Impact of Globalization on Value Chain Globalization

Question: Discuss about the Impact of Globalization on Value Chain Globalization. Answer: Introduction To many managers, the term globalization has always elicited mixed reactions relating to anxiety and fear. Globalization has formed dynamism in the market which has precipitated high degrees of efficiency, the new model of competition, and need for highly qualified expertise in the supply chain management. Through globalization, various competitors with efficient supply chains from developing economies have entered the world market and decided to compete with already-established global market leaders in the supply chain. Value chain and globalization are interrelated concepts which play a significant role towards organizational prosperity. Through economic liberalization, companies have been able to access new markets, cost-effective raw material, and skilled human resources. A firm which needs to extend its operations to a global scale needs to observe various aspects. The elements include political, economic, social, and technological considerations. Value chain involves all activi ties required in designing the product, production, product marketing, and distribution. In this paper, I am going to explore the way globalization has affected value putting into consideration various aspects such as financial, human resource, technology, competitive advantage, corporate social responsibility, political, and cultural issues. Globalization has created a wider market for companies with various forms of competitive advantages. Countries such as China have established various companies in countries where the cost of labor is low. With world-class machines, China economy has improved significantly due to the establishment of markets in different nations where consumers can quickly acquire the goods and services easily and at a dear price. To the value chain, taking the competitive advantage of low cost has not only led to lower commodity prices but also it has made the goods and services to be near the customers. Efficient logistics ranging from cheap and efficient means of transport has increased the outsourcing activities for the companies. Cost-effective means of transport has facilitated the transport of raw materials from the countries where their cost is low. (Frick Laugen, 2012, p.276). This has, in turn, led to lower production costs for the firms. Lower cost of production has resulted in low prices. Additionally, effective logistic means has also given the buyers various buying alternatives. Consumers can outsource the goods and services from the economies where they feel the price is low. Economic globalization has also enhanced the marketing scope for various companies which possess it as an added competitive advantage. Organizations with global products such as Sony, Samsung, Mercedes-Benz, and Toyota have engaged in aggressive marketing in various countries as a form of promoting their goods. This world marketing has led to multiple benefits both to the consumers and the sellers. To the sellers, the strategy has made it easy for the companies to launch a product in various economies within a very short period. Marketing has led to the increase in sales revenue, tax savings and access to finance. (Naghi Para, 2013, p. 168-169). Additionally, product marketing has helped to reduce the operational costs due to the product's unique name. To the consumers, it has led to quality improvement, lower cost, and the variety of choice. About financial consideration, globalization has led to increase in sales revenues and decrease in expenses in the supply chain. Unlike old days when businesses used to focus on internal logistics, nowadays through economic globalization organizations have come up with ways of eliminating every type of risk and increase revenue through the creation of relationships across the globe. One of the strategies which many companies have adopted is the integration of the customers and the suppliers. This game plan has considerably led to a sound financial performance for various firms. It is important to keep in mind that company expenses cover 30% to 40% of most companies' sales while 20% to 30% goes to the profit. (Trunick, 2011, par.5). The goal of many financial managers is to find ways of either turn around the 20% to 30% or eliminate the 30% to 40%. Creating an efficient integration between the suppliers and the consumers has become the core strategy of various supply chain managers. I t has to the attention of many organizations that the only to reduce financial expenses and increase revenues is through creating a proper value chain. Economic globalization has opened avenues for various companies to increase their revenues through the concept of vendor-managed inventory (VMI). VMI is a business model which aims to enhance the value chain by making sure that the consumer has continuous flow of products. The manufacturer and the supply share information regarding the supply quantity and the time of supply. With VMI the producer can track the stock level and identify the right time for replenishment. Through VMI, commodity manufacturers have been able to increase the amount of sales and minimize expenses such as waiting costs. The producers are now able to link with distributors in various parts of the world, and this has helped to only increase the sales, but also increase the product marketing. Global technological changes across different firms in the world have improved the whole concept of value chain. With high levels