Copyright © 2016 – Curt Hill Globalization What cause it? What challenges and opportunities are provided?

Cause and Effect Recall that the reduction of the size and cost of computing has allowed the development: –Personal Computers –Smart Phones –Cloud Computing Similarly it has allowed for cheaper communications among other things The digital world is changing things in all areas Copyright © 2016 – Curt Hill

Economic Impact Nations have observed that trade is to their economic benefit –Underdeveloped nations sell labor and raw materials and get the ability to buy what they cannot make –Developed nations benefit from new markets and inexpensive exports The sum of the factors of: inexpensive communication, shipping and travel, loosening of trade restrictions and globalization is the inevitable result Copyright © 2016 – Curt Hill

Melting Pot The US used to be the melting pot of the world –One nation that hosted many people from very many different cultures Electronic media and travel has propelled that process world-wide –Eg. The youth of China no longer drink tea – cola instead –This may be a result of the grass is greener theory This is part of globarlization Copyright © 2016 – Curt Hill

Results of Globalization Economic change –International trade, global finance, labor outsourcing Cultural change –Multiculturalism from media, international travel, ethnic foods Technological change –Computing and communication platforms, global patent and copyright laws

Outsourcing Outsourcing: moving of business processes or tasks to another company Lesser developed nations have lower labor costs The lower labor costs compensate for shipping costs making the product less expensive This benefits both nations

Recall Japan Historically Japan was a closed country After WW II it was opened up in a new way to US interests For several decades “Made in Japan” meant inexpensive –The low labor costs made them competitive This is no longer the case The nation used the money that came in to develop Copyright © 2016 – Curt Hill

Foxconn The counter example is Foxconn which assembles Apple products This has many of the elements of the oppressive companies in 19 th century US –Workers were almost slaves –Lived on company property –Shopped at the company store –Very little ability to better themselves Copyright © 2016 – Curt Hill

Key Reasons for Outsourcing To reduce or control costs To free up internal resources To gain access to world-class capabilities To increase the revenue potential of the organization To reduce time to market To increase process efficiencies To be able to focus on core activities To source specific capabilities or skills

Information System Outsourcing Several nations have the capacity to provide information workers Most notable are India and China Both have: –Large populations –Underemployment –Good educational systems India has the advantage of large number of English speaking citizens Copyright © 2016 – Curt Hill

More The fundamental reasons are all still the same What is now being outsourced is the technical expertise –Programming skills –Customer service skills Again this can be good for both nations –It compensates for a lack of technical skill in the US –This could be dangerous as well Copyright © 2016 – Curt Hill

Opportunities Falling Transportation Costs –Shipping a bottle of wine from Australia to Europe costs only a few cents Falling Telecommunication Costs –These have helped create shared perspectives of behavior, desirable goods, and even forms of government –Teleconferencing has made the face to face meeting rare – especially for teams on different continents

More Opportunities Reaching Global Markets –A larger market can reduce cost per unit and increase profit Accessing a Global Labor Pool –Highly skilled or low-cost labor pools exist in many countries that are now economically accessible Copyright © 2016 – Curt Hill

Challenges Governmental –Political instability –Differences in how business must be conducted –Regulations such as taxes/tariffs, import/export restrictions complicate life Geographic –Multiple time zones makes communication more difficult

More Challenges Workforce issues –Corporate culture will be different –As will be welfare, demographics, expertise available Cultural –Different cultures have different expectations as to what services should be provided and how Copyright © 2016 – Curt Hill

Finally The Chinese pictogram for crisis is the combination of two others –Danger –Opportunity Globalization is like that –It is an opportunity with danger Businesses are like species –They must grow or die Thus expanding into global markets is usually a necessary risk Copyright © 2016 – Curt Hill