How Technology and Globalization Change Businesses
Cheap access to energy and technology has altered the way the world does business, through reducing the cost of particular kinds of business-to-business transactions. Such reduced transaction costs have led to a range of business practices also known as globalization.
Globalization and Its Preconditions
A particular globalization precondition is air transport or safe sea. The 2 prior eras where something comparable to the modern globalization happened were early Imperial Roman area as well as during the British maritime empire of eighteenth and nineteenth centuries. In these cases, a powerful political entity with vested interest in the overseas trade, kept the risks to shipping at minimum. Today, US Navy offers that role. The second precondition is an increase in ease of communications in comparison to the contemporary practice. For Roman Empire, it’s the network of roads of Romans. British Empire straddled the transition from the roads to the telegraphs. For America, it is the internet communications and cellular phones that have enhanced communications.
Impacts of Business Purchasing
Many businesses benefit from the globalization through being able to access cheaper materials and labor. In modern era, it leads to the businesses contracting manufacturing to Thailand and China. The shipping cost the finished product is less than the price differential in the manufacturing costs and wages. Clothing and cloth were the first items that were outsourced, yet has since included injection molded plastic, electronics, and office jobs like telephone customer service and customer service.
Brand and Business Management Effects
Reliance on the globalized resources makes managing the businesses more dependent on the factors that are outside of the control of the business owner. When the volcano in Iceland erupted and shut down ocean and air traffic in the Northern Europe for a week, such effects are felt across the globe. When the cartels control a needed material including lithium, oil or rare earth metals, the price fluctuations happen.
While the advantages for the globalized businesses are substantial for the investors, the risks are huge. The brands compete for the customers on global basis as well as billion dollar companies may vanish easily. There are no safe niches in the businesses where the local conditions may shield businesses from the global marketplace.
Globalization’s Limited Duration
The periods of globalization are short lived. British experiment with the globalization lasted forty years. America continues to import products for thirty years and there’s a growing rejection by consumers. There are 2 things end periods of the globalization. Economic crises in the economies of nations have naval security while technology disruption provides new technology a chance to reshape the market in some ways that favor the rivals.
Effects of Government Policy
With the reduced barriers in transportation costs and communications, businesses are free to move to the places where the conditions favor them. Businesses in America move their manufacturing to the country of China not because the labor of Chinese people is cheap, but for the reason that China has lesser restrictive worker and environmental safety regulations. The secondary impact of globalization on the government policies is in the monetary policies. The countries that are goods’ net exporters like China want to keep their currency weak against US dollar and Euro. This serves as a magnet for some foreign investments because Euros or dollars have greater purchasing power.
- Globalie Blog Team