Globalization Creates Opportunities For Outsourcing Commerce Essay


Globalization is the modern term formed from the frequent global interactions between peoples from various countries in the recent century. Barter trade is the main economic activities in old centuries. Low education level and developing technology are not helpful to increase economic transactions while the unstable political situations limited the economic growth. Till the end of world wars, people started to develop their new lives and aware of the importance of people interaction. Peoples living in developed countries carried out many active researches and developments of new technology which created many convenient transportation and user friendly communication tool. Along with the increased mobility of worldwide population, the sense of connectivity in economic and cultural life across the world was increased accordingly. Anthony Giddens (1990: 64) described globalization is the process refers to a process of increasing integration between units around the world. As the mobility of transportation was increased, more skills and knowledge about new technology was inflow between regions. Different kinds of higher costs will be incurred during the exploitation process of new transportation and technology. However, from the businessmen's views, the main goal is to gain highest profit as they can. But higher costs will hinder them to achieve satisfactory profit. From this point of view, entrepreneurs were trying ways to search for lower costs and expenses so they can raise the profit level. Consequently, globalization will lead to outsourcing. As per David brooks, the journalist of New York Times, who commented that globalization is vital important and it is same as outsourcing. Outsourcing becomes the most commonly and globally used tool for current business world and it includes distributing the limited resources to various regions around the world for the purpose of obtaining the highest economic achievement. Everything has two-side view. Different arguments occur when outsourcing happened since 1990s, although outsourcing is highly adopted by entrepreneurs, supporters think outsourcing can promote diversification of experiences and development of new products so it can strengthen the market possession and build up brand recognition, but peoples from the opposite sides think it will affect domestic job opportunities and break the traditional norms in the origin of the companies. No matter where voices come out, it would be a great success for entrepreneurs if they can obtain the highest economics of scales based on lowest costs. Undoubtedly, Outsourcing became a unique business trend.

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Ø Background

After world wars, telegram was developed and mails of packages and letters were highly used. People started to communicate with foreigners by various tools which could not be expected before. In social view, globalization is a process of the integration of social activities, cultures and values between peoples from different regions. In technical view, peoples can exchange ideas and skills between them, then new knowledge and technology were developed accordingly. New technology attracted peoples to look around the world in order to obtain more new knowledge and skills. New transportation such as fast underground railway transits or airplanes was then developed so it can fasten the transit time of goods and services. Globalization is not only limited to substantial goods but also intangible services. Entrepreneurs were given a chance to acknowledge other peoples living in other sides of the world and understand the regional markets are multiple larger than domestic market. Developing countries are depending on some industries such as commodity production, resource exploitation, component assembly process which is for providing job opportunities to the labors but developed countries are mainly concentrated on profit earning oriented and customer service business. Owing to this differentiation of business natures, developed countries also need to import labors and materials from developing countries to maintain the man power in their regions as their residents are mostly well trained or highly-educated so business organizations need to afford high salary expenses for their local employees. Through researching by visiting different countries, the companies can explore which places can provide cheaper materials and labors. Companies will build a new work station and necessary labor force. They will design some materials to provide appropriate training to these new employees so they can produce qualified goods and services to maintain their existing quality goods and services to their targeted customers in different markets. When entrepreneurs achieve the profit earning result, at the same time they will start their businesses in other markets outside their mainland as they believe selling more in more regions can expand their business maps and raise up their reputation in the industry. Meanwhile, they also can obtain higher bargaining power in buying materials and using facilities from local governments.

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Ø Objectives of the Review

Outsourcing is mainly including researching new materials, technology innovation and man power development. On material side, companies will launch research about which countries can provide the materials or resources they need but they cannot produce domestically, so many countries will buy cotton from China for making clothes and white rice from Thailand as a part of ingredient of their food products before selling to other countries. Hiring exclusive man power for those workers are well educated or skilled can promote the inflow of different knowledge and information and generate new ideas. Since the economy of developing countries is poor and not competitive so people living there needs more jobs for earning higher salary to improve the living standards and quality of lives. Owing to this, mass labor force can be output to developed countries. Outsourcing has a significant benefit to those developing countries as the developed countries can provide various kinds of help to developing countries by increasing the working population, providing special training, promote more employment opportunities. Poor people enjoy working when they can earn more money than they expected. Therefore, outsourcing can help to increase the working incentives as it can raise the purchasing power of the workers so they can buy what they like and they can go farther beyond their own place than before. This behavior will directly improve the relationship between peoples with different cultures. Besides of the working population, customers travel to different countries is much easier than before. They will expect to buy new things which cannot find in their home land so they will carry their money for traveling. As a result, the buying pattern is changed and the retail business will indirectly expand to new countries. This phenomenon is much expanding among countries and he states that companies needs to adjust responsively as customers are adjusting their preferences and buying pattern. Therefore, from the view of macroeconomic, outsourcing is a win-win economic tool actually.

