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GLOBALIZATION.
Term Paper ID:26706
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Essay Subject:
Overview of causes & effects of global economic innovations, interdependence, political & cultural adjustments, management functions, technology, agreements & coalitions.... More...
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8 Pages / 1800 Words
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Paper Abstract:
Overview of causes & effects of global economic innovations, interdependence, political & cultural adjustments, management functions, technology, agreements & coalitions.
Paper Introduction:
MANAGEMENT OF GLOBAL BUSINESS
Introduction
Globalization—the spread of economic innovations around the world and the political and cultural adjustments that accompany this diffusion—appears to be unstoppable. The reason is because globalization it is not the result of a planned activity by government or military power “toward ever larger geopolitical entities. Nor is it the product of some growing ideological conformity on how we should live. It is, rather, the organic result of the virtuous cycle …, by which economic convergence and the diffusion of innovation raise standards of living over time” (Lewis & Harris, 1992, p. 114).
In this context, globalization has been occurring in some form for the last three millennia. The Phoenicians “spread innovations almost
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Even informal relations becomefundamental when dealing with firms which operate on a global scale. With regard to product design and development-both of which are strongly linked to R&D activities-decentralization of thedevelopment centers can facilitate access to technology and itsdevelopment, as decentralization improves the flow of information, improvescontacts in border areas, and induces contacts with leaders in the field(Mitchell, 1995, pp. Similarities of products and processes within the companyhelp the transfer of technological improvements. In global strategy it is of vitalimportance to reduce total costs as well as design, production anddistribution times (Mitchell, 1995, pp. The peculiar characteristics of the internalorganization and of the role of management present some notablesimilarities in the various phases of the operation value chain (Baron,1995, pp. 364-382). Mitchell, K. Often standardization takes place within thewider framework of redefinition of the product, which requires itstransformation from local to global, that is, its redesign in order tomeet the needs of a world market. Three types of transfer class can be recognized: transfer of plants andresources, transfer of knowledge and ability, and transfer of tasks andresponsibilities. 47-65). The manager, therefore, becomes a vehicle of integration.Internationalization and cosmopolitanism are the new characteristics whichare required of this person. MANAGEMENT OF GLOBAL BUSINESS Introduction Globalization-the spread of economic innovations around the world andthe political and cultural adjustments that accompany this diffusion-appears to be unstoppable. Factors which playan important part in compressing time are: company organization,management as a strategic resource in integrating activities along thevalue chain, the use of management systems which help to make the operationflow lean, and the use of information technologies (Mitchell, 1995, pp. Integrated Manufacturing Systems, 2(1), 23-29. These advantages derive more from how the companymanages the various activities than from where these are located.Coordination among development centers allows an exchange and increase intechnological expertise, while coordination in the purchasing of materialsmakes it possible to obtain economies of scale and create a base for long-term agreements with suppliers. 114).Although the speed of diffusion among Europe, North America, and Japan hadincreased by the first half of the 2 th century, it was still limitedalmost entirely to trade in manufactured goods because of dissimilaritiesin the way people lived and the relative economic unimportance of trade inservices. Physicaland informative processes will have to be followed with a horizontal andintegrated approach (Mitchell, 1995, pp. Industry Week, 245(1 ), 16-42. The cost and time compression whichcan be obtained by adopting a global strategy is greater than that whichcan be obtained by adopting a domestic one. 36-45). High-tech firms, in whichintangible assets are fundamental, are favored in this process as transfercosts are very low. Nor is it the product of some growingideological conformity on how we should live. J. The identification of a segment of theglobal market, the redefinition of the product and the consolidation of thesources of supply have been indicated as strategic factors which, togetherwith the already-mentioned environmental factors, can trigger off theglobalization of an industry As far as the production phase is concerned, an aggregate planning ofplants, according to the global requirements of the distribution system,can be an advantage, because it becomes possible to shift production fromone plant to another, to improve the development of plants and to optimizefluctuation in the rate of change. McKinsey Quarterly, (2), 114-131. De Toni, A., & Zipponi, L. 115). 176). What is new about globalization in the contemporary period isthat innovations occurring within any of the developed economies can betransferred to and adopted within any other developed economy in a minimumamount of time (Lewis & Harris, 1992, p. Journal of International Business Studies,26(4), 461-49 . 