Tag: Globalization

Globalization and Outsourcing

Globalization and Outsourcing

Globalization is a phenomenon that has swept across most sectors of the globe leaving firms to adjust to the changes that are occurring. The rise of competition Is one example of an aspect that has emerged within the twenty-first century, especially due to a dissolution in trade barrier that marked numerous markets as impenetrable. With globalization escalating gradually, businesses have gained an exposure opportunity to learn more as well as share tips on better ways of approaching futuristic growth. The following report will expound on globalization as a phenomenon, as well as its associated impacts within the modern day era. 

From an entrepreneurship perspective, the duties and functions that defined the modern-day capitalist or businessperson, have significantly complicated with time. Ideally, the 21st century, unlike its predecessors, has been defined by a revolutionary economic, educational, political, and social landscapes, elements that have emerged as a result of globalization.

Interestingly, the emergence of the phenomenon has transformed the manner in which man does business, given that it has erased the limitations that were nurtured by geographical borders as well as trade barriers, an aspect that has resulted in man embracing new synergies that will offer him or her competitive advantage over other similar players in the same market niche. The following report will further expand on wise investment moves as well as tactics such as outsourcing and offshoring that managers can apply to realize a wider economy of scale as well as achieve a greater competitive advantage. By utilizing the Case study of Telstra Call center services Outsourcing and offshoring, this report will expound on the impact, opportunities, as well as challenges, Globalization, and its associated strategies, have imposed on business operations especially on the global scale.

The World as we know it is currently evolving at unprecedented levels, an aspect that is reconfiguring and transforming the manner in which business, as well as trade, is conducted. As a result of the rampant transformation, goods and services have become easily accessible for most people across diverse regions of the globe. In addition to this, the international business community has continuously expanded as a result of favorable influences that have been nurtured by the economic reconfiguration and transformation. But, what is all this economic reconfiguration and transformation? The 21st century, unlike its predecessors, has been defined by a revolutionary economic, educational, political, and social landscapes, elements that have emerged as a result of globalization. The emergence of globalization as a phenomenon has transformed the manner in which man does business, given that it has erased the limitations that were nurtured by geographical borders as well as trade barriers (Beck, U. 2018, P. 35).

From an entrepreneurship perspective, the duties and functions that defined the modern-day capitalist or businessperson, have significantly complicated with time. Why and How? With factors such as competition escalating as a result of the globalization aspect, most entrepreneurs have embarked on redefining the rules of trade and business engagement provoked by the need to craft and embrace new synergies that will offer them competitive advantage over other similar players in the same market niche (Hay, C. and Marsh, D. eds. 2016, p. 52). As a result of the shift in momentum, it is crucial to note that today’s economic environment has shifted its dependency from the public sector to the public sector, given that the later has emerged to be the global powerhouse, while the former segment has continuously shrunk in size, cumulatively losing its prior influence and relevance in the economy setting.

Globalization and Expansion

In spite of Globalization nurturing numerous advantages from an economic growth perspective, it is crucial to note that the phenomenon has also escalated the rate of competition present across all trade sectors. The given aspect has manifested as a result of numerous entities across diverse regions entering the market, with each unit producing a similar commodity, to an already existing product. The escalation of competition has provoked most organizations to invest heavily in expanding their operations onto a global scale, efforts that have emerged based on the need to grow and expand the market niche that each organization claims and controls (Beck, U. 2018, P. 27). As an approach, the expansion to international markets has provided firms with an opening to increase their returns, realize other potential economic opportunities, as well as improve their image perception and brand loyalty. Although there are also challenges associated with the entry into foreign markets, the manner in which a venture tackles the emerging challenges significantly determines its survival chance in the new territory.

Outsourcing and Offshoring

Outsourcing is a strategy that has been employed by numerous institutions, which have pursued the global expansion route, based on its cost-cutting approach. When entering new markets, firms have always been primarily challenged by their ability to adopt, embrace, and conform to new customs, cultures as well as language that define the new market (Solli-Sæther, H. and Gottschalk, P. 2015, p.90).

Outsourcing as a platform provides a solution to such challenges among others, by utilizing the local manpower within the new economic niche as the organization’s workforce. The following report will expound on globalization and its impact on today’s businesses as its foremost agenda. Furthermore, this paper elucidates on tactics that managers pursuing expansion into the international market should observe if they wish to remain ahead of the game. In the second segment, the publication will analyze outsourcing and offshoring, coupled with their contribution to globalization, based on an Australian firm Case study.

Globalization and Today’s International Managers

Globalization as a concept is not new as one may perceive it to be, given that the concept has existed for centuries, only evolving with time to its present state. By definition, Globalization is a term that refers to the gradual but global integration of the numerous states economies, through the production of goods and services, trade escalation, as well as investment flows (Hay, C. and Marsh, D. eds. 2016, p. 11). From a phenomenon perspective, globalization emerged as a result of the global outreach fever that swept most nations, transgressing through each of the states military economic, trade and geopolitical niches. The cumulative impact of the global outreach manifested in the erosion of national economic borders, an element that embraced the emergence and growth of integrated international economies.

From a profile perspective, globalization has been defined by; the emergence of global corporations, robust internalization of production related economic activities, growth in the level of specialization, and escalating disaggregation of production. How has this been possible? Globalization as a phenomenon has consistently relied on policy changes as well as technological growth as catalyst platforms (Teece, D. Peteraf, M. and Leih, S. 2016, p. 19).

