Chapter 2

Question 1

What are global supply chains dependent on?

Answer 1

A: Global supply chains are dependent on the efficient and effective flow of commerce between and among the countries and regions of the world.

Question 2

: What factors can impact and influence the flow of global goods and services?

Answer 2

A: Numerous factors can impact and influence the flow of global goods and services, especially economic and political factors. Additional important factors range from weather to the threat of terrorism to demographics.

Question 3

Q: Are all factors that can impact global trade flows discussed in the chapter or text?

Answer 3

A: No, the number of such factors that can possibly impact global trade flows are too numerous to discuss each one in detail in this chapter or the text. The authors used their judgment to select those important factors that will most likely impact and shape global trade flows in the twenty-first century.

Question 4

Q: What factors are the “drivers” of global commerce?

Answer 4

A: The factors that are the “drivers” of global commerce and need to be discussed to gain an appreciation and understanding of global supply chain flows are referred to as the Global Drivers.

Question 5

Q: What is summarized before discussing the Global Drivers?

Answer 5

A: The rationale for global and regional trade will be summarized before discussing the Global Drivers.

Question 6

: What was Adam Smith’s argument for international trade?

Answer 6

A: Smith argued that countries should trade commodities where each country had an economic or cost advantage for one or more of the products that they produced. In other words, sell or trade products where they had a cost advantage and buy or trade for products where they did not have an advantage. Smith concluded that all participants in such transactions would be better off than trying to be self-sufficient.

Question 7

Q: What is the logic behind the theory of comparative advantage?

Answer 7

A: The theory of comparative advantage was advanced about 40 years later by several economists. They maintained that even if one country had a comparative advantage (lower cost) in the production of two products, they should focus on the production of the one that they had the greatest advantage and trade for the other. The analyses were somewhat simplistic because not all of the relevant costs were considered. However, the logic was sound as long as total landed costs were considered.

Question 8

Q: What is the Factor Endowment Theory?

Answer 8

A: The Factor Endowment Theory postulates that when a country has more of one of the four so-called Factors of Production (land, labor, capital and entrepreneurship), they may have a comparative advantage in producing one or more products.

Question 9

Q: What are the essential factors for economic growth and increased development of global trade flows?

Answer 9

: The essential factors for economic growth and increased development of global trade flows include population growth and age distribution, urbanization, land and resources, economic integration, knowledge dissemination, labor mobility, financial flows and investment in infrastructure by public and/or private sources, faster communication systems, and improved financial services for the effective flow of goods and services. These factors are the driving forces for globalization around the world and need to be discussed in order to understand the future course of global trade and development.

Question 9

Q: What are the essential factors for economic growth and increased development of global trade flows?

Answer 9

: The essential factors for economic growth and increased development of global trade flows include population growth and age distribution, urbanization, land and resources, economic integration, knowledge dissemination, labor mobility, financial flows and investment in infrastructure by public and/or private sources, faster communication systems, and improved financial services for the effective flow of goods and services. These factors are the driving forces for globalization around the world and need to be discussed in order to understand the future course of global trade and development.

Question 10

Q: What is the difference in median age between the most developed and least developed countries?

Answer 10

A: The difference in median age was 21 years in 2010 and 2025, but is projected to drop to 18 years by 2050.

Question 11

Q: What are the implications of aging populations in more developed countries?

Answer 11

A: The aging populations in more developed countries will result in increased healthcare costs and a reduction in the size of the working population or labor pool, which could result in a lowering of labor productivity and increased taxes.

Question 12

Q: What are the consequences of having a median age population under 20 years old in least developed countries?

Answer 12

A: The consequences could mean high unemployment, scarcity of some resources, and a need for more housing, infrastructure, education, and other services thus straining their economic viability even more.

Question 13

Q: What is urbanization and where is it most profound?

Answer 13

A: Urbanization is the increase in migration in many countries from rural areas to cities or urban areas. It is most profound in the less and least developed countries of the world.

Question 14

Q: What is a Megacity and what are the opportunities and challenges it presents?

Answer 14

A: A Megacity is a city with 10 million or more inhabitants. The rise of the Megacities will present opportunities and many challenges, including infrastructure shortages of transportation, fresh water, sewage disposal, health services, educational facilities, etc. which will require public and private funding.

Question 15

Q: How has migration affected the median age in some developed countries?

Answer 15

A: Migration from various countries of the world has kept the median age stable in some developed countries.

Question 16

Q: What are the two other “Factors of Production” besides labor availability mentioned in the text?

Answer 16

A: Land and resources.

Question 17

Q: What are some examples of resources that are critical for economic viability and future development?

Answer 17

A: Energy, food, and water.

Question 18

Q: How can technology help mitigate scarcity of key resources?

Answer 18

A: Technology can help through processes such as desalinization of ocean water, fracking for gas and oil production, and biotechnology for improving crop yield and agricultural production.

Question 19

Q: How has fracking impacted the global dynamics of the oil and gas industry?

Answer 19

A: Fracking has made North America a major producer and a potential exporter of gas and oil.

Question 20

Q: What is needed to alleviate global economic disparities around the world?

Answer 20

: Public and private sector collaboration and partnerships, investment in infrastructure, and elimination of terroristic acts along with economic and political stability.

Question 21

Q: What are the two important dimensions of technology?

Answer 21

A: Technology can be viewed as an internal change agent that can enhance organizational efficiency and effectiveness and enhance the ability to compete in the global marketplace. It can also be viewed as an external driver of change similar to globalization.

Question 22

Q: How has information technology affected competition and business models?

Answer 22

A: The availability and sharing of information through information technology, particularly the internet, has become a major force for driving competition and the development of new business models. It has also caused the “bricks and mortar stores” to establish an omni-channel distribution approach.

