Globalisation

Definition: 

The process of the creation of a single world market; where the removal of trade barriers (tariffs), technology such as enhanced communication and efficient transportation (supply chain - distribution), has enabled businesses to become ‘global’.

How it can influence operations:

• Small and domestic (national) businesses must compete with trans-national corporations with lower costs of production (and thus lower prices)

• Production must be oriented to a global market, to meet global needs

• The business with the largest scale (production) has the edge in minimising costs (economies of scale)

• Firms from global market have capital to invest in production improvements and technology to consolidate competitive advantage over smaller rivals

• Firms that utilise lower labour costs in developing nations can reduce overall costs; sending domestic businesses into insolvency

• Costs of importing from global competitor are very low for end consumer (containerisation)

Globalisation also presents opportunities for firms to change their supply chain and source inputs from global sources. This complicates the operations process, affecting lead times (how long critical supplies take to arrive), increases financial risk (currency risk, payments risk), and less control over quality and brand.

Can be ethical issues resulting from utilising global labour markets… (CSR)