From a policy perspective, the creation and amendment of numerous trade policies has resulted in the dissolution of trade tariffs and barriers, an element that has opened up and exposed the local markets to international products, while also local products from different nations have been able to trade on the global market platform (Beck, U. 2018, P. 42). Evidently, nations such as Australia, China, and Dubai, all of which opened up their markets to trade and embraced international brands, have gained immensely from Globalization, an aspect that is visible in each state’s current market situation. 

Technology as the second catalyst factor propelled the evolution of globalization to what it is today. How So? As a result of its rampant evolution, technology has been integrated into man’s life as a crucial platform in his civilization. The emergence of a technology-based lifestyle, shifted the manner in which consumers’ access, shop, and order for their products, as well as the strategy in which manufacturers, industrialists, and producers advertise, retail, and distribute their products (Hay, C. and Marsh, D. eds. 2016, p. 52). Given that the dependency on technology is still expected to escalate with time, the business world has realized of its importance in globalization and the influence it imposes in the productivity, of goods and services as well as the consumption of the products.

Impact of Globalization: A Business Perspective

Globalization as an economic exposure platform has brought along with numerous advantages as well as implications both from the producer as well as consumer’s perspectives. When focusing on the producer side, which primarily made up of entrepreneurial organizations within the private sector, it is crucial to note that globalization has exposed the sector to competition, fluctuation in prices, as well as the substandard quality of products (Kraidy, M. 2017, p. 31). The following segment will offer an in-depth view of Globalization from a business perspective.

It is crucial to note that from the consumer’s end, globalization has been perceived to bear numerous benefits over time. However, that may not be necessarily the case when the aspect is perceived from a business perspective. The increased exposure of markets has also escalated the vulnerability of ventures both in local and international economies to a myriad of unforeseen risks, aspects that will be expounded on below.

Globalization and Outsourcing Dissertation
Globalization and Outsourcing Dissertation

Intense Competition

Competition as the first impact of globalization emerges from the opening up of local markets as well as the integration of economies. It is crucial to note that exportation and importation, as well as outsourcing of product and services are crucial aspects of globalization. Unfortunately, the given elements have created an influx of substitute commodities to most products in diverse markets (Donati, P. 2017, p. 15). The cited aspect which has emerged as the entry of new players into the market culminated in the escalation of competition between existing firms and the new entrants. Cumulatively, although the approach has compelled previously existing firms to improve their quality of products and services, it is unfortunate to note that the cost of competition has been overwhelming for firms in markets that are defined by numerous players.

Price Fluctuations

Fluctuation of prices as the second impact of globalization is highly associated with competition and market saturation. It is crucial to note that although globalization opened up local and international markets, the platform also led to the saturation of various markets that were already defined by a presence of numerous existing local players. Most of the international entrants into local markets were able to supply the consumers with alternative or substitute commodities, to local options at a lower price and even a better quality (Teece, D. Peteraf, M. and Leih, S. 2016, p. 27). Case in point, China’s products are renowned for their cheap price, although inconsistent quality. The given aspect nurtures price fluctuation of commodities because local producers will always be compelled to adjust their prices in a bid to compete with foreign producers, and the cost of their commodities, an aspect that culminates in the unsteady prices of goods.

Substandard Quality of Goods

The quality of a product as well as the brand it has crafted for itself, are aspects that significantly shape customer loyalty and satisfaction. Globalization as a phenomenon has compelled most firms operating in the international platform to outsource their products to developing nations, in a bid to realize a wider competitive advantage, margin when compared to other firms operating in the same niche (Kraidy, M. 2017, p. 22).

The downside of outsourcing is that for most organizations, the ability to observe a given set of quality standards becomes impossible especially when the firm focuses on offering services, or manufactured goods. Cumulatively, although globalization is inevitable, its impacts can be positive as well as be overwhelming for organizations without adequate control structures. The following segment will expound on strategies that international managers can adopt in a bid to remain afloat if not advance in the face of stiff and harsh globalization-induced changes.

Today’s International Managers: Winning tips amidst fierce competition

Drawing from the above analysis of globalization, it is evident that the phenomenon has significantly reshaped the manner in which organizations functions, and conduct business, especially within the international market platform. In spite of the prevalent changes, there are several tactics that wise international managers can utilize to continuously attain growth in returns, and market share. In addition to this, the tactics will enable an organization to establish a reputable image that retains a wide base of loyal customers.

Globalization, Identifying and analyzing the existing and potential Competition

For an organization to stay ahead of its competitors within any market niche, the firm should be aware of the existing threats, an aspect that can only be realized by conducting a thorough competitor’s analysis. It is crucial to note that any industry with new players and startups joining every day is considered to aggressively active, and as such, any firm operating within such a niche should consistently update its analysis in a periodical manner (McLean, M. 2018, p. 35). When analyzing the potential threats, it is crucial to identify the primary and secondary competitors as well as the level of threat each player imposes on your particular firm. By doing so, a manager can analyze the strengths and weaknesses of potential and existing competitors, in addition to making strategic moves that will consistently position the organization ahead of the competition. 

Assessing and Understanding the Target Market

In any business competition, it is crucial to note that the clients or consumers always represent the judges, as their choice embodies their final opinion about their desired product. In any market niche, a wise international manager will always assess the audience, its expectation, and needs, as well as demands. It is crucial to note that consumer behaviors keep on changing depending on the influence of macro factors such as economic conditions (McLean, M. 2018, p. 54). In such an instance, an astute director establishes constant communication with the organization’s existing and prospective clients, as an approach to remain informed and update on consumer concern, predictions as well as desires. By doing so, a firm can adjust its product pricing, market strategies, product packaging, and promotional campaigns in a manner that will attract potential clients and retain the existing ones.

