The World Is Getting Flatter, and That Is Not Necessarily a Good Thing - Essay Example

Introduction Globalization and the advancement in information and communications technology (ICT) have allowed for facts and figures to be communicated in real time across the globe. Technology has virtually shrunk the world. Internet is today used as a channel aggressively by businesses both new and established ones. It has become a virtual marketplace which has re-shaped the way people do business (Prufer & Jahn, 2007). Internet is flattening the world where families are getting dispersed and concentration is on success and achievement in the cyberspace (Ahmad, 2008). The world according to Friedman has been flattened due to major political events, innovations, and companies. He also cites ten flatterers that have shrunk the world. Information technology has definitely brought the world closer and made it interdependent and interconnected, it has resulted in both economic and social integration but this is not necessarily a good thing. Companies have to plan their strategies with special focus on talent management, cross-cultural diversity and the supply chain. Outsourcing and offshoring have affected the way business work today. Networking too has had an impact on services and product offerings. Thus the phenomenon of flat world gives rise to an emergent ‘mess’ of change that confronts us each new day (Weeks, 2007). Argument Flatness is not a new phenomenon. Members of the same industry cluster together inefficiently in the centre of a straight line. This limits competition as it creates a long-term relationship between buyer and seller due to cost-advantage which benefit both (Leamer, 2006). Flatness can increase the scope of relationships but such relationships need to be maintained which is not as simple as it is made out to be. Flatness means taking advantage of the sun-dial model and getting the tasks to be done in other countries while Americans are still in bed. Friedman does not consider the amount of job loss it has caused the US. A flat world would imply that all nations can sell the same goods at more or less the same price and people have the same culture which enhances adaptability. McDonalds have faced problems in selling the same menu everywhere and do have to make local adaptation. It is not possible to change the culture and taste of a nation even after years of flatness. Flatness would means that labor costs or more specifically the costs of production should be the same all over but MNCs start production in developing nations to take advantage of cheap labor. This just means that relationships have shifted geographically and not always to the advantage of all. Companies like Wal-Mart and Nike have taken undue advantage of this ‘flatter world’. A flat world has caused an increase in fraud and conspiracies as advanced technology is used in communications. a flat world has only served o to increase inefficiencies in supply chain and logistics. Cross-border mergers have increased the incidence of failures; cross border mergers require a shift in the education system to handle the challenge of cross-cultural diversity of the workforce. A flat world is not necessarily a good thing! Application Southwest Airlines (SWA) is considered a benchmark in the airline industry and has been able to meet the challenges. The managers have been able to reach this state with the help of advanced technology. Amongst other benefits, SWA has been able to contain costs and lead in the category of budget airlines. They do not offer frill benefits in order to keep costs under control. One such area is that they do not offer assigned seats. The passengers can issue their own boarding pass online 24 hours before the scheduled flight. This has now taken the form of unlimited chaos as passengers vie with each other to rush and bag the prized seat (Ahmad, 2008). Technology may have flattened the world but it has led to declining customer quality. While the airline may benefit but the customers would prefer to pay a little more and avoid the hassles and chaos when they are traveling. Outsourcing is considered to be another evil that is the result of ICT. While it has helped the industries to contain costs and compete in the global market place, it has helped the developed nations to improve their standards of living, it has also affected the economy and jobs in many countries. It has also created air pollution and traffic congestion in many cities of the developing nations like Bangalore and Beijing (Ahmad, 2008). Friedman says the flattened world has caused only low-skills jobs to be outsourced to countries like India which motivates the Americans to be more creative and innovative. Hence he considers this to be a positive move by the Americans but what has been ignored is that in the process, as Forrester predicts, roughly 3.3 million service jobs will have moved offshore, including 1.7 million "back office" jobs such as payroll processing and accounting, and 473,000 jobs in the information technology industry by 2015 (Otterman, 2004). This job loss of 3.3 million would translate into $136bn in wages being transferred from US to countries like India, China, Russia and the Philippines (Frauenheim, 2002). Digital platforms do not always imply disaggregation; skills