour markets aboard beneficial to the businesses of Maritime Group. For Instance, the Government of Kenya, an economic hub of East Africa has a contract with Maritime Group to transport crude oil from Saudi Arabia to Kenya, where refining takes place. Kenya understands that it is cost effective to import crude oil and proceed to refine the same (IMF Discussion Paper, 2007, p. 78). Other neighbouring countries such as Rwanda followed the same procedure and contracted the company for the same purpose. Today, economic globalisation makes it possible for Agri-products to reach one continent after harvesting from another. Maritime Group ships produce from Netherlands to South Africa for intermediate processing. The organizational structure at Maritime Group after adapting to the impacts of globalisation Fig a (Boone, 2011, p.412) The company also ships the finished products to other countries including Angola and Namibia following 6the expansion of the regional and global market. Similarly, the company ferries cotton grown in North America to fabric mills in Ghana, then to Malaysia in apparel plants before returning to North America to the market in retail stores (European Conference on Information Systems, p. 14). On the other hand, Chrysler is struggling because of the effects of economic recession shortly after picking as one of the leading automobile companies. The US is smarting from the 2008 economic recession. Its economy is struggling. The same translates directly to the proportion of disposal income available to the Americans. Subsequently, people are not spending as much as they did before the economic recession. Reports show a sharp decline in the purchases of pickups, trucks, and minivans. The desire by consumers to buy fuel-efficient vehicles explains the rapid decline in the demand and purchasing of the other vehicles (From remarks at an UNCTAD conference in, 2003, p. 212). Chrysler being an American company lay off several employees besides the recession limiting the availability of credit facilities. Chinese firms, as well as Indian car manufacturers such as, TATA also pose a big threat to the growth and market of Chrysler (Lim, 2001, p. 156). In this case, the threat is that Americans who constitute the largest market for Chrysler have started preferring to buy more cars from abroad (Avery, 2007, p. 80). Gradually, they continue to stay away from local products. Unstable oil prices are threats that cause worry to the development and stability of Chrysler. Oil Prices from Dec 2010- Jan 2015 Fig b (Mullaney, 2007, p. 4) Gas and oil remain expensive with no signs of prices coming down because of the increasing stability in the producing zone in Asia and other parts of North Africa. Consumers now prefer smaller cars, yet Chrysler does not major in their production. In addition, Chrysler does not have an established international network to sell its products abroad. The biggest market is domestic (Mullaney, 2007, p. 4). Graphical representation of the performance of Chrysler within the economic globalisation context Fig c (Silva-Risso, 2008, 17) Statistics shows that sales continue to decline from 2008 where the company recorded a 22 percent drop in auto sales. Furthermore, the price of steel continues to rise steeply. Reports from the consumer survey agencies ranked Chrysler one of the fifteen countries with the worst quality. The other threat emanated from the decision by Daimler-Benz, a German automobile company acquiring Chrysler in 1998 developing a new company dubbed DaimlerChrysler (Silva-Risso, 2008, 19). The aim was to develop a new plan of action that focuses on improved product quality, better design, and higher productivity. The two companies wanted to achieve these through sharing parts and design models (Ebling, 2001, p. 72). By the end of the 2006 trading period, the performance of the company disappointed shareholders with the shares falling to ten percent. The fall generated from a threat developed by the company by choosing on a manager without the qualities of managing the company in the current contemporary market. Poor and obsolete shape of the factory adds to the poor quality of the products and lack of innovation at the company. The CEO failed to bring together a team of engineers from the companies to work as a team (Evans, 2007, p. 203). In the end, the design models became extremely difficult for Chrysler engineers as those from Daimler refused to cooperate. The performance of Chrysler on the stock market Fig d (Evans, 2007, p. 203) Successful companies depend on proper marketing. To get the right results, the company must ensure an excellent mix of all the elements besides the efforts directed to marketing (Armstrong, 2009, p. 61). Silva-Risso (2008, p. 23) posits that, price as a marketing mix element, exerts important effects on the performance of a service or a product. Scholars define the price as the amount paid by the client for a service or a product. Many factors determine the pricing of a product. Among other factors, Chrysler considers the demand for their product, the production cost of the product, and the response the product receives on the market. In most case, Chrysler uses the price to execute strategic changes because it is a factor used by price-sensitive customers to choose between two or more products on the market. Chrysler Corporation marketers remain in the lead in terms of placement of their products when compared to other automobile manufacturers. Conclusion A boom in the rate at which economic globalisation influences the performance of businesses resulted from the integration of developed economies and least developed ones through Direct Foreign Investment (DFI). Other factors that influence economic globalisation are modernization of developing cultures and reduction of trade barriers across the nations. Although economic globalisation entails economic and financial aspects, the interdependent nature of the economy influences the entire process of making laws and identity of culture inevitably. In the presence of economic globalisation, marketers use various outlets to campaign and boost the brand name for their companies including print adverts, television spots, as well as engaging in sponsorship of various social activities including sports. Chrysler was the pioneer car manufacturing company to use science in making pricing decisions. The company contracted J.D. Power Associates to execute a planning model based on incentive. The technique depends on a random-effects vehicle model. Other features of the approach include relying on program-type and acquisition. Transaction covering data sales collected daily from more than 10 000 dealers across the globe help experts using the same model. The experts capture customer feedbacks in a heterogeneous way using the hierarchical Bayes framework. Bibliography Armstrong, M, 2009, marketing through management practice, London, Kogan Page. Asia Business, 2010, Asia Online drops B2B barriers for small firms, Asian Business; Hong Kong; Vol.36 (10), p. 8. Avery, S. 2007, Online tool removes costs from process, Purchasing, Vol.123 (96)79-81. Bank for International Settlements, 2006, BIS Quarterly Review a journal, p. 29. Boone, L., 2011, Contemporary marketing. London: Cengage Chaffey, D., 2009, Internet marketing. London: Pearson Ebling, T. 2001, the economics of online banking, Target Marketing; Philadelphia; Vol. 24, Issue 2:67-78. Edwards, N. 1998, Electronic commerce: reality bytes, Supply Management, Vol.3, And No.8:32-34. Eichhorn, S. 1997, Cyberspace crosses selling. Credit Union Management, Vol.20 (9), p.28, European Conference on Information Systems, CA Magazine, Vol.130 (6)12-15. Evans, G, 2007, Organizational behaviour: The central role of motivation, Journal of Management 12 (2), 203. From remarks at an UNCTAD conference in February 2000, in Johan Norberg (2003), In Defense of Global Capitalism. Washington: Cato Institute. Growth is Good for the Poor, 2004, Journal of Economic Growth (2002), and "Trade, Growth, and Poverty”, The Economic Journal (2004). IMF Discussion Paper, 2007, Reaping the Benefits of Financial Globalization, , (http://www.imf.org/external/np/res/docs/2007/0607.htm). Joseph, S., 2003, Globalization and Its Discontents. New York: W.W. Norton & Company Kotler, P., & Keller, K., 2012, Marketing Management Global Edition, 14th Ed. Kylie McMullan, Simon Fraser University. Lim, L, 2001, The Globalization Debate: Issues and Challenges. Geneva: International Labour Organization. Mullaney, T., 2007, Maritime’s Real Sparkle. Business Week Online, 00077135, 6/8/2004 JCK, Blue Nile. Silva-Risso, J., 2008, Chrysler and J. D. Power: Pioneering Scientific Price Customization in the Automobile Industry. California: University of California Press. Wolf, M, 2005, Why Globalization Works. New Haven and London: Yale University Press. Read More