Outsourcing and Offshoring, Telstra Case study

Outsourcing, when defined, refers to the process whereby a firm subcontracts the organization’s tasks and mandates to various external organizations that have specialized in providing the desired service. In other cases, outsourcing also involves a practice whereby an organization acquires a smaller firm with adequate resources and employees to run its tasks. Cumulatively, outsourcing revolves around the breaking down of a given function, and it’s subsequent assigning to third parties (Oshri, I. Kotlarsky, J. and Willcocks, L. 2015, p. 15).

Offshoring, on the other hand, refers to the purposeful relocation of a specific or cumulative business procedure to another new location, such as a country. A good example of offshoring would be when an industrial firm physically relocates its manufacturing process to a new state. The main difference between offshoring and outsourcing is that the former focuses on establishing an operation in a new state as a result of repositioning, while the latter primarily refers to the subcontracting of a firms’ task or duty to a third party which in most cases is usually an external organization (Solli-Sæther, H. and Gottschalk, P. 2015, p.90).

 The fierce aspect of globalization has compelled firms’ overtime to search for innovative and alternative approaches to getting the work done efficiently. Outsourcing and Offshoring have emerged to be promising alternatives means of meeting the production needs of any company. By employing the two approaches, numerous international firms have been able to regulate and cut down operational costs, free up internal resources to support other crucial sectors, and streamline time-consuming functions (Oshri, I. Kotlarsky, J. and Willcocks, L. 2015, p. 48). 

Telstra Outsourcing

Telstra within Australia is presently recognized as the largest media and Telecommunications Company, offering services that include; operating telecommunication network, as well as a vast range of entertainment and communication product and services. As a firm, Telstra prides its purpose to be creating a brilliant and connected future for everyone, a vision it has managed to achieve over time through the expansion of its products and services towards the international telecommunications market.

Expanding into the international market is a move that Telstra implemented provoked by the need to grow the company’s portfolio onto the next level, in addition to embracing the global market platform (CX Central. 2018b, p1). In its expansion operations, the firm has gradually relied on outsourcing and offshoring as approaches to realize its economies of scale and competitive advantage over other players present in the telecommunications industry. One particular and crucial department that the firm has constantly outsourced and offshored to India, Manila, and Perth is its call center operations (CX Central. 2018, p1).

Essentially, under the firm’s international operations plan, Call centers are usually overwhelming departments that are defined by large volumes of low severity type of work. If the firm was to house most of call center operations within its main headquarters back in Australia, evidently quite extensive resources would be committed to the department, to the extent of overwhelming significance performance targets of the institution. Thus by outsourcing and offshoring call center services, the firm is primarily able to focus its resources on dealing with challenging and more severe issues affecting its product portfolio, brand depiction, and customer market base (CX Central. 2018, p1).

Challenges of Outsourcing and Offshoring

Two of the major challenges that Telstra has realized in its international expansion conquest, are cultural and language barriers. As a telecommunication firm, Telstra is constantly in touch with its customer base compelled by the need to introduce and sell new products, as well as offer supportive services (CX Central. 2018b, p1). Given that the firm opts to outsource and offshore its call center operations, most of its customer base across the western world have been complaining of an ineffective call center support base, as in most situations their needs and demands have often been unmet (CX Central. 2018b, p1).

One good example was a recent scenario, where an American customer received poor call center support services that were perceived to be abusive and culturally insensitive, especially after the firm had withdrawn its support for same-sex relationships (CX Central. 2018, p1). It is unfortunate to note that the given aspect resulted from a conflict in cultural and linguistic customs between the firm’s support staff and a worried client, an aspect that could have been deterred if the firm offered locally based call support from America or Australia.

Globalization, Outsourcing and Offshoring Opportunities

From an opportunity perspective, Telstra was able to run its call center support services at a lower cost especially given that the standard labor wage of employees in most of the countries that the firm outsourced its operations are way below what Telstra was offering its initial employees. Additionally, the firm, thanks to outsourcing and offshoring was able to free up more resources back at home and commit them to more severe and demanding issues associated with the firm’s growth and future projections.

In conclusion, it is evident that Globalization is a phenomenon that is here to stay. More so, firm’s that do not embrace this occurrence will gradually become outdated in our ever-changing and first paced world. As economies integrate, there is a crucial need for managers to begin “thinking out of their market niche, and across the globe.” Customer preferences change from time to time, and with that being a significant determining factor of choice, firms should consistently lay down moves that will secure more potential customers besides retaining the existing ones. Additionally, with competition emerging to be a significant defining factor of today’s markets, there is a pressing need for firms to adopt positive elements of outsourcing and offshoring, besides other competition analysis schemes, all in a bid to remain ahead of the curve that is a saturated market full of numerous existing and emerging start-up players. 

References

Beck, U., 2018. What is globalization?. John Wiley & Sons.

CX Central. 2018. Telstra call centre staff in Perth have language problems – CEO | CX Central.

CX Central. 2018b. Telstra’s offshore call centre has a cultural alignment shocker– CEO | CX Central.

Donati, P., 2017. Globalization of Markets, Distant Harms and the Need for a Relational Ethics. Rivista internazionale di scienze sociali, 1(1), pp.13-42.

McLean, M., 2018. Understanding your economy: Using analysis to guide local strategic planning. Routledge.

Oshri, I., Kotlarsky, J. and Willcocks, L.P., 2015. The Handbook of Global Outsourcing and Offshoring 3rd Edition. Springer.

Solli-Sæther, H. and Gottschalk, P., 2015. Stages-of-growth in outsourcing, offshoring and backsourcing: Back to the future? Journal of Computer Information Systems, 55(2), pp.88-94.

