The impact of globalization on developing countries
Globalization has greatly benefitted a number of developing countries, through international trade as well as providing them with a number of opportunities in the form of outsourcing and information technology plays a major role in having enabled this.
Globalization refers to removal of trade barriers and enabling faster movement of goods, services as well as a number of other factors of production including capital and labor easily, without restrictions or with reduced restrictions. Information and technology are great enablers of globalization. Globalization has changed the face of trade and commerce all over the world and the developing countries are the ones who have greatly benefitted out of this. Information and technology have enabled them to communicate effectively as well as efficiently. Outsourcing of business processes as well as knowledge processes is one of the most important outcomes of globalization that has greatly benefited developing countries. It has helped in creation of jobs and revenue as well as setting up of a number of companies in developing countries like India and China.
Information in today’s world of business creates opportunities and provides competitive edge. Timeliness and accuracy of information are very essential to a business. The present business scenario is well developed and well equipped with sophisticated technology to handle bulks of information. But the most important task is the filtering of useful and critical information. This makes information management a very important function and a criterion to achieve operational efficiency.
Information management refers to the process of collection and management of information from one or several sources of data and processing it to suit the needs of the users. It also involves dissemination and distribution of information. It aims at making processes and operations more efficient by enabling access to accurate and timely information. Information management largely involves conversion of media of storage of information from paper records to the electronic medium. Double handling of data entry and information is a major problem and increases costs in the construction business. These are due to poor communication and lack of knowledge sharing between different parties. Information systems and globalization has enabled knowledge sharing.
Information systems enable organizations to create cooperation structures where information is freely exchanged. This helps in better and quicker decision making as well as helps bring in more efficiency into various processes including purchase and customer service. It greatly helps in better environmental management inclusive of both the internal and the external environment (Aouad, 1999).
Globalization has led to developing countries being technologically advanced; implying that organizations operating in these countries are advancing with technology and using technology to develop at a rapid pace. They are able to manage great amounts of information in such a way that they are becoming knowledge capitals. In this way information management has been a great enabler as well as outcome of globalization. Information management systems can range from simple data bases to complicated collaborative networks. The choice of IT depends on multiple factors including the resources of a firm, requirement of its business, compatibility with existing information systems and most importantly the willingness of the users to adapt and implement an IT structure in the firm.
Modern day technological developments make it possible for firms to just adapt an already formulated MIS or get a customized MIS to suit specific business needs. A firm would assess its various options and alternatives. All of this has enabled firms in developing countries to take up outsourcing of business processes as well as knowledge processes. For example, a number of BPO’s in India including Accenture and Hewlett Packard are into voice processing and customer care services as well as tele - marketing for companies in the USA and the UK. Ernst and Young is into American taxation and risk management for a numberof American companies. All of this indicates that outsourcing has been a major impact as well as catalyst in the process of globalization (Globalretailbusiness.com, 2009).
Outsourcing refers to giving out a portion of the work to another nation in order to have it done in a better and more efficient way. It may be within the country or may be given to a firm in another nation. Outsourcing helps a firm give out some portion of its work and ensure that it carries out only the main aspects of business thus focusing on the major aspects of work and value addition activities. This makes it very important for a firm to take outsourcing as a strategic decision. It is important that the firm does not take this decision very casually, but treats it as a decision requiring strategic importance(Quickmba.com, 2009).
Outsourcing begins usually when a firm’s operations exceed its limit of being able to perform efficiently. As the operations of a firm exceed its capacity and are not a part of its core competencies, then it becomes important for the firm to outsource these activities to those who can perform them efficiently and also can do them effectively. A job is done better by a firm who is a market leader or an expert who specializes in certain critical areas. It helps the firm achieve ease at work and also benefit out of economies of scale. This will help the firm move ahead of other firms who do not specialize, but still perform certain functions as a part of their total business. Though they can perform them, they would be putting in more time and efforts, thus increasing the overall cost of production of goods and services(Retailindustry.about.com, 2009).
In cases of not being able to perform a task efficiently and effectively, outsourcing becomes a blessing and helps the firm achieve a lot of savings of effort, time and capital. A firm might not be able to handle a order completely, but would be extremely competent at delivering some of the tasks. In such cases, it is essential that the firm opts for outsourcing and delivers the completed product or service to the final customer.It is very crucial for a firm to take the decision of outsourcing based on a number of factors including its internal processes as well as its external associates, suppliers and outsourcing partners. All of these factors will help a firm analyze the need and feasibility for outsourcing along with the various benefits and disadvantages of outsourcing.Outsourcing requires transformational leadership as there is a huge requirement of co-ordination. An effective environmental management system requires transformational leadership (Soderquist, 2005).
Outsourcing can be based on technological outsourcing or outsourcing of a particular business function. In any of these cases there is a requirement of consideration of certain factors which includes the cost benefit analysis as one of the most important considerations. It really matters as the cost of the final product is greatly influenced by this strategic decision of outsourcing.
