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The Global Economy: an environment in change - Research Paper Example

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The countries which are increasingly considered for expansion opportunities in a global strategy are chosen on the basis of concepts of ‘Cost Drivers’ and ‘Government drivers. …
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The Global Economy: an environment in change
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? “The Global Economy: an environment in change” The Global Economy Globalization refers to the nature of global relationships that exist between people, cultures and economies. Today’s global economy is characterized by an increased assimilation of trade, capital flows and labor, to varying degrees. The trend of globalization went into expansion after the end of WWII with an increase of over 8% per annum in the global merchandise exports in the period from 1950-73. After a period of slow growth, advances in technology innovation renewed the process of globalization beginning in the 1990s- with the export expansion at an average rate of 6% p.a during early 2000s (WTO, 2008). There have been some main factors which have led to the countries taking an increased part in the world global trade. Firstly the market drivers have to be taken into account, as countries are adopting the policies of open market economies due to mutual trade agreements or in accordance with WTO compliance, companies have gained an incentive to invest in previously untapped markets. A push is also provided by the Competitive drivers, for any company wanting a competitive advantage from its competitors moving into the global arena is an attractive option. With a potential for developing new markets as well as gaining access to fresh resources, globalization can be an extremely prudent decision for manufacturing firms. It is also sometimes the only way firms can come up to the level of their competition- with more and more firms entering the global marketplace the competition drive is stronger than ever. The globalization process is further aided by ‘technology drivers’- the enhanced communication transportation facilities, information exchange which are a marker of the 21st century make it easier for the average firm to move operations to other regions and make the transition into a global organization. The countries which are increasingly considered for expansion opportunities in a global strategy are chosen on the basis of concepts of ‘Cost Drivers’ and ‘Government drivers. Companies considering moving their operations have to keep in mind what is the cost of production, government facilities, resources, skilled and unskilled labor for any entering manufacturer or trader in that region. Often the developing countries provide a more viable cost structure. In relation to this are the government drivers, which refers to the governments attitudes and policies towards global trade generally and entering manufacturers particularly. These include trade tariffs, trade barriers, the policy and structure of exports and imports, privatization policies, corporate taxation, overall infrastructure, facilities provided and others. Supportive local governments are the strongest factor in introducing an economy into the global market. The adoption of market and business globalization for individual countries has become even more important in the face of the changing nature of the world economy. The nature of management of firms has gone through major modifications in the last few decades. From the pre oil crisis era of the 1969-1975 through the somber atmosphere of 90s in the aftermath of the oil crisis and to the eventual shift towards emergence of “globally distributed production organizations” (Eliasson, 2005). Firms are taking an advantage of the resources available in the different regions of the world and the aim of many is to establish a global presence. As our economies move into the knowledge era “advances in computing and telecommunication have created new and far less costly access to the large global supply of skilled, relatively cheap labor [ leading the local workforce to face an increased] level of competition from abroad” (Bernstein, 2004). The organizations and the overall economy has integrated the notion of a business environment which is unpredictable, prone to extreme changes and where decisions have to be made increasingly without the complete information. There are too many factors affecting the average organization operations to be kept completely in control; change and crisis management have to be adopted as one of the core principles. One such example of an extreme change in the global arena is the rise of the Chinese economy. It has been predicted that China will take over the US economy in a few years….the world bank provides data that the size of China’s economy is $10.1 trillion, compared with $14.6 trillion for the U.S and the Chinese economy increased at an annual rate of 9.6 percent in the first half of 2011, vs. a rate of less than 1 percent in the U.S. China has build its economy on the strength of globalizations, by allowing manufacturing opportunities with a low cost structure to multinational corporations and increasing their share of global exports. Charles Kenny in his article gives an interesting perspective behind the reason of China’s growth saying that while China works on the principle of ‘deferred gratification’ for US the principle is ‘deferred maintenance’- China has been busy investing back its profits into its economic development plans but the citizens of US are concerned about personal life quality just as much as the overall economic conditions. Another stark difference between the two economies is despite the overall volume, the average personal income China can only allow the purchase of 16% of goods and services that an American utilizes (Kenny, 2011) So on a corporate level, in countries like the US, there has to be an emphasis on global management if they wish to strengthen and improve their economies while keeping in view the local work practices and culture. Global management doesn’t only involve setting up operations in another country and then managing production and people, it refers to understanding the benefits that can be gained by tapping into the global supply of skills and resources and how best to utilize these benefits in relation to your business strategy. Similarly it is important to realize the drawbacks and problems which come with having a global presence and a diverse workforce which maybe physically separated and working in conflicting cultures. Once this global mindset is adopted it will much more smooth transitioning into a global organization. Some of the best traits of global leaders and managers are “Openness, adaptability, execution” towards new situations and people (Demailly and Rabotin, 2006). The people who have lived in other cultures than their own and have a high emotional intelligence, find it easier to understand the needs and viewpoints of a diverse workplace or anew culture where operations have to be extended. Managers have to adapt to a remote learning environment and have confidence in the ability of their workers to understand and approach global problems. More than anything they have to embrace the idea openness towards stimuli and ideas- in the global world they have to seek out opportunities which would be a good match for their organizational skills and recognize that with the right people and the right attitude these opportunities can be availed to reach global presence. References Demailly, C. & Rabotin, M. (2006). Going global: life experience is the best training. Judy poll debrief, european pwn.  Bernstein, J. (2004). The Changing nature of Economy. Economic policy Institute, retrieved from:http://www.epi.org/publication/webfeatures_viewpoints_changing_economy_testimony/ Eliasson, G. (2005). The nature of economic change and management in a new knowledge based information economy. Information Economics and Policy Volume 17, Issue 4, October 2005, Pages 428–456 WTO (2008). Globalization and Trade. World Trade Organization report, retrieved from: http://www.wto.org/english/res_e/booksp_e/anrep_e/wtr08-2b_e.pdf Kenny, C. (2011). China Vs the US: the case for the second place. Bloomberg Business week, Oct 13. Read More
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