Teece, D., Peteraf, M. and Leih, S., 2016. Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy. California Management Review, 58(4), pp.13-35.

Kraidy, M., 2017. Hybridity, or the cultural logic of globalization. Temple University Press.

Hay, C. and Marsh, D. eds., 2016. Demystifying globalization. Springer.

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Apple Company International Law Globalization

International Law and Globalization

Apple Company is a US base incorporation incorporated in the US in the year 1976 by Steve jobs. Ever since then Apple Company has witnessed huge milestones in its production, distribution, and marketing of its electronic device majorly the apple phones (Johnson, Phan, Singer & Trinh, 2012). Currently, Apple Company is one of the largest us based companies listed on the stock exchange contributing significantly to the US GDP. Its forms one of the largest multinational companies offering the highest job opportunities both locally and internationally. The company has offered more than 60,000 jobs globally for both full time and part time.

International roles of Apple Company

Customarily, business is expected to deliver or play some roles in the economy. Some of the roles may be economical or social functions.  Companies are to structure their overall operation to ensure that the end product of it all defines their contribution to the international business globally. Consequently, Apple Company is not an exceptions or immune to this role. It has to ensure that its functions in the international business by involving herself in various activities that benefit the global trade through its interplay with various economic factors. The discussed under are some of the roles of Apple Company in the international business.

Export promotion. Apple Company has expanded exports to many countries in which it has established its production processes.  The apple come has established its production in many countries especially those countries from Asia. The key player comes from Irish and China. Reports and researches assessing the contribution of this on exports of these countries are astounding. It indicates that, for instance, China has mostly benefited from exports of apple products contributing to at least 8% on China’s GDP.

The same spill overs have passed on to other countries in which Apple have established its main production activities. This forms one of the primary roles of the company to support the trade activities of those countries in which they are operating in. In this way, Apple Company has played a major role in international business through export promotion.

Job creation. Apple Company is one of the largest giant multinational companies which have massively created thousands of job opportunities. Apple Company has over 700 production operations across the world. Statistics shows that the company has offered over 60,000 job opportunities globally either directly and indirectly. These jobs are provided either through their factory outlets or through their middlemen and intermediaries who are strategically situated in the various countries.

Revenue creation. Apple Company has largely contributed revenue generation of many countries. When companies operate in the international arena, they are subject to tax payment and other reparation laws which ensure that a certain percentage of revenues generated in those countries are retained and locally promote local activities. Apple has paid millions of taxes to these countries which have helped local people to enhance their lives through productive activities. (Hutt 2017)

Cultivation and promotion of innovation. This is one of the key roles they the company has played in the international business. When it comes to innovation, Apple Company stands conspicuous from the rest of other electronic or mobile phones producers. The company has the culture of developing and promoting innovations throughout its production process. This has led the company to win many global trophies as a leader of global innovation. Studies indicated that the company is strategically studying the markets niche and satisfactory innovating products which satisfy those needs.  This innovation is not constrained in their key factory outlets, but it has diffused globally contributing to more innovation into the global business.

Enhance improvement in global supply chains. Apple Company has come up with one of the best supply chains in their marketing strategies. Customary, Apple Company does outsource their raw materials from many countries outside us. This means that they need to have proper supply and delivery channel that ensures that raw material is moved on time to production sites.

In the same way, such channels should ensure that products are moved and delivered to customers on time. In facts, Apple boost of the most efficient supply channels in the international business which other companies globally have adapted to in their supply chains.

Environmental protection role. Apple has had significant role in the international business environment. The company has come up with major policies that ensure the sustainability of the environment. This has involved low carbon emission policies that have ensured the company uses low carbon means like solar power plant to run their factories.

Effects of international laws on apple company operation

Globalization comes with the internationalization of business. Consequently, when businesses start trading internationally, they operate in different countries with varying jurisdiction and laws. In this way they are to ensure that they abide by those laws fully and in case they violate them, they are prosecuted, and sometimes their operations are shutdown. International laws have the ability to promote or totally dismantle business operations of a company which violates them. The discussed below are some of the effects of international laws effects on the operation of the apple company (Chan, Pun, & Selden, 2013).

International Taxation laws and effects on Apple performance. In the year 2016, the European Court ordered Apple Company to pay close to $14.5billion of tax the penalty to Irish government (Hunt 2017) The court held that the Irish government violated international tax law by meddling tax laws to favour Apple Company which resulted to the company pay less tax to Irish government (Heckemeyer & Overesch, 2013).

Also, the court ruled that Apple Company had not paid the entire required tax amount and other revenues from sales they had made in 20-14 and 2003. Such tax laws are just reducing the Apple’s operations in the international business as it has ended up suffering one of the largest financial losses ever. International tax laws have the ability to limit Apple operating activities. Apple has had in past major corrosive effects that resulted from tax avoidance in the United States.

This leads the company to pay in millions of money as the Senate ruling indicated that the company had strategically formulated strategies that they use to avoid tax. This too has affected the profitability margin of Apple Company. Responding to the Europeans Commission ruling in taxes, the chief executive officer of Apple Company warned that were likely to reduce their operations in Ireland risking over 1.5 million jobs in entire Europe. The effects of such international laws are simply just to reduce business operations.

Apple Company International Law
Apple Company International Law

International labour laws and the effects on Apple Company business. These are laws that are internationally accepted by all countries and which ensures employees’ rights are protected, and their work environment is safe. Occasionally, Apple Company has found itself in conflict with such laws when engaging with employees. In the year 2012, apple industry outlet located in China, Foxconn, was reported to have engaged minors as workers (Duhigg & Barboza 2012).

