Influence: Globalisation Flashcards
What is globalisation?
Globalisation refers to the removal of barriers of trade between nations. Globalisation is characterised by an increasing integration between national economies and a high degree of transfer of capital resources, labour, intellectual capital and ideas, financial resources and technology. From a business perspective, globalisation provides both opportunities and threats.
What are the threats of globalisation?
increased competition - may not even know who the competitors are e.g. childcare business have hundreds of business around the world (could be anyone)
ethical concerns - exploitation of workers in developing Countries
Customer needs and wants may vary between Countries
product may not be practical for other countries - will need to alter products e.g. hot chairs from Europe melting in Australia
How has the supply chain been affected?
A key influence of globalisation has been the development of rapid international (instant) communication and rapid advances in technology. These developments in communication and technology mean that operations and production have been revolutionised.
Globalisation has had a significant effect on the operations function with respect to supply chain management. The supply chain refers to the range of suppliers a business has and the nature of its relationship with those suppliers. A supply chain must be highly responsive to changes in demand.
There are three main approaches to the supply chain:
Global web refers to the global network of suppliers a business has, chosen on the basis of lowest overall cost, lowest risk and maximum certainty in quality and timing of supplies.
Reverse engineering is a process that involves a business taking the product of a competitor that has already been released into the market. The imitating business then tries to make their own version of the product from the component parts, at a lower cost.
3. Innovations occur when the business creates novel (new) products, and in doing so leads the
market. Innovations may improve an existing product or create an entire new product.
What are the opportunities from globalisation?
Increase in reputation
Economies of scale
access to global consumer
form cross branding with other companies cheaper production e.g. labour, land, resources, technology
increase in imports and exports which has positive effect on GDP
due to technological advancements business no longer need physical stores in every country
can now operate a micro business while operating on a global scale
What is the Ikea case study?
IKEA’S GLOBAL SUPPLY CHAIN
IKEA minimises costs and global logistics by having their customers form part of their supply chain. Customers collect their furniture from the in-store warehouse, without waiting, and then transport and assemble the furniture themselves (known to IKEA as ‘instant gratification’.
IKEA operates via a global web of 42 distribution centres, in partnership with a network of 1220 suppliers in over 55 countries. IKEA invests considerably in creating long-term partnerships with suppliers, committing to buying large volumes over a longer time frame and, as such, negotiating lower prices. Suppliers also have the guarantee of ongoing orders. IKEA has 31 trading service offices in 26 countries. This allows them to be close to their suppliers, so they can monitor production, test new ideas, negotiate prices and check quality while keeping an eye on social and working conditions (CSR).
Top FIVE purchasing countries:
China 20%, Poland 18%, Italy 8%, Germany 6% and Sweden 5%.
Global sourcing has enabled decreased costs in operations as IKEA can take advantage of specialised skill sets; decreased wages’ favourable exchange rates and more lenient government regulation(s). Globalisation has promoted economic, social and environmental development. Firms such as IKEA are under intense public scrutiny and must act in an ethically and environmentally responsible manner. IKEA was one of the first multinationals to establish an International Framework Agreement (IFA) protecting workers rights on a global scale.