85-112). Academyof Management Journal, 38(1), 85-112. It is believed that this phenomenon will grow as itis aided by the progressive reduction in barriers between countries anddifferences between consumers. This practice must be guardedagainst by assuring that jobs are created in those economies vacated byglobal firms to assure that buying power will be preserved. 364-382). In the distribution context the regulation of controlover communication technologies, together with deregulation in transport,favors the creation of alliances. Most attempts toestimate these benefits have concentrated on the achievement of completelyfree trade in manufactured products. Often the shared understanding of the role of management becomesan instrument of integration which is more powerful than formal structuresand systems. (1995, Winter). Product standardisation and processsimilitude. One of the main competitive advantagesderives from the transfer of advanced innovations in process technologies,information technology, and product, raw-material and componentstechnologies. To obtaincompetitive advantages in global industries, all producers, including thosein other countries, must be taken into account. H. Theformal systems alone are not able to satisfy the enormous information needswhich are necessary to coordinate such a complex configuration (Baron,1995, pp. 85-112). The transfer of experience can beconsidered as a form of coordination; the ability to capitalize andtransfer experience among the various units represents an importantadvantage for global companies in their competition with national firms.The transfer of management and technological experience is often recurrent. The choice of suppliers in international markets makes it possible toreduce costs and improve the quality of acquired materials. With reference to theoperation value chain, the most favorable configuration of each phase candiffer from the others. (1995, Winter). (1992, June). Bowersox, D. In this context, globalization has been occurring in some form for thelast three millennia. The strategic benefits oflogistic alliances. Market globalization, on the other hand,also depends on the behavior of companies. The transfer of just one of these classes is ineffective(Gulati, 1995, pp. For example, Japanese producershave given a significant impulse in this direction by redefining productson a world basis (Balasubramanyam & Greenaway, 1992, p. P. 85-112). When several different cultural backgrounds are present within acompany at any one time, management cannot assume that all values arecommon. Sheridan, J. Global Environment Globalization is growing as far as both finished products andcomponents are concerned. Why globalization mustprevail. The reason is because globalization it is notthe result of a planned activity by government or military power "towardever larger geopolitical entities. References Balasubramanyam, V. 16-42). Some observers, however, cautionagainst the so-called "race to the bottom," wherein global companies seekout the lowest cost labor, while in the process creating unemployment orunderemployment in the economies they leave. Indeed, in global strategiesit is possible to take greater advantage of the purchasing, production anddistribution economies of scale by working on large manufacturing volumes,made possible through being present in a large number of markets. They are used forseveral reasons: to reduce innovation and technology acquisition times, toreduce risks linked to research and entry into new markets, and to createbetter economies of scale (Gulati, 1995, pp. (1995, February). Agreements and coalitions are much more important in the case ofglobalization than in the case of other strategies. W., & Harris, M. As far as the design and development phase is concerned, it isimportant to underline how policies of product standardization make itpossible to increase the unit production volumes of codes (raw materialsand components), thus favoring the consolidation of "comakership" (DeToni &Zipponi, 1991, pp. Withoutconsumer buying power, efficiently manufactured products are of littlevalue to anyone. Integrated strategy: Market and nonmarketcomponents. 114). In this sense it becomes important to create astructure which is complementary to the line structure, with task forcesand committees which represent a permanent and non-transitorysupplementary decision-making body. Lewis, W. Gulati, R. With regard to manufacturing, advantages can be obtained in a globalstrategy through: the effective utilization of scale economies; theconcentration of learning in one plant or a small number of plants; theintegration of operations; the coordination or the concentration ofactivities to support production and product development; and the use ingeneral of world-class manufacturing policies. With trade being supplantedby foreign direct investment as the primary route to globalization,countries that accept transnational firms will reap the benefits ofincreased investment, jobs, growth, and the higher standards of living forconsumers (Sheridan, 1996, pp. The reduction in costs in the whole operation chain and thecompression of time make it possible to gain competitive advantages inprice, product innovation and service. Reappraising the eclectic paradigm inan age of alliance capitalism. Market globalization requires achievement of high standards ofperformance in quality, timeliness, total costs, and customer service. 