The company employed children and students in their factories which are against international labor laws. Several other employee cases have been lodged in the courts on claims of proper working conditions as well as employees being forced to work overtime. Violation of such international laws directly damages the reputation of a giant company like Apple (Sandoval 2013).

In 2014, Apple, Google, and Intel were fined $324 million in laws suits. Frequent labor laws have negative effects of damaging Apple reputation and stakeholders too. Regular penalties only have hindering effects on the performance of the Apple Company (Hunt 2017).

Approaches to global politics – Realistic approach

The approach is based on the premise that each country is seen to be in fight for its position in global arena while each is advancing its interests. In this way, a country will consequently reign supremacy over its borders and population. The states are seen as seemingly guarded against invertible threats against the freedom of its people and encroachment of potential threats on its borders (Gilpin 2011).

Under this approach, the attainment of economics, as well as the mobilization of economic power, is viewed as marshalling power over its borders. The main facets of realism include mercantilism, ethno nationalism, colonialism, and neo-colonialism. Colonialism is viewed as a major precursor to globalization while mercantilism is the smooth approach that promotes establishment of industries through subsidizing them and protecting them from international competition (Gilpin 2011).

Mercantilists advocates for free trade to enhance the realization of an end to political struggle. Realists presume of an international state structure as progressively more revolutionary, and they assume that all countries work in attaining their parochial interest. The approach characterizes international politics as being power centered focusing on power balance, and eventually, that war is unavoidable in the international states system (Baylis, Smith & Owens, 2013).  The main advantage of realism is that it prioritized state political supremacy over an individual and that state should be the key player

Liberalism approach

Primarily, the liberalism approach to global politics seeks spreading of democratic as well as economic power to necessities the true picture of globalization. The approach also advocates for an economic path for a true realization of one economic and cultural global political order. Liberals fall out that a great room exists for collaboration and gain for all countries in international state politics. Also, liberalism unmoving believes that countries can still work from mutual benefits and avoid international politics (Baylis, Smith & Owens, 2013).

Liberalism can be traced about 200 hundred years ago to economic philosophers Adam Smith and David Ricardo. Liberalism has thrived in fame in the aftermath of World War 1 and world war 11. Even though limits have resulted in the incapability of liberalism to put up with the fruit that it so dynamically argued. Liberals’ mainly important role is based on the notion asserting that all accomplices in an organization of free trade markets are beneficiary (Baylis, Smith & Owens, 2013).

 The main advantage of liberal is the advocacy of free trade in international political arena. They argue that little political restriction will automatically cause the trading parties to gain mutually. The second aspect here is that realism advocate and strongly prefers an individual to state politics. In global world, protectionism is necessary; this forms one as the major advantage of liberal as it vehemently fights against protectionism.

Use of globalization at Apple Company

Global outsourcing. Apple has applied outsourcing significantly to enhance its production. The company has its head office in the United States which is a nonmanufacturing office. Productions are located in Europe and Asia. The company does outsource it critical production raw, materials from many countries to their assembling plant globally. This is one of the key utilization of globalization by the apple company. Employees and innovators have also been outsourced globally as a result of globalization in trade laws and practices. Aided by globalization, Apple Company has been able to cut the high cost of production in the United States by strategically setting their operations in countries where production cost is low (Borrus & Zysman, 1997).

Apple has used the effects of globalization to establish one of the best online retail shops. Their customers can purchase company’s product all over the world with no limitation to geographical distance and be delivered to them on time. These online stores and websites can be translated into different languages for everybody who wishes to transact with the company.

The company has also structured its production process to move in line with globalization. The supply chains and value chains developed have been used to ensure that The Company remains competitive in global market. Globalization has also been used to do market segmentation and various market strategies by Apple Company. Through globalization, Apple Company can easily now segment international market for profitable returns and consistently shy away from those markets with low profits or markets which are risky.

Conclusion

It is clear crystal that Apple Company has grown over the years to be one of the world’s giants businesses globally. The company has set up its operational internationally in many strategic countries. By going international, Apple Company has been forced to operate within international trade laws which prescribed the nature of and ways in which accompany ought to conduct business at international levels. Such laws which have affected apples international business include tax laws, labor rational laws as well environmental laws. The major roles of Apple Company in international business include export promotion, job creation, and revenue generation among many others. Strategically, Apple Company has been affected by global business in areas such as outsourcing, redesign of supply chains, and establishment of online business among many others.

References

Baylis, J., Smith, S. and Owens, P., 2013. The globalization of world politics: an introduction to international relations. Oxford University Press.

Gilpin, R., 2011. Global political economy: Understanding the international economic order. Princeton University Press.

Sandoval, M., 2013. Foxconned Labour as the Dark Side of the Information Age: Working Conditions at Apple’s Contract Manufacturers in China.

Johnson, K., Li, Y., Phan, H., Singer, J. and Trinh, H., 2012. The Innovative Success that is Apple, Inc.

Duhigg, C. and Barboza, D., 2012. In China, human costs are built into an iPad. New York Times, 25.

Linden, G., Dedrick, J. and Kraemer, K.L., 2011. Innovation and job creation in a global economy: the case of Apple’s iPod. Journal of International Commerce and Economics, 3(1), pp.223-239.

Licht, Tine R., Max Hansen, Anders Bergström, Morten Poulsen, Britta N. Krath, Jaroslaw Markowski, Lars O. Dragsted, and Andrea Wilcks. “Effects of apples and specific apple components on the cecal environment of conventional rats: role of apple pectin.” BMC microbiology 10, no. 1 (2010): 13.