of competition exhibited within the businesses operating in the supply chain, technology has been seen as an integral part of value chain. Technology has enabled the supply chain managers to improve their perception of physical operations. Information technology has assisted the organizations to gather data regarding the value chain. This information collected has, in turn, helped the managers in faster planning, implementation, and evaluation. (Marinagi, Trivellas, Sakas, 2014, p.588). Also, technology has played a great role in providing crucial information about all the customers, suppliers, and competitors around the world. This has helped to boost the managers' perception on the organization's value chain. Firms with established infrastructure on IT have taken a more advanced route by running parallel value adding process through virtual teams. This creation of a parallel virtual value chain is meant to improve the capability of the physical value chain. With the help of globalization, virtual members of the team can communicate effectively through communication channels such as teleconferencing and CAD (computer aided design). Using virtual value chain (VVC) has improved the speed, flexibility, and lower cost of operations. Apart from improving the level of services, IT has enhanced the extraction of the value from the customers. Extraction of value has been fostered by the creation the of relationship with consumers in the virtual world through the internet. To the customers, global technology has facilitated better decision-making regarding which product to buy. Customers can search for details concerning a particular a product and compare it with various products to come up with the best decision regarding the best commodity to buy. Apart from getting the variety of products, searching the information concerning the product reduces the cost of research. Nowadays customers can negotiate for prices online without physically visitin g the premises. Globalization has also enhanced the operations of value chain through human resource management. Through economic globalization, developed countries have been able to acquire skilled labor from developing countries. Human resource is an underlying asset towards value chain, and most companies have realized their importance. Various companies nowadays have widened their scope when it comes to recruitment of new staff. Multinational companies (MNC) with services and goods across have embarked on the serious hiring of skilled labor especially from developing economies due to low costs involved. Having a pool of skilled labor has always acted as a competitive advantage to the company since it can execute most of the operations efficiently. (Hahn, 2013, p.40-45). With sudden shift in demand for certain types of personnel, most HR managers have decided to find ways of retaining or sourcing the tops talents. Retaining prolific talent has forced the organizations to adopt various strategies such better salary package and motivation especially for those employees who meet specific goals. Also, liberalization has changed the way organizations perform the recruitment process. Nowadays companies have increased the scope of employment opportunities by allowing individuals from various countries to apply for the positions advertised. This is meant to open more avenues to get best people who will come with ways of improving the value chain. Due to the shortage of particular talents in developed countries, organizations in such countries through globalization have been able to hire the required skills from developing economies at a lower cost. To the developing economies, this practice of brain drain has significantly affected the economic prosperity of the developing country. For example, the amount of young professionals in developing economies such as China is expanding at an average rate of 5 .5% annually which is more than five times the number of professionals emerging from developed economies such as Germany, India, and USA. It is approximated that the number of graduates from low-income economies has surpassed that of the high-income economy. Globalization has led to cultural diversity which in turn has facilitated easy distribution of goods and services to areas where they were available before. Take for example McDonalds and Coca-cola Companies which are found close to every country in the world. Cultural diversity has helped to eliminate cultural barriers between communities. Understanding other people's culture has helped organizations in defining consumer segmentation. Knowing other people's culture has helped the managers to identify the particular type of commodity, features, quality, and size which are required in a certain type of the company's market. This has helped to increase the level of sales and reduction of losses within the value chain. To the workforce, liberalization has brought in different personnel from various segments of the world. Employing people from diverse cultures regarding race, religion, language, ethnicity, and nationality has enabled management to sell its products, increase its consumer base or even set up branches in those areas. Additionally, it has helped to enhance the spirit of creativity and innovation. This has helped the firm to come up with better ways to improve their product and minimize losses. It has also played a prominent role towards decision-making process. When people from different cultures are put together to solve, we are likely to obtain a most formidable solution due to diverse perspective towards