Integrated and Interdependent Global Economy - Essay Example

 Integrated and Interdependent Global Economy Introduction The main purpose of this paper is to provide the reader a synopsis of the global economy through interdependency and integration. The countries, region, policies and business programs are going towards a sustainable position which is going to incubate the entire global economy under a single umbrella. This will give an integrated and holistic viewpoint to the integrated approach of global economy. The fact remains that persistence is required in all aspects of business and globalization is not devoid of the same. When one can find the constant growth opportunities and increase in the productivity aspect, it becomes all the more clearer that an integrated and interdependent approach is quite efficient. It not only saves time, energy and money, but also induces overall growth to the economy. It is not one country that will be benefitted, but all the countries who are involved in the bilateral trade will be immensely benefitted from the same. What is Globalization? Globalization has made a major impact on the world economies. The shift has been mainly towards a more integrated and interdependent economy. Here the market and the production unit must be merged together to give and integrated effect. Also, the geographical factor has been considered when this interdependency aspect has been implemented. This is a good concept because the economy has been merged to source the local services and products and make it available to the huge global market and also to take advantage of the individual national distinctiveness and the other factors of production like energy, land, capital and labor. In this perspective, the matter of outsourcing refers to the concept of sharing of the production and service operations in an overseas country and also it helps in hiring the employees in a different location rather than employing the people in-house. The processes and functions, which Global Economy 2 are being outsourced most often, are supply chain by 36%, learning - training by 31%, information technology by 43%, finance and accounting by 21%, human resources by 25% and customer relationship management by 13%. The present scenario of globalization The free trade generates gains for all the countries which take part in the system of free trade, but as the factor of globalization moves throughout the U.S. financial system, many people dispute the effect of outsourcing on the jobs they hold. Outsourcing is primarily related to the low-level, blue collared jobs in the manufacturing industry and out of the U.S. and also directing towards the low-salaried countries, like shoes to Philippines, steel to Brazil, electronics to Malaysia and Taiwan and textiles to China. But, with the slowing down of the global economy post 2000, and also due to the fact that corporate profits have slumped, different U.S. companies moved many of their knowledge-based jobs to the developing nations so as to help them lower the input cost. The present condition of U.S. economy has impacted greatly to the global outsourcing business since the US GDP alone accounts for 28% of the world’s total GDP. Enhanced competitiveness, lower input costs, and higher profitability give confidence to the FDI in the smaller marketplaces where the U.S companies have contracted out their processes. In this effect the numbers of global jobs have increased manifolds, the wages have improved and practically the world has come closer. The developing countries have been hugely benefitted by the availability of well-educated and skilled manpower. This has helped the countries to improve their education system, transport and infrastructure. This also enables the developing countries to be financially stable and also to increase the trade for U.S. products. However, the trading aspect is not restricted only to the U.S. country, but has spread to Europe, Africa, China and other countries as well. This Global Economy 3 also helps the developing nations to payback the debts they have accrued over a period of time from other countries. In the mean time the investors, consumers and shareholders of the parent company gets the benefit form the outsourcing aspect. But this comes at times to the cost of the jobs available in the parent countries. On another context it must be noted that loss of highly skilled manpower and also the high-paying jobs in the U.S. and other countries have also reduced the salary structure in such developed countries. But, different studies have mentioned that the U.S. economy is going through recession and will sink at a rate of 1.3% in Quarter 1 of 2009. The experts think that the highest saving possibility will be derived from the outsourcing of the assembly line productions and also training the people aboard. But the fact remains is that more and more service and production related jobs are getting outsourced to the other countries, will result into decline of the job market in the U.S. and other countries. The people of these developed countries will incur loss on their pension fund and will reduce the consumer spending. The requirement for Integrated and Interdependent Global Economy There are very minute international financial activities in the world which will not get affected by the numerous changes in the U.S. economy. Hence, the global outsourcing is no exception to this phenomenon. The present developments in the U.S. economy will definitely have great impacts on the outsourcing business. But there are two primary developments in the world economy. Global Economy 4 One of the major developments is actually in progress in the U.S. and is related to the unemployment problem. Since more and more people are looking towards the new government of Obama to restrict the outsourcing effect. But it must be remembered that the loss of job is not primarily based on the outsourcing effect, rather it is dependent on attrition rate and job changes. Hence, the fact that the developed countries are loosing jobs due to outsourcing to the developing nations like China, India and Philippines is not exactly true. Another concurrent increase is the diminishing revenue margins of the companies, which is again putting lot of pressure on the management to find means to cut the costs and preserve the profit. Hence, the non-core activities of the companies are outsourced, so that the costs can be lowered and the profitability can be maintained. This growing need to cost cutting is another indication that the economies must co-exist. Conclusion In the long run, the outsourcing trade will definitely benefit. As different businesses are going to compete against each other for the matter of survival, cost will be a deciding factor. This will put immense pressure on the shareholders and managers to find out the opportunity to curtail the costs and go over their competitors. This fact will be much bigger than the politics itself. The phenomenon will address the problem for both the sides that is the client and the vendor. The human societies across the world have been able to establish closer relationships over the centuries. What was initially just a barter system to exchange goods has slowly and steadily gathered enormous mass. Apart from the 2 major World Wars nothing exactly has gone wrong in Global Economy 5 terms of global trading. The advent of email, jet planes, FDI, cheap telecommunication has all been the important factor in developing the global economy and bringing the countries together. This was expected, because no single country can survive alone. They have to depend on other countries as well for improving their economy, supplies and overall growth. This is a common factor for both the developing nations and the developed countries. One thing is for sure, is that no one will be alone now, neither at the top and nor at the bottom. With rapid progression in technology and communication, the world has come closer. Moreover, each country is getting specialized in some aspects of international business. This has happened primarily due to outsourcing. With expertise comes commitment and propensity to grow. This is bound to happen, that no single country will be able to cater to the rest. Work will be divided and segregated to match the skill sets of the manpower of the respective countries. As an example, China has done extremely well in the manufacturing business, while India has been able to provide more towards the intellectual part of the business. There is nothing wrong in it, because at the end all are benefitting and it adds on to the overall development of the world. For many people the global economy has helped the world to have international peace and collaboration. Global Economy 6 Reference: 1. How the current U.S. economy affects global outsourcing. Christina Pomoni. http://www.helium.com/items/1264319-how-the-current-us-economy-affects-global-outsourcing 2. How the current U.S. economy affects global outsourcing. V. Kumar. http://www.helium.com/items/1266142-global-outsourcing-global-outsourcing-and-us-economy-us-economic-impact-on-outsourcing 3. http://www.helium.com/items/1266142-global-outsourcing-global-outsourcing-and-us-economy-us-economic-impact-on-outsourcing Read More