Heckemeyer, J. and Overesch, M., 2013. Multinationals’ profit response to tax differentials: Effect size and shifting channels.

Smith, J., 2012. The GDP illusion: value added versus value capture. Monthly Review, 64(3), p.86.

Chan, J., Pun, N. and Selden, M., 2013. The politics of global production: Apple, Foxconn and China’s new working class. New Technology, Work and Employment, 28(2), pp.100-115.

Borrus, M. and Zysman, J., 1997. Globalization with borders: The rise of Wintelism as the future of global competition. Industry and innovation, 4(2), pp.141-166.

Hunt, Elle. “Apple Paid No Tax In New Zealand For At Least A Decade, Reports Say”. The Guardian. N.p., 2017. Web. 29 Mar. 2017.

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MBA Project Globalization

MBA Project Globalization

Summary

Over the past few decades, the global scenario has changed considerably with increased interdependence amongst nations and economies. This intertwining amongst nations and sharing of ideas and technology has been termed as “Globalization”. Globalization has been a buzzword of late, with heated discussions about its pros and cons. Some consider it to be a blessing for mankind while others take it as a curse. For some it has brought about material prosperity while others have become unemployed due to it. This paper tries to analyse the effect of Increased International Trade and Globalisation on the US economy. The first section discusses the pros and cons of Globalization while the second section discusses how globalization has lead to increased foreign trade. Thereafter, it discusses the effect of globalisation and increased foreign trade on the American economy.

Introduction

Trade is believed to have taken place throughout much of recorded human history, whether as barter or in exchange of currency. Till the 1800’s, trade was limited due to difficulties in transportation, communication and restrictive trade policies. However, in the mid 19th century, with advent of free trade and nation advantage concepts, trade started to pick up (Daniels & Sullivan, International Business and Operation).  Although international trade has been present throughout much of history, for example Silk Route, its economic, social, and political importance have increased in recent centuries, mainly because of Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing. Worldwide, countries are doing away with trade restrictions and lowering trade tariffs, thereby supporting free trade and making the world a global village (Daniels & Sullivan, International Business and Operation).

Globalization – Boon or Bane

The global economy is no longer an individual event and USA no longer plays the dominating role. This is apparent from the fact that ten years ago the World Trade Organization had only 80 members whereas now it has 153 members (WTO Data, 2010). Also countries like China and India are getting more bargaining power day by day. Globalization is the deepening relationship and broadening interdependence amongst the different countries of the world. The World Bank defines globalization as “the growing integration of economies and societies around the world.” This integration of regional economies into a global village has lead to increased international trade, investment, capital flows and technological advancements. Technological advancements such as the internet and cell phones have literally reduced the world to a Global village. Globalization has both its critics and it supporters. Some interpret it as a way of countries losing their cultural identities and becoming “Americanized.” Others see it as a way to reduce costs and to increase profits and efficiency. The debate over globalization is perceptible in demonstrations against the WTO in Seattle in the fall of 1999, against the Summit meetings in Quebec and Genoa and against several annual meetings of the IMF and World Bank. While on the other hand, supporters of globalisation look forward to a global village, linked together by the Internet, and enjoy the ever-increasing material well being (Daniels & Sullivan, International Business and Operation). The United States is seen by much of the world as the strongest supporter of globalization – in fact, as pushing it on everyone else. Over the years, globalization has resulted in increased foreign trade and capital flows, thereby contributing immensely to the domestic economy. In the 1990s, globalization and free trade, resulted in integration of China and the former Soviet bloc into the trading system thereby lowering inflation and opening new markets. However, as the emerging markets got stronger, the prices of commodities started rising immensely and competition from foreign workers lowered the average US wage rates. Jeffrey Garten, professor of international trade and finance at the Yale School of Management, points out that in 2000, the world’s wealthiest countries accounted for about 70 percent of the global economy, compared with 30 percent for developing economies. These rates are slowly but surely reversing. Thus, USA has seen both the positives and the negatives of globalization.

International Trade

One important effect of globalization is the increased interdependence among nations which has demanded increased liberalization of markets, the dismantling of almost all trade barriers (Lee, 2005; Czinkota and Ronkainen, 2007). As a result, the forces of globalization have necessitated trade liberalization (Martin, 1993), leading to increased international trade, not only in good and services but also currency and capital. Ever since independence, America has been a supporter of Free Trade. In 1988, USA signed a Free Trade Agreement with Canada that progressively eliminated tariffs over a ten‐year period, thereby making Canada USA’s premier trading partner. Further, in 1994 the Mexican Government, in pursuit of market reforms, signed the North American Free Trade Agreement (NAFTA). The passage of the NAFTA agreement signalled the continuing support of U.S. policy‐makers for the worldwide march toward free markets and further economic globalization (Paul. S Boyer, 2001). The above agreements lead to immense increase in trade and greater market efficiency. However, by 1999 USA had a huge trade deficit of around USD 200 billion (Paul. S Boyer, 2001). The trade boom of the 1990’s had ended in a recession marked by serious job losses and the nations policy of “free trade” was being questioned. President George W. Bush insisted that America’s economic future lay with the global economy, but early in 2002 political pressures led him to slap import duties on cheap foreign steel. However, he was forced to withdraw it in 2003 due to retaliation against US exports and WTO sanctions (Paul. S Boyer, 2001)

Globalization MBA
Globalization MBA

Competition and Business Restructuring

International competition goes hand-in-hand with globalization. A company that has been very successful in the domestic market may suddenly find itself facing competition from a yet unheard of company from the other end of the globe. Survival in this new business environment calls for improved productivity, reduction in costs, up gradation in technology and advancements in supply chain management (O’Reilly, E., & Alfred, Diane., 1998). For example, In the 1980s American automobile manufacturers began losing market share to Japanese competitors who offered American consumers higher quality cars at lower prices (Brewer, G., Managerial Accounting). However, from the consumer’s point of view, increased competition promises greater quality, reduced prices and a greater variety of goods and services. China’s entrance into the global marketplace has proved that globalisation leads to competition and changes the business environment. For example, from 2000 to 2003, China’s wooden bedroom furniture exports to the United States increased by more than 233% to a total of $1.2 billion. During this same time, the number of workers employed by U.S. furniture manufacturers dropped by about a third, or a total of 35,000 workers (Fishman, T., 2005).