Ø Literature Review

As per R. Robertson, Globalization, 1992: 8, Globalization is both a process and a theory. The main difficulty with modernization theory was its focus on changes within societies or nations and comparisons between them-with Western societies as their main reference points-to the neglect of the interconnectedness among them, and, indeed, their interdependence, and the role played by non-Western countries in the development of the West. Although globalization theory is broader, more variegated in its emphasis on the transnational spread of knowledge, and generally less deterministic in regard to the role of economics, world system theory was critical in shaping its development. Here the World-System theory and World-Culture theory are discussing below.

World-System Theory shows the system consists of a single division of labor within one world market but contains many states and cultures. Labor is divided among functionally and geographically and core states concentrate on higher-skill, capital-intensive production; they are militarily strong and appropriate much of the surplus of the whole world-economy. Peripheral areas focus on low-skill, labor-intensive production and extraction of raw materials; they have weak states. Semi peripheral areas are less dependent on the core than peripheral ones; they have more diversified economies and stronger states. Different forms of labor and labor control suit different types of production, distributed across the three main zones;, that are militarily strong relative to others and also not dependent on any one group within the state (1974b: 355)-serve the interests of economically powerful classes, absorb economic losses, and help to maintain the dependence of peripheral areas., Semiperipheral areas are a "necessary structural element" in the system because "they partially deflect the political pressures, Shared ideology solidifies the commitment of ruling groups to the system;

World Culture Theory shows that the globalization refers to "the compression of the world and the intensification of consciousness of the world as a whole" (R. Robertson, Globalization, 1992: 8). As a process that both connects and stimulates awareness of connection, globalization dissolves the autonomy of actors and practices in contemporary world order. All units engaged in globalization are constrained to assume a position and define an identity relative to the emerging global whole (1991: 216; 1992: 29). And, globalization comprises the set of dynamic relationships among the four core units--societies, international system, individual selves, and humankind and involves the "conjunction of different forms of life" (1992: 27). This is expressed concretely in the interaction between actors or groups holding different views of world order.

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When we comes to the Failure of Globalization theory, World-System Theory caused to the transition from one type of system to another due to contradictions that cannot be contained., resistance by ant systemic movements that can lead to regime change, ideological shifts, and alternatives to the system. This forced core states to redistribute wealth and supported the formation of states challenging the capitalist world-economy., shifts in dominance from one power to another due to advances in productivity, periods of innovation and expansion, reduced profit rates and exhaustion of markets lead to recession and stagnation, to be followed by a new period of accumulation. The World culture theory portrays the process as ongoing and open-ended. It emphasizes the role of reflexivity and worldviews in globalization, in principle change can originate anywhere but the globalization provokes reaction/resistance rather.

Globalization cannot simultaneously be the process of which it is itself the outcome. Although it may have emerged from capitalism's unfolding on an international scale, globalization is said to refer to a qualitatively new form and level of world-wide 'intensification of social relations' that can no longer be adequately captured by notions such as the 'latest phase of capitalism-imperialism', or by existing notions of an international order, system or society. It is this that creates a new world of "transnational simultaneity".

Ø Findings

As above mentioned, outsourcing is oriented from globalization and it is actually a win-win situation. Local government is the fine example of outsourcer as they outsource the blue collar administrative works, office cleaning, It system maintenance or laundry job, etc to outside contractors based on a mutual agreed contract with working cost lower than original. In the Principles of Macroeconomics, Gregory Mankiw, President Bush's former economics advisor wrote that investment from abroad is one way for a country to grow. The advantages of globalization and outsourcing are attracting peoples to go forward. Globalization breaks the border between nations. Industrially, it promotes the back and forth flows of material transportations and provision of goods and services. Financially, it provides a better access of stock exchange and financial activities. Politically, it promotes the development of political relationship between interested nations as they can deliver their political concerns to each other while potential citizen government can be formed when necessary. In cultural view, people exchange their traditions and cultural norms which can help to develop global relationship and idea generation. More costs can be saved for business men. Besides businessman, others are enjoying the advantages. More opportunities are created through globalization. Two ways trade can be promoted and any nation can enjoy a comparative advantage in a product or service as the opportunity cost is significantly lowered. Saved costs can help on focusing on technology innovation and internal training in order to raise the productivity and efficiency. According to Jeffrey Frankel, the effects of economic globalization are reduced transportation costs and communication in the private companies, at the same reduced barriers for investment in public industries. Entrepreneurs awake that they have to work harder to compete with others and catch up the steps of competitors. Through competition force, more products and services will be more efficient and cheaper. Cheaper product and services can attract peoples from developing nations to buy so GDP will be increased accordingly. Outsourcing also can increase flexibility, provide alternatives, reduce obsolescence risks.

Unfortunately, Globalization has below disadvantages so cause to the antiglobalization. It produces wealth for significant numbers of people, but many others have suffered. The gap between rich and poor has widened as global capitalism has expanded. In order to look for lower costs for production, cheaper labor and resources are ultimately important. Reduced costs increased the wealth of the entrepreneur but labor's wages and benefits are exploited. A recent salary survey among Vietnam and India factories discovered that many workers are unpaid. This in fact cannot improve the poverty in developing countries. This also arouses the problem of inequality, child labor and unemployment. Globalization forces poor countries to develop based on free trade with subsidies reduced. Then these developing nations will face more competition especially in agriculture and basic goods, government reduced subsidies actually hindered the growth of these countries and made them more dependent on the industrialized nations. People choose to work for manufacturing jobs and forgive to continue their family agriculture business. Traditional business will then decease and traditional hand crafts will be failed to hand down from past generations. The lost of valuable cultural assets is a great loss to a developed nation.