It is very important to consider the benefits and disadvantages of outsourcing to be able to make the right decision. It is extremely important to be able to make this strategic decision correctly as it could otherwise cause a company or a product is success as well as its competitive position in the market.It is extremely important that a firm should analyze its strategic position in the market. A firm can analyze its strategic position by an analysis of its internal as well as external environment.
This would help the firm formulate its outsourcing strategies in a well-planned and strategic manner. It would be able to analyze its own position in the market as well as the position of other competitors and understand that it is possible to be able to make this decision on a strategic basis and not on a pure cost analysis.
Organizations in developing countries before globalization were very different. They were usually family owned businesses or government owned or even union led organizations. All of this has now been taken over by professional management and company administrations. These firms now look into the concepts of management, leadership and performance management along with quality control and change management.
Such leadership helps create a dynamic work environment where in people can work as a team and participate in various activities voluntarily and also change can be easily implemented. It helps create a group of self-aware people or employees who have the freedom and opportunity to be creative and solve complex problems. Such leaders would strive to improve quality and provide outstanding service. Transformational leaders are dynamic and work towards motivating everybody. They encourage people to come up with new ideas and are not over controlling. They are not self-focused but accept others as a part of the team. In fact they sometimes believe themselves to be a team leader only for directing and co-coordinating, but work as a part of the team (Fishman, 2006).
Outsourcing requires leadership as well as strategic vision to a great extent. Leading is not a complex endeavor, but an extremely important managerial trait and a requirement in today’s complex business environments. Leadership is even more essential as environments become uncertain as it is leaders who are more capable of unstructured decision making rather than administrators who are used to structured decision making. Outsourcing can be based on technological outsourcing or outsourcing of a particular business function. In any of these cases there is a requirement of consideration of certain factors which includes the cost benefit analysis as one of the most important considerations. It really matters as the cost of the final product is greatly influenced by this strategic decision of outsourcing.
Boeing is classic example of outsourcing to a number of developing countries in order to save costs and benefit out of a number of specialized organizations building its parts. In this way they have also provided a number of other countries with opportunities to work with the largest of the companies and work on contractual basis. They are able to achieve a rapid economic growth due to globalization. Liberalization of trade has enabled developing countries to earn foreign exchange as well as make use of expanded opportunities.
The most important factor to be considered by Boeing, while making its outsourcing decisions is the cost benefit obtained by outsourcing. The cost advantage or cost minimization should be greater than the logistics and other complex structural costs that Boeing would need to bear for successful outsourcing. Cost savings should not lead to unnecessary delays due to logistics and coordination problems, which could have been avoided in case of in-house production(J.Lynn Lunsford, 2007).
It made more sense to manufacture the fuselage in –house because getting it outsourced involved coordination of a complex supply chain, involving a number of countries and multiple suppliers. If even one of them delayed, the complete series of activities in the supply chain would be disrupted. Also one of the firms faced political problems in setting up a factory which it did not already have(J.Lynn Lunsford, 2007).
Outsourcing of the metallic tubing and ducting to German- based PWF was a good decision. The suppliers had sub-contracting facilities and were competent in their domains. Though there were certain complications of the supply chain, expertise and specialization could be obtained. Outsourcing the passenger doors and other assemblies to Vought, Latecoere and China’s Shenyang Corp was a good decision. These would really help obtain benefits of outsourcing. Integration of complex assemblies had to but obviously be done in-house as it was a complex and high value-addition activity (J.Lynn Lunsford, 2007).
Dreamliner could become one of the fastest selling planes for Boeing. Yet there has been a considerable delay in launching it. This was due to their outsourcing plan. There have been several problems with Boeing’s outsourcing plans. One of the primary weaknesses of the outsourcing plan is the lack of effective and efficient contingency planning. Boeing, at this stage should look at partnering with its suppliers and working towards completion of remaining work. It can suggest those suppliers, who have not been able to complete the work so far to subcontract it to smaller manufacturers (J.Lynn Lunsford, 2007).
It can also obtain the work completed so far, for a partial payment and continue with further completion of the work using its in-house competencies, in case of a supplier facing severe problems with completion of work. Boeing should not allow a further delay to take place. The cost of being late is much higher than the benefits Boeing can obtain through outsourcing. It might lose its present customers to competitors (J.Lynn Lunsford, 2007).
Boeing’s vertical integration strategy for its next airplane program should be based on manufacturing of those parts which it specializes in. It should also manufacture those parts which its suppliers are not very strong at. Only those parts of the assemblies should be outsourced which Boeing’s suppliers are extremely competent and efficient at manufacturing. Boeing should largely focus on strengthening its in house capabilities itself and obtain a strategic competitive advantage rather than outsourcing and obtaining cost advantages (J.Lynn Lunsford, 2007).