along with geographical and cultural distance can impede service disaggregation. Friedman says labor and capital should be as flexible as possible which would allow for swifter and less painful adjustments. The multinationals seize oppurtunities in overseas ventures but the entry of foreign MNCs is not always beneficial to the developing or the underdeveloped nations. The governments of such nations try to adopt a protectionist attitude as it affects the local manufacturers. Economic integration due to a flattened world leads to openness and openness triggers volatility leading to insecurity. Hence to alleviate the fears, to provide security to the local firms, the governments need to have a protectionist attitude (Fitoussi, 2007). The governments in emerging economies cannot allow growth to slow down and hence will use the instruments of economic policy which will help it reduce the uncertainty linked with investment. The protectionist attitude has been criticized but Shiva (2005) is of the conviction that trade liberalization does not lead to development. Protectionism is justified because development should be from with and cannot be imposed with restrictions. MNCs can also stifle competition. They may transfer huge funds and technology to the developing nations but there is stiff resistance from domestic competitors (Savitsky & Burky, 2004). When market share is concentrated in one hand, it can distort allocation of resources, raise prices and decrease output. MNCS may have to face anti-corporate and anti-establishment sentiments from the civil societies in the host country. MNCs take advantage of trade liberalization and a flatter world. They open overseas production units to save on costs but in the process it can also lead to exploitation of human capital. Nike endeavored to deliver high quality goods at affordable costs and went in for heavy cost-cutting measures. Like many others they too started getting their manufacturing from the Asian countries and came under heavy criticism. The working conditions and wages were deplorable. There were reports of physical and verbal abuse of workers, low wages and anti-union efforts through out Indonesia, China and Vietnam (O’Rourke, 1997). The company kept shifting its manufacturing base as it encountered problems in each country. This was possible because ICT has removed the constraints of communication and control. A flatter world hence can lead to exploitation and human abuse. Wal-Mart is well known for its adaptation of information technology in all its processes and because of the implementation of technology it is able to connect with global vendors. This is the reason Wal-Mart has been able to monopolize labor and retail markets (Heyer, 2005). Through this it is able to keep its worker compensation and retail prices low. It is known to squeeze profits at each point in the supply chain and use this to negotiate deals with the vendors. As it pressurizes its vendors for low prices, they have been forced to outsource supplies from cheaper markets. Wal-Mart hence serves as a vast pipe-line that gives non-US companies direct access to the American market. The benefit of ICT is cheaper prices which have allowed many to indulge in luxuries which they may otherwise not have been able to afford (Bianchi & Swinney, 2004). This means Wal-Mart is able to offer better products at low prices but at what cost have they achieved this? Friedman claims that because of flatter world efficiency in the supply chains have been achieved. He says something that is produced in China is bought off the shelf in Connecticut it has forced many US manufacturers out of business and was the primary distributor for children-produced clothing from Bangladesh and sweatshop-produced toys from Asia. It employed 16 and 17 year-old Chinese immigrants without permits in Manhattan’s Chinatown (Burara, Sehovic, Al-Askari & Meikle, 2004). Even MNCs like Levi Strauss, for whom Wal-Mart is the biggest retailer in the US, had to shut down four remaining production plants in North America and shift the work to Ibero-America and Asia. Do we require such a flat world? Friedman however agrees that it is one of the most controversial companies. The World Wide Web or the networking has been considered a flattener by Friedman while highlighting the importance of the search engines. True it has become possible to download music and find books online; it has become easy to locate people, communicate and Google Earth has also made it possible to identify locations anywhere on the earth. Have this not increased fraud and corruption and thrown many out of business? The airlines do not want to offer commissions to travel agents any more as they can get online bookings; the music companies are losing money because it is possible to download movies and music on the net. People can now watch what they want when they want on the television. They do not have to sit through the commercials any longer. This means that the broadcast shows with commercials thrown in do not make any sense now and the advertisers are just wasting their money. A flatter world makes the world transparent, says Friedman but it has actually given rise to more of corruption. Flatter world has led to efficiencies in supply chains according to Friedman but it has also