In our Global Business Strategy, beyond discussing globalization with the insightful speakers already mentioned, we also explored various opinions on globalization by discussing articles, most notably Globalization in Retreat from the Economist, Globaloney from the Washington Post, In Retreat of the Global Economy from the Economist and the Global Presence Framework.
Globalization in Retreat from the Economist proposed the idea that companies are starting to bring back their manufacturing as labor starts to get more expensive abroad. In my opinion, this does not show the full picture. It is true that some companies are bringing their manufacturing back home, however, this is not due to a retreat in globalization. Because of the new technological improvements, companies can bring back some of the manufacturing in order to reduce the transportation costs associated with shipping products from Asia to Europe or North America. Nonetheless, they are keeping some manufacturing plants in Asia to service those markets. As technology is becoming more advanced and wages rise in developing countries due to growth of the economy, costs such as transportation start to play a large role. However, with this growth in the Asian economy, there will be more demand for goods and services so the manufacturing in those countries will likely remain steady, if not increase, to satisfy the needs of the regional markets. With the fast growth happening in Asian markets, international companies are racing to enter the market first and to gain the consumers’ brand loyalty. So, while production locations may be shifting due to improvements in technology and growth in developing countries, there is more globalization then ever as companies from developed countries try to escape their mature market and tap a new developing market.
Along the same lines of automation, globalization does come with some costs. One of those costs is that small companies are finding it harder and harder to compete against international behemoths. For this reason, some countries, like India, are looking for ways to protect their small businesses while welcoming large multinationals to grow the economy. One cost that gets attributed to globalization unfairly is that specific jobs types are decreasing and being eliminated altogether. Nevertheless, this is a result of automation and it would have happened regardless of whether companies have gone abroad. It is now the country’s responsibility to offer skills and job training to these employees in order to ensure that they do not enter the ranks of the unemployed. Through the class discussions, I learned that this is a lot easier said than done. Unlike in planned economies, governments in market economies cannot simply redirect labor to other jobs where human capital is needed. People are reluctant to move so when the big manufacturing employer leaves a town and cuts 30% of the town’s employment, those people simply choose to stay on unemployment. I hope to, in the future, be able to create campaigns where the benefits of training programs are highlighted and where we figure out exactly how to appeal to the displaced workers in order to encourage them to enter the job market again. Moreover, I aim to raise awareness for all of the economic benefit that globalization creates and to dispel the myths surrounding some of the negative effects of globalization. The Globaloney article from the Washington Post highlights this fact that protectionist create rhetoric to point to all of the negative effects of globalization. Yet, all of those effects are either exaggerated or caused by a third, confounding variable. Individuals need to remember that correlation does not prove causation. As stated above, a decrease in manufacturing jobs seems to be inversely related to an increase in globalization. However, it’s actually the third variable effect of the rise of customization that is actually causing the majority of this phenomenon. And as the Globalization in Retreat article mentions, manufacturing processes are actually coming back to the United States but they end up being serviced by robots and not people.
Finally, In Retreat of the Global Economy from the Economist is claiming that globalization is coming to a close as evidenced by the decreasing profit margins of large international firms. This again employs a logical fallacy; just because the product margins of companies from developed countries are decreasing, it doesn’t mean that globalization is coming to a close. It just means that companies in developing countries are starting to enter the market and are raising the competition. But, as capitalists, this is exactly what we want for a healthy world economy: we want developing countries to become developed, which will not only increase the size of the potential consumer market but it will increase global competition thus creating more competitive and efficient companies. American companies are reeling a little at this idea because they are used to simply being first without putting in a lot of effort. Now, however, they are meeting strong competition and are scared that they will not prove to be superior. So, they claim that all of the opportunities have been had and that there is nowhere else that they can grow. In my career, I will make sure not to blame the environment for my own shortcomings. If someone does better than me, I will learn for their preparation and operations and will adapt to the ever-changing environment, just like Thomas Friedman suggests in his book.
The course avoids using a traditional college textbook intentionally. The focus is on high impact readings (Economist: Globalization in Retreat; Washington Post: Is America enriching the world at its own expense?/Globaloney; 3) Boston Consulting: Global Challenger, etc.). How did the readings (Globalization in Retreat, Globaloney, etc.) help you gain knowledge regarding globalization and enhance your global mindset? How did the readings help you recognize the challenges of globalization; assist you in developing a health respect for globalization and recognize the benefits as well as the costs and pitfalls associated with globalization. Many people believe that globalization and global business have failed them.
The Global Presence Framework gives some strategies that companies can take in order to position themselves to be the best in their field. IKEA has followed a path of global standardization for example in order to maintain costs impossibly low and to entice consumers all over the world to buy its products. I go into some of the other strategies of the company in my reflection on the IKEA speaker. On the other hand, one of my classmates explained how McDonald’s used an adaptation model on certain key features while it used standardization on others in order to compete in the global environment. For example, in countries that have a large population of Hindus, McDonald’s doesn’t sell beef. In Europe, where healthy living is prioritized, McDonald’s uses local meat to provide the highest quality ingredients and burgers. This Global Presence Framework is very important when expanding abroad because it focuses on the importance of company capabilities and it suggests the most effective way to win over various foreign markets. If a company doesn’t properly take stock of its capabilities and the requirements of a country, the products of the company and the needs of the consumers will not align and the company will fail in that foreign market.