In a 2002 speech, the Economic counsellor to the US Embassy, Mr Lee Brudvig, said, “We have not resisted the free flow of money, goods, services, and ideas. Rather, we have subjected our companies to market competition and limited the role of government on the whole to that of facilitator, regulator and, when necessary, safety net provider. As a result, we have seen a massive reorganization of business structures. Whereas in 1960 manufacturing accounted for 27 percent of GNP, by 2001 it had dropped to below 15 percent.” The changes brought about by technology and productivity is causing both markets as well as organisations to undergo restructuring.

Labour Market Developments

An important trend in labour markets in the advanced economies has been a steady shift in demand away from the less skilled toward the more skilled (Slaughter, M., & Swagel, Philip., 1997). Studies have shown, for the advanced economies as a whole, that trade with developing countries has led to about a 20 percent decline in the demand for labour in manufacturing, with the decline concentrated among unskilled workers (Swagel, Philip., 1997). This trend has produced dramatic rises in wage and income inequality between the more and the less skilled. In the United   states, wages of less-skilled workers have fallen steeply since the late 1970s relative to those of the more skilled (Slaughter, M., & Swagel, Philip., 1997). According to a study conducted in 2007, the impact of trade flows in 2006 increased the inequality of earnings by roughly 7% (Bivens,J., 2007). The study goes on to prove that although “liberalized trade” is a win-win proposition for nations, it reduces the income of most workers. Workers employed in industries directly in competition with low-cost imports from abroad can expect to see immediate job dislocation and/or downward wage pressures.

The rise of labour abundant nations, like China and India, has increased the global labour pool. The price of labour-intensive commodities falls as a result of this increase in the global labour pool, and these falling prices harms the labour in professional-abundant nations like the United States. DVD Players, clothing and call centre operations, all provide examples of reduction in prices due to expansion in the global labour pool (Slaughter, M., & Swagel, Philip., 1997). Outsourcing and offshoring, has further increased unemployment and decreased national earnings. 22-29% of the U.S. workforce has been rated as potentially offshorable over the next one or two decades (Blinder, 2006). The implied loss due to offshoring would push these wages well below the 1979 levels, completely undoing the entire increase in these wages over the past three decades. The trade adjustment assistance (TAA) program has been formed as a way to compensate globalization’s victims in the United States. In 2006 TAA allocated $655 million in income supports for workers harmed by globalization, and, another $200 million for training. As quoted by Bradford, Grieco, and Hufbauer in their study, “While the gains from increased trade generate a permanent rise in income, the associated losses are temporary. Nevertheless, they are very real, and are concentrated on a small fraction of Americans”.

Financial Market Globalisation

Financial globalization has been one of the most important trends in the world economy in recent decades. Financial globalization has been one of the most important trends in the world economy in recent decades (Lane and Milesi-Ferretti 2003). International financial liberalization was also accompanied, in a

somewhat chicken-and-egg causal relationship, by the abandonment of the Bretton Woods system of adjustable exchange rate pegs and the shift to floating exchange rates among the major currencies or regional currency blocs (Eatwell 1996). When currency fluctuations are considered, it is the exchange rate between the US dollar and the euro that gets the most attention. This not only reflects the size of the respective economies using these two currencies, but also the fact that the US dollar is the most widely traded currency today. That’s because it effectively serves multiple roles: as an investment currency; as a reserve currency for many central banks. According to an IFSL research conducted in April 2007, the US dollar was involved in 86% of foreign exchange transactions, followed by the euro (37%), which proves its importance (Safar, L., 2008). The report further states that foreign currency trading increased by 70% in 2008 compared to 2004. This increase in currency trading makes it imperative for companies to learn to deal with exchange fluctuations and how to benefit from all situations. The US dollar has fallen since January 2004 against the euro as well as against most major European and Asian currencies. This has caused many companies to introduce a “fluctuation clause” in their contracts to protect themselves from losses due to exchange rate fluctuations and has also lead to the development of many financial instruments to help companies hedge their currency risks. However, times such as these when the dollar becomes weaker often works well for US producers with a larger proportion of their costs being in dollars but selling worldwide. International revenues not only translate to higher US-denominated revenues, but they also contribute to higher margins which can be achieved globally (Safar, L., 2008). For example, Q1 2008 for instance marked a milestone for Google, whose international revenues exceeded US revenues for the first time. Revenues from outside of the United States represented 51% of total revenues in the period, compared to 47% in the first quarter of 2007 and 48% in the fourth quarter of 2007. In Q2 2008, this had increased further to 52%. According to Google, “Had foreign exchange rates remained constant from the second quarter of 2007 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $249 million lower.” (Safar, L., 2008). Nothing can be predicted with 100% accuracy when it comes to exchange rates, and the only thing that can be safely said is that there will be no “business as usual” when it comes to currencies.