It should focus on obtaining the first mover advantage in the aerospace industry rather than bring in cost efficiency to the maximum extent. The crux is that if it is able to provide airplanes at a reasonable price, even if it is a little higher than the minimum price possible, customers would readily pay it if they are getting the planes on time. That is to say that time also adds value for customer and for a fact in case of aircrafts; time is a matter of years and adds value much higher than the price premium. Reducing the lead time should be the major focus of Boeing’s vertical integration strategy for its next airplane program rather than cost minimization being the focus (J.Lynn Lunsford, 2007).
Employment in foreign nations as well as in home country in multinational companies has become much easier in countries like India and China. Infosys, United Breweries, Satyam and Biocon are some of the global companies with major operations in India and other developing countries. This has been enabled and facilitated by globalization. A great deal of development in case of education and infrastructural development can be seen due to globalization. A greater exposure to a number of opportunities and culture has enabled developing countries togrow into cosmopolitans.
Globalization has encouraged practice of transformational leadership in developing countries, which is extremely beneficial.There are a number of leadership models as well as leadership styles. It includes autocratic leadership, bureaucracy as well as participatory leadership and each leader has his own style of managing and leading. All of this shows that leadership is not just a concept but a theory that is very useful to a firm when applied. This helps an organization propel ahead of its competitors and become a market leader (Quickmba.com, 2009).Transformational leaders are highly appreciated and looked up to as they have the charisma required to make people actively participate and get involved in every process. They are never over-controlling. They let people participate in the decision making process which makes them more committed to actions. They are less competitive and more collaborative. It involves a great deal of convincing people over ideas in order to make joint decisions.Many a times a transformational leader decides as to what is to be achieved and lets the team decide as to how they would achieve it. This helps bring in ideas and commitment. So an effective “Enterprise Management System” would require transformational leadership.Another important outcome of globalization is performance management. As global firms have their operations spread all over, it becomes extremely important for them to evaluate performance.One of the most important measures of talent and growth is performance measurement and managing employee performance. Ideal performance management is one that is integrated into the system as well as the processes. It should not be required to conduct performance management separately. Performance appraisal adopts a post-mortem approach where in evaluation occurs after the activities. But performance management should be an ongoing process and take place on a concurrent basis. It is very essential that performance management takes place with identification and prioritization of desired results and establishment of means to achieve those results. Performance management also requires setting of standards, measuring progress, controlling through corrective action and a feedback mechanism. HRIS can also be used for performance management in an organization.
Lack of integration and coordination between various operations and disciplines at various stages; leads to poor project performance. Many a times techniques originally developed for the manufacturing industry are directly applied to the business. This can decrease the efficiency. The procurement process across the project life cycle needs to be integrated. The methodological issues in the analysis and design of construction have to be considered in great depth (Emerald.com, 2010). Yet globalization has enabled organizations to be able to co-ordinate and function in tandem.
Not just these but multinational firms are able to enter developing countries. Wal-Mart is a classic example of a firm that has entered developing countries and has benefitted them by providing value to customers(Walmartstores.com, 2009). A number of international brands are also able to sell in developing countries due to globalization.Wal-Mart can grow and not stagnate or face extreme challenges due to changes in the macro environment. Wal-Mart needs to be proactive and be prepared to face the challenges that change would create in the operating environment. Wal-Mart has so far, adapted very well to various industry forces in the retail industry in order to stay as a predominant market player. Wal-Mart has sustained in the same industry for 40 years and nowis well versed with the industrial environment as a player or a firm in the retail industry. A similar trend is expected to continue even in the future. Thus using human resource information systems would prove highly beneficial for Wal-Mart’s progress and success(Wal-Mart.com, 2010).
A dynamic organization is started with the mission of providing value to its customers. This is the core of its business strategy. Its strategic planning should firstly aim at maintaining the value it provides to customers even in situations of uncertainty and decreasing purchasing power. It should consider technological upgrades in order to increase its competitiveness and reduce costs. An organization should consider reducing its cost of operation and then passing on this benefit to their customers. The fact that the consumer is the central focus keeps organizations much ahead of its competitors. This is how organizations can successfully adapt itself to the industry environment in order to become a successful market leader. Globalization has helped organizations in a great way to achieve this.Web enabled project management helps increase the communication flow and also helps share information and knowledge among various users and associates including suppliers and transporters. Firewalls and security systems enable limit access through limited authorization. Web based management of logistics is increasingly gaining popularity in countries like UK, due to globalization.‘In order to improve the efficiency and enhance the integration of information within the economies, it is necessary to establish and appropriate information structure using state of art technologies in developing countries.’
Apart from these globalization has also impacted the world in a lot many ways. Free trade has enabled the world to form increased production and make use of economies of scale. This in turn has also led to multi-cultural organizations and enabled cultural interchange. Globalization on the whole has led to better exposure and opportunities.
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