Question 23

Q: What has been the impact of global supply chain flows on developing economies?

Answer 23

A: Global supply chain flows have provided an opportunity for developing economies to participate in the global landscape due to their material resources, workforce size, technical skills, or other economic advantage that made them attractive to companies from more developed economies.

Question 24

Q: What are the potential positive and negative effects of global interdependence?

Answer 24

A: On the positive side, global interdependence can result in lower prices, wider availability of goods and services, land and resource development, and new employment opportunities for countries and regions of the world. On the negative side, interdependence can lead to global economic downturns or recessions, requiring government intervention to mitigate the problems.

Question 25

Q: How has information technology affected supply chains?

Answer 25

A: Information technology has allowed supply chains to be redesigned and has enabled processes to be separated or split off from a company for outsourcing on a competitive and efficient basis.

Question 26

Q: What is a supply chain and what are its important flows?

Answer 26

A: A supply chain is a group of interrelated firms focused on delivering the best price or value products and services to the ultimate customer at the end of the supply chain. It encompasses four important flows, namely, materials/products, information, financials, and demand.

Question 27

Q: What is the role of logistics in extending the market area of countries or companies?

Answer 27

A: Logistics can help extend the market area of countries or companies through improved efficiency to lower the landed cost in new market areas.

Question 28

Q: How have advances in information/communications technology made operating globally easier?

Answer 28

A: Advances in information/communications technology have made operating globally easier for even individuals and small companies, because of the continuing improvement of specialists such as UPS, FedEx, DHL, etc., which can provide global supply chain services at a very reasonable cost.

Question 29

Q: What is the impact of global supply chains on the economy?

Answer 29

A: Global supply chains impact the economy with lower prices, increased array of products, and convenience (read 24/7, one-stop shopping, etc.), but some are critical of the outcomes when individuals lose their jobs; businesses are closed, and so forth. Many would argue the advantages outweigh the disadvantages, for instance, lower prices have saved consumers billions of dollars in purchase prices.

Question 30

Q: What are some of the changes that have occurred in the global business environment?

Answer 30

A: Companies are no longer just importing and exporting products but are also locating plants and other facilities in other parts of the world. Tariffs and other trade barriers have been significantly reduced among many countries, allowing a much more competitive global economy.

Question 31

Q: What are some strategies that global companies need to develop to be successful?

Answer 31

A: From a supply chain perspective, global companies need to strategically source materials and components worldwide, select global locations for key supply depots and distribution centers, evaluate transportation alternatives and channel intermediaries, provide customer service, understand governmental influences on global supply chain flows, examine opportunities for collaboration with third- or fourth-party logistics companies, and other supply chain issues.

Question 32

Q: How does global competition impact product life cycles?

Answer 32

A: Global competition often reduces the product life cycle since products can be copied or reengineered quickly by competitors. Shorter product life cycles present challenges for inventory management with respect to obsolete items, and customer service levels are also impacted because changes have to be made as the product matures in terms of sales volume and then declines, which reduces product profitability.

Question 33

Q: How does globalization impact traditional organizational structures and related business models?

Answer 33

A: Traditional organizational structures and related business models frequently change since companies get more involved in outsourced manufacturing and some logistical activities such as transportation, warehousing, and order fulfillment. All of this impacts the supply chain and its related customer service activities.

Question 34

Q: What are some of the challenges for supply chain managers in the global environment?

Answer 34

A: The social and cultural elements come into play when dealing with foreign business partners and require daily effort to ensure smooth supply chain execution. Cross-cultural communication is made complicated by not only different languages and time zones, but also other culturally-rooted practices such as communication styles, different approaches to completing tasks, different attitudes toward conflict, and different decision-making styles, among other factors. Globalization also introduces more volatility and complexity, which can lead to challenges with weather, terrorism, strikes, and other disruptions. Additionally, some of the customary strategies used in the domestic market are also challenged, such as reduced order cycle time and demand-driven supply or pull systems.

Question 35

Q: Is it recommended that companies avoid globalization?

Answer 35

A: No, the discussion is not meant to imply that companies should not be involved in globalization. Rather, it is meant to provide understanding of the challenges necessary to improve the likelihood of success.

Question 36

What are the potential consequences of overly tight security measures in border crossings and ports?

Answer 36

If security is too tight, it could impede the flow of needed goods or materials, causing delays and decreased efficiency. Ports and border gateways can become congested, and clearance times have increased from hours to days in some instances.

Question 37

What steps have been taken to improve the flow through border crossing?

Answer 37

Electronic filing of cargo information has helped to improve border clearance times. Information systems, procedures, language, labels, and documentation are being redesigned to expedite the border crossings and the flow of commerce.

Question 38

What is the North American Free Trade Agreement (NAFTA)?

Answer 38

NAFTA is an agreement signed by leaders of Canada, the United States, and Mexico in 1993, which establishes free trade between these three countries. The objectives of these three countries are based on the principles of an unimpeded flow of goods, most favored nation (MFN) status, and a commitment to enhance the cross-border movement of goods and services.

Question 39

What is most favored nation (MFN) status?

Answer 39

Most favored nation (MFN) status provides the lowest duties or customs fees, if any, and simplifies the paperwork required to move goods between the partner countries.

Question 40

What are the goals of NAFTA?

Answer 40

The long-term goal of NAFTA is to create a better trading environment. NAFTA’s goals involve making structural changes to operate a borderless logistics network in North America. There are continuing challenges to achieving the established goals among all three countries.

Question 41

What are some of the challenges facing NAFTA?

Answer 41

Migration from Mexico into the United States continues to be a political “hot button” issue because of the relative ease of entry into the United States. As new markets and supply sources develop, new transportation and storage facilities as well as intermediaries need to be developed.