Political and Institutional Changes

According to CIA Global Trends 2015, 2000,” The rising tide of the global economy will create many economic winners, but it will not lift all boat. It will spawn conflicts at home and abroad, ensuring an even wider gap between regional winners and losers than exists today. Regions, countries and groups left behind will face deepening economic stagnation, political instability and cultural alienation. They will foster political, ethnic, ideological, and religious extremism, along with the violence that often accompanies it.” One of the most important and necessary features of the current process of globalization is the proliferation of international organizations. Scholars point to the emergence of expanding web of international treaties and institutions, which regulate and adjudicate on matters of interstate behaviour. The number of international organizations rose from 61 in 1940 to 260 by 1996 (Barnett 2002:110). Since 1995, when the World Trade Organization (WTO) was formed, transnational corporations have increasingly influenced political leaders to push international trade laws in the same direction of liberalization and deregulation. In addition, existing international organizations like the IMF, the World Bank and the GATT/WTO have transformed their roles substantively, gaining further powers and responsibilities (Camillery and Falk 1992:94-7; O’Brien et al. 2000). The United States has enjoyed a position of power among the world powers, in part because of its strong and wealthy economy. Due to this reason, the United States enjoys considerable bargaining powers in the WTO and World Bank. With the influence of globalization and with the help of The United States’ own economy, the People’s Republic of China has experienced some tremendous growth within the past decade, and now enjoys as much bargaining power, if not more, as USA. If China continues to grow at the rate projected by the trends, then it is very likely that in the next twenty years, there will be a major reallocation of power among the world leaders. China will have enough wealth, industry, and technology to rival the United   States for the position of leading world power (Fishman, T., 2005).

Crime and Terrorism

At the end of the 20th century, a new phenomenon appeared—the simultaneous globalization of crime, terror, and corruption, an “unholy trinity” that manifests itself all over the world. This unholy trinity is more complex, however, than terrorists simply turning to crime to support their activities or merely the increased flow of illicit goods internationally. Rather, it is a distinct phenomenon in which globalized crime networks work with terrorists and both are able to carry out their activities successfully, aided by endemic corruption. Crime groups and terrorists have exploited the enormous decline in regulations, the lessened border controls, and the resultant greater freedom, to expand their activities across borders and to new regions of the world. The United States has been one of the worst sufferers of this new “global” terrorism. Since September 11, 2001, numerous resources have been shifted in the United States and elsewhere from addressing trans-national crime to fighting terrorism. It has increasingly become clear, that for a nation to advance, it has to keep its crime and terror activities in check.

Cultural and Other Issues

The growth of cross-cultural contacts has helped the United States participate in a new World Culture. It has helped Hollywood reach remote corners of the world while at the same time Bollywood has reached out to the Americans. Globalization has also lead to greater international travel and tourism thus greatly benefiting the tourism industry. WHO estimates that up to 500,000 people are on planes at any one time. (WHO Data, 2009). In 2008, there were over 922 million international tourist arrivals, with a growth of 1.9% as compared to 2007 (UNTWO Data, 2009). Globalization has also increased the number of illegal immigrants entering USA. The Rockridge Institute argues that globalization and trade agreements affected international migration, as laborers moved to where they could find jobs. The Mexican government failed to make promised investments of billions of dollars in roads, schooling, sanitation, housing, and other infrastructure to accommodate the new maquiladoras (border factories) envisioned under NAFTA. The 1994 economic crisis in Mexico, which occurred the year NAFTA came into effect, resulted in a devaluation of the Mexican peso, decreasing the wages of Mexican workers relative to those in the United States. Unemployment, corruption, low wages and few opportunities cause Mexican laborers to look for greener pastures and migrate illegally to the United States.

Conclusion

Globalization leads to increased international trade and reduction in trade barriers, which is beneficial for all the trading nations. Increased globalizartion has increased competition in the global economy, making it tougher for organisations to survive, and leading to greater productivity, efficiency and quality. This has in turn lead to the rise of countries like China and India, which are rich in labour. Due to the rise of labour abundant nations, the US labour market has suffered with fewer jobs being available for unskilled workers and lowering of wages. Further, outsourcing and offshoring have lead to loss of jobs and unemployment. In order to establish a set of trade rules and monitor the trading nations, institutions like WTO, IMF and World Bank have gained in importance. The United States hold a very important place in all these institutes, due to its strong economy and political power. Thus, it has a huge bargaining power when it comes to trade regulations. Overall, globalisation has affected America both positively as well as negatively but it is primarily due to globalisation and increased trade that America has a strong economy today.

References

Bivens, J., 2007, Globalisation and American Wages: Today and Tomorrow,

The author examines the effect of globalisation on wages and predicts what the future is going to be, based on mathematical models.

Blinder, Alan. 2006. Off-shoring: The next Industrial Revolution. Foreign Affairs magazine.

Boyer, P., Foreign Trade, U.S., The Oxford Companion to United States History.2001.Encyclopedia.com.

Boyer, P., Global Economy, America and the., The Oxford Companion to United States History. 2001. Encyclopedia.com. Accessed on 22 Apr. 2010 at

Daniels & Sullivan, International Business and Operation, 11th Ed, Pearson Education

Eatwell, John. 1996, International Financial Liberalization: The Impact on World

Development, Office of Development Studies, Discussion Paper Series (September). New   York: United Nations Development Programme.

Fishman, T., 2005, How China Will Change Your Business, Inc. magazine,

O’Reilly, E., & Alfred, Diane., 1998, Innovations in Technology and Globalization,

Slaughter, M., & Swagel, Philip., 1997, Does Globalization lower wages and export jobs?, IMF Report,

UNWTO World Tourism Barometer (World Tourism Organization) 7 (2)

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