The Impact of Globalization on Business

The Impact of Globalization on Business

The Impact of Globalization on Business
Businesses are turning themselves into global concerns. Information technology is an important tool in making this transformation and in designing the international organization.
Even a one-person company can have worldwide sales through the Internet! One researcher who studies international business suggests that information technology is the glue that can hold an international organization together and help coordinate its operations.
All of our IT design variables that focus on communications, such as electronic links, technological Matrixing, electronic customer/supplier relationships, and virtual components, are available to help manage and coordinate the global firm, and its staff and operations.


The Impact of Globalization on Business
Globalization has been one of the major trends in business in the 1990s and twenty first century. The world's strongest economies are heavily trade oriented.
The United States actively promoted free or reduced tariff trade. The European Union (EU) eliminated almost all barriers to trade and a majority of its members adopted a common currency, the Euro.
The U.S., Canada, and Mexico completed the NAFTA free-trade pact that phased out most tariffs over a 15-year period.
The consensus among economists is that free trade has benefited all countries that participated.

The Impact of Globalization on Business
Globalization can greatly complicate the task of managing IT in a firm. Yet, IT can greatly improve the management of firms with operations in many parts of the world.
There are nine impacts of globalization:
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1. Rationalized manufacturing. Firms manufacture in locations with a comparative advantage for the type of manufacturing involved.
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Worldwide purchasing. Firms can purchase worldwide for their operations, giving them a great deal of leverage over suppliers.
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3. Integrated customer service. A multinational firm is likely to have multinational customers and can provide all locations with the same level of customer service.
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4. Global economies of scale. Size, if managed properly, provides for economies in purchasing, manufacturing, and distribution
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5. Global products. Consumer firms have worked especially hard to market global brands such as Kellogg's cereals and beverages like Coke and Pepsi.
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6. Worldwide roll-out of products and services. The firm can test products and services in one market and then roll them out around the world.
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7. Subsidizing markets. The profits from one country can be used to subsidize operations in another.
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8. Managing risk across currencies. With floating exchange rates, doing business in many countries can help reduce risks.
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9. The growing irrelevance of national borders. Technology has far outpaced political progress in integrating different cultures. As electronic commerce plays an increasingly important role, the ability of national governments to control transactions will become more difficult.
Click the numbers to read about the nine impacts of globalization.
One conclusion from the above list is that global business creates greater uncertainty and complexity. To handle these challenges, the firm will needs efficient communications and information processing. It relies more on IT to manage the organization.