been influenced by a complex interplay of trade liberalization and intense global competition. Market power is now in the hands of a few buyers which have been powered by deregulation, reduced transportation costs, and better communication facilities. This has resulted in a large number of competitive and relatively powerless suppliers facing a few large buyers (Vorley, n.d.). Value has been transferred from producers and rural areas to consumers and urban areas. In the cocoa supply chain four companies control 40% of cocoa grinding and in livestock three companies control the process of crushing and feed production along the entire chain which stretches from South America to Europe. Those firms that are high on resources and low on costs, and are vertically integrated have the control. They are in a position to employ the right technology to meet the demands. The buyer power or flatter world concept has undermined the justice and fairness in the supply chain. This has also put the family owned producers at a great disadvantage. A flatter world has changed the American job market. The youth no more has the employable skills or the skills are available cheaper elsewhere. Friedman suggests that the American education system especially for the engineers needs a change (Felder, 2006). The American education system has focused on equipping students with analytical skills but creative researchers, developers and entrepreneurs are required that would help keep their companies ahead of the technology development curve. Strong interpersonal skills are required to maintain good relations with existing and potential customers but nobody want to leave their comfort zone and acquire these skills. This means a flatter world poses a challenge for talent management. Globalization and internationalization have forced many countries and more industries to become part of the global network. Cross border mergers and acquisitions have become common due to the flatter world. There has been a high failure rate in M&A and the reason has been attributed to disproportionate attention to strategic fit as compared to integration issues (Olie, 1994). Lack of cultural fit leads to conflicts and may hinder agreement over management issues. Cultural differences in international mergers are evident in different dress codes and behavior which divides them into ingroups and outgroups. Despite being a flatter world, these changes have not taken place. Today the consumer is sophisticated and demands global standards in service, treatment of employees and pricing (O’Neill, Lawson & Purushothaman, 2003). Flatter world has intensified competition to an extent that firms is most developed countries have been forced to look for cheaper option where sweatshops operate to produce the most sophisticated goods. Netscape is one of the ten flatteners according to Friedman. Netscape brought the internet alive with the browser but it also commercialized a set of open transmission protocols so that no individual could own the Net (Pink, 2006). Netscape further triggered the dotcom boom, which triggered the dotcom bubble and which in turn triggered the overinvestment of a trillion dollars in fiber-optic cables. Westerners long for a simpler life where life paths were clear. Today we live in a world of contradictions and confusions. That which was self-evident and certain has today become plural in the face of subjectivity and diversity (Weeks, 2007). People are confronted with multiples of truth, realities and reasons. This has happened because people are trying to make sense of the events through diverse values, beliefs, norms, attitudes, assumptions and past experience that collectively shape peoples’ world view interpretation. Conclusion A flat is what Friedman has perceived but this flat world has only compounded confusion and created chaos. A flat world has changed the way people work and think, changed the way people act and react, change the nature of relationships but has not created advantages for many. Advanced ICT may have shrunk the world but has led to greater incidences of fraud and corruption. Cultural differences have not been sealed due to the flatness of the world. Flatness has led to higher levels of unemployment in the developed nations. It has increased the standards of living in the developing world but has increased consumerism. People crave for more and more which leads to corruption as desires increase. It has become easier to reach people across the globe; it has reduced the transportation and communications costs but it has not all been for the good of the society. References Ahmad, A 2008, Globalization (2008), retrieved online 11 February 2009, from http://globalization.icaap.org/content/v7.1/ahmad.html Bianchi, D & Swinney, D 2004, Wal-Mart: A Destructive Force for Chicago Communities and Companies, Center for Labor and Community Research, Special Report to The New Chicago School of Community Economic Development, retrieved online 11 February 2009, from http://www.clcr.org/publications/pdf/walmart_impact_analysis.pdf Burara, R Sehovic, A Al-Askari, B & Meikle, M 2004, Wal-Mart: Where did all the small businesses go? retrieved online 11 February 2009, from http://www.plu.edu/~meiklemr/doc/capstone-paper.doc. 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