Meanwhile, these problems cannot be solved by just economic growth. Conversely, some illegal corruption will be happened without appropriate control in some third world nations which also cause the barriers for material import and export.

Ø Analysis

Globalization is a direct reason for outsourcing. In order to achieve above mentioned advantages of globalization, organizations have to know how to adapt and manage themselves in the global economy other than depending on government's help (Colin Leys ,2001). Start is now easy, but keep surviving within shrinking budget is a difficult task to each potential organization. Different kinds of challenges and limitations may occur unexpectedly which hinder the road to success of globalization with outsourcing.

Sir Terry leahy, the contemporary economist, who is the chief executive of Tesco in UK, he thinks a successful business is incorporated by input and output. Inputs are entrepreneurs should have a concrete and strong reason to support them to continue the globalization rather follow others. They should find out the actual value they will upgrade themselves under full observation and investigation instead of eye watching what benefits others possess. The true world sometimes will be cruel and vague to see, there may be many hidden reasons hinder the entrepreneurs to get a true market value that they may need to compensate more than anticipated on undervalued prices. Therefore, entrepreneurs should train up to manage the risk they are facing and analyze the strategies before approach as there should not be any reason for make inaccurate decision. Bad management and wrong decision making will cause to the business failure. Entrepreneurs work hard to save cost simultaneously and should focus on core business instead of over expansion. During the process, the entrepreneurs will find difficulties on solving the problems. But no matter what problems, they should be always have a clear mind on all decision making and insist on focusing on their goals. As employees also need to be respected, clear instruction should be delivered and clear cut working tasks should be well defined. When cheap labor force is explored, entrepreneurs need to launch appropriate training to train up the labor as the skilled labor otherwise the efficiency cannot be improved. They should let them learn the mission of the company, the knowledge of the products they are producing, the goals of the business and the importance of their personal growth. Quinn, 1992 suggested the entrepreneurs to outsourcing the design work of their product and services. This can collect various design ideas from more parts of the world instead of just inside the company circle, more creative ideas will be generated and it can help the company to promote diversification and increase the popularity in the market.

Nicholas C. Burkholder, 2006 stated in her book that entrepreneur should think clearly before they start outsourcing as there still many uncertainties even outsourcing was developed for nearly 50 years. She thinks the entrepreneurs should clearly understand the objective first before outsourcing it should be clear about no any internal management problem inside the company. Outsourcing is not a solution on internal problem and not related to. Therefore, stable company structure and little employee movement can help to launch any new strategy. Outsourcing may cause to additional cost if the company cannot handle by the team and needs to hire consultant. Adequate capital fund is an essential support to launch the outsourcing program too as some hidden costs are unknown till it occurs.

Ø Conclusion

Above all, the occurrence of globalization leads to the change in people's lives. In old times, outsourcing is some kind of responsibility transfer. Along with the boost of globalization in 1980s, people can go around places, cities and nations in fastest and cheapest way as they unexpected before through the process of outsourcing. No doubt, globalization is an inevitable development in modern business world and outsourcing is a vital strategy leads to success. In order to survive in the competitive business world, outsourcing is an option as strategy. This is beneficial to free market economy as the statement presented by T.L. Friedman (1999). Along with the significant global changes, the traditional economical and social norms were replaced by new rules based on new combinations of ideas or gradually changed in nature when peoples are aware of the bad result of receding. In view of this, outsourcing is a great step for globalization which both will make the world integrate into a single world as per Malcolm Walters (1995). Outsourcing also can reflect the maturity of the world(Elizabeth Sparrow 2003).

Bibliography / Reference List

Anthony Giddens,

Colin Leys 2007 ,

M. Waters, Globalization, 1995

Outsourcing: The Definitive View, Applications And Implications, Nicholas C. Burkholder, 2006

Roland Robertson(1992), Globalization: Social Theory and Global Culture

Sen, A. (2002) 'How to judge globalization', The American Prospect Online, 

Smith, M. K. and Smith, M. (2002) 'Globalization' the encyclopedia of informal education,

Shaw, M. (2001) 'Review - Jan Aart Scholte: Globalization. A critical introduction', Milleneum. A journal of international studies,

Stewart, J. (1992) 'Guidelines for public service management: lessons not to be learnt from the private sector', in P. Carter el. al. (eds.) Changing Social Work and Welfare, Buckingham: Open University Press.

The Follies of Globalisation Theory by Justin Rosenberg; 

T.L. Friedman, The Lexus and the Olive Tree, 1999, p. 7-8).

Wolf, A. (2002) Does Education Matter. Myths about education and economic growth, London: Penguin.

World Bank. (1999) World Development Report 1998/99: Knowledge for Development. Washington: World Bank. [1999, 9 August].