125). Theimplications of repeated ties for contractual choice in alliances. It is, rather, the organicresult of the virtuous cycle ..., by which economic convergence and thediffusion of innovation raise standards of living over time" (Lewis &Harris, 1992, p. (199 , July-August). Economic Geography, 71(4), 364-382. Dunning, J. As great as such benefits are,however, they do not include the principal economic benefits from fullglobalization which are derived from the diffusion of innovation in boththe manufacturing and the service sectors of the economy and which have thepotential to increase global output by almost 25 percent compared to theapproximately 1 percent increase derived from the globalization ofmanufacturing (Lewis & Harris, 1992, p. It isalso possible to configure and coordinate the company structure on aninternational basis, utilizing the many differences (in cost and in accessto technology as examples) among the various countries. H. (1991). The roles and tasks of management also change noticeably in thesecontexts. Flexible circulation in the Pacific Rim:Capitalism in cultural context. As far as aspects of internal organization are concerned, successfulglobal competitors must have an organization capable of managingmultidimensional problems. 23-29). Global Business and the Quality of Life Globalization produces enormous economic benefits for allparticipating economies (Dunning, 1995, pp. The diffusion of process technologyfollowed after-sometimes centuries later" (Lewis & Harris, 1992, p. 461-49 ). (1996, 2 May). Production in decentralized plants can favor theattainment of various objectives: low cost, learning economies, theestablishment of a company in foreign markets, the introduction of newproducts, and technical leadership (Gulati, 1995, pp. N., & Greenaway, D. Finally, asfar as production is concerned, the generation of economies of scale can berealized either through the concentration of all production activities orthrough the construction of a number of plants according to the logic ofspecialization. (1995, October). California Management Review, 37(2), 47-65. 85-112). The Phoenicians "spread innovations almost entirelythrough the movement of products (trade) to small centers of developmentscattered around the Mediterranean. Conclusion The literature related to the globalization of business is almostuniversally positive in character. The coordination of decentralized units is fundamental in obtainingcompetitive advantages. In many industries there is a clear tendencytowards globalization. A higher degree of vertical integration involves fewer riskswhen it is realized through agreements and coalitions than it does when itis obtained through acquisitions or the utilization of internal resources.Through coalitions a company is repositioned more quickly than throughinternal development. Modern information and communicationsystems allow greater integration among phases of the operation valuechain, and make decentralized units efficient (Bowersox, 199 , pp. 364-382). Harvard Business Review, (4), 36-45. Economicintegration and foreign direct investment: Japanese investment in the EC.Journal of Common Market Studies, 3 (2), 175-193. The time which is necessary to create the minimumthreshold of experience within a firm is greater than the time which isrequired if a coalition is formed; this can occur in the case of rapidtechnological innovation (Gulati, 1995, pp. In each phase(design, purchasing, production and distribution) these actions mustinvolve organization and management, management systems, and technologies.The effectiveness of the change depends on the degree to which functional-type logics, focused on single operating phase, are overcome. Market integration meansthat choices in design, purchasing, and assignment of production anddistribution tasks must all be assumed and coordinated on a global scale togain competitive advantages. 364-382). Does familiarity breed trust? Baron, D. Toreach these levels of performance simultaneously it is necessary to changeand improve all the phases in the value chain continuously. Agreements and coalitions with other producers or with other companieswhich are upstream or downstream on the operation value chain have theobjective of creating economies of scale and learning economies, allowingaccess to technology, reducing risks and modifying the competitiveenvironment. Manufacturing: The global economicengine. 47-65). The task of the top manager is not that ofsubmitting the activities of a national organization to a central control,but rather that of co-opting abilities and obtaining the involvement ofthe national organizations; paradoxically, attention shifts from controlof the strategic content to management of the organizational process.Evaluation and reward systems must favor the free exchange of informationand commitment to global objectives over the above local interests, so asto obtain a positive attitude to integration and thus favor a climate ofcontinuous improvement. (1992, Spring). Management Functions In global industries competitive advantages derive in large part fromthe integration and coordination on an international scale of the variousactivities of the value chain, while in the so-called multi-domesticmarkets the competitive advantages are specific to each country anddifferent local strategies are adopted.
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