a problem. A study conducted by Al-Jenaibi (2011, p.49-81) in various companies in UAE showed most employees preferred to operate in the culturally diverse environment for the purpose of improving team performance. On the other hand, cultural diversity in the workforce has negatively affected the performance of certain employees due to due to resistance to change and the tendency to engage in interpersonal disagreements. Placing culturally different employees in a team has been seen to affect the performance of the whole team due to deep-level incongruence that exists between the members. This phenomenon has forced management to come up with new policies regarding what is expected each employee and the importance of cooperation. Political instability due to regime change and violence in the community has become one of the most threats especially to the organizations which engage in the global supply of goods and services. Ukraine and Syria is one of the countries which have become the victims of political unrest. As a result, companies with global supplies to such have shifted their operations from such areas while others are on high alert ready to evacuate in case the crisis continues. More than 620 Germany firms with business operations in Ukraine have stopped the delivery of goods and services while others such as Astras have reported a more than 20% worker turnover. This political reverberation has been felt by the global companies which supply goods and services and those which acquire raw materials from such countries. Political and economic tension has also been observed between two world-class economies of China and Japan. The two economies have been on the wrangle for several years by now over the ownership of an island located in the east of Chain Sea. This political dispute has spilled over to the economic relations between the two nations. As a result, there has been massive decrease in the number of supplies especially those which come from Japan. (Ferrari, 2012, par.1-4). Toyota Company being one of the biggest manufacturers of automotive has reported a decrease in the sales of its products in China. In fact, the firm has opted to eliminate the supply of various models such Lexus due to reduced sales revenues. Other companies such as Nissan, Mazda, and Honda have reported flat sales in China due to political disagreements between the two economies. On the other hand, good political relationship between countries such the UK and the United States has led to massive development and value supp ly especially when it comes to automobiles. For multinational corporations taking part in global supply, economic liberalization not only just brings more benefits and opportunities for multinational companies, it additionally makes the MNCs adjust to the changing economic environment and acknowledge the business-related difficulties at the global level, industrial and different levels. CSR has been considered as a standout amongst the most critical viewpoints facing organizations in the value chain. Nowadays global companies have chosen to include, ethical, social, and moral issues during decision-making process regarding the business operations and strategies. Globalization has advanced the development of corporate social responsibility everywhere throughout the world. In one hand, globalization additionally has made organizations and public see the way negative results, for example, the increase in income inequality, the abuse of work, and environmental pollution can contrarily influence their supply chain. Companies engaging in international business are not only held responsible for labor and environmental practices in their home country. (Information Resources Management Association, 2013, p.1560). They are also expected to observe all regulations when dealing employees, suppliers, and the environment. There has been pressure to the MNCs from external and internal stakeholders such as workers unions, customers, NGOs, and government concerning the offshore operations of international companies. This pressure has forced the firms to come up with a code of conduct which will adhere both to the buyer company and the supplier. The behavior specifies the rules regarding how the organization should conserve the environment and its contribution to the society. (Anderson Larsen, 2009, p.78). Companies which have been able to observe the environmental regulations have been able to attract more consumers. Consumers are more likely to purchase from firms which follow environmental laws. Treatin g employees fairly through equity payment also enabled international companies to flourish in their supply chain hence increasing the revenues. Workers are likely to deliver their best if they are treated equally and paid equitably. Conclusion We can conclude that good performance of organizational value chain depends on various factors which lie under globalization. Through globalization, countries with shortage of skilled labor have been able to source quality workforce from developing nations. This acquisition of labor has helped the organization to increase diversity in the workforce which has resulted in creativity and innovation. Technology is also another aspect which has boosted the sales for MNCs. Customers have been able to access information about particular commodity by just click of a mouse. This has enhanced the consumer's decision-making process. To the business, the internet has enabled them to increase the level of sales and lower the expenses. 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