How Globalization Impacts Operations Management: In Simple Language About the Highlights

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Updated Jun 22, 2021
How Globalization Impacts Operations Management: In Simple Language About the Highlights

The modern development of economic relations cannot be imagined without the processes of globalization. It has embraced almost all spheres of human life. The processes of globalization today are the main trend of world development and are the main guiding vectors. For students of economics and business schools, anything on the topic of globalization will be a real challenge. Studying this topic takes a lot of time and effort, so it is better to turn to economics homework help. The assignment writing service will write your case study in a timely manner.

Globalization determines the main processes in the world economy:

  • sets certain dynamics for the development of international business;
  • accelerates global competition for goods and services;
  • forms the structure of the goods;
  • sets the level of competitiveness of goods and services in the new market;
  • control of international capital flows and foreign direct investment in multinational companies;
  • increasing the transfer of capital, labor, technology and financial resources.

Key Points of Globalization Effect

Put simply, barriers to trade between different countries are being removed, and national economies are being integrated in the current situation. This leads to an increase in the exchange of labor, financial resources, technology and capital. To expand customers and become more competitive, businesses are expanding around the world. The operational function facilitates this process. All consumers tend to trust standardized products more, for example, the world-famous brands Apple, Nike or McDonald's.

To achieve such a high level, businesses need to focus on a few key points:

  • meeting the needs of consumers through interesting product design;
  • quality management logistics;
  • location of working capacities;
  • inventory management process;
  • efficient supply chain management.

Later in the article, we talk about the establishment of these economic processes in the context of globalization.

Operations Management Focus on Product Design

The different countries've got different business strategies according to their culture. As the individuals are the rulers in the market, the managers who don't know the culture and attitude will fail in the global business market. Organizational culture is just how things are done regularly. The political and environmental differences between countries is a superb concern for the managers.

When designing something or services, it should fit the culture. The option of technology and skills are an issue for operation in global market and the labor cost and skilled laborers. The travelling and the storage area capacities are other difficulties for global operations.

By the way, developing a product design to enter a new market can be a great topic for research. If you are one of those who need it, but do not know where to start, contact the business plan writing service.

Global Web and Supply Chain Management

The current stage of logistics development is determined by two main factors: the globalization of the world economy and the global scientific and technological revolution, which generate new customer needs for logistics services and various forms of their satisfaction. These problems pose problems for logistics, which must be solved if you want to stay afloat. Without logistics solutions to the problems that the market puts forward, it will be difficult for an enterprise to achieve leadership positions, so you need to pay serious attention to logistics problems.

Business globalization is expressed in the following:

  • Improved communications and transportation have made physical distances less important, thanks to which enterprises can operate in a single, worldwide market;
  • There is a reduction in trade barriers between countries and an increase in international trade and competition, which complicates the tasks of logistics;
  • The location of enterprises does not take place on a national basis, but in countries and regions with low production costs.

Logistics Development Factors

Development of competition caused by the transition from the seller's market to the buyer's market

Entrepreneurs began to pay more and more attention not to the product itself, but to the quality of its delivery, the strategy for the development of global sourcing. Improving the work in the distribution of goods did not require such large additional investments as, for example, mastering the release of a new product, and at the same time ensured a high competitiveness of the supplier by:

  • reducing costs;
  • reducing order fulfillment time;
  • adhering to an agreed delivery schedule. 

Cash invested in distribution began to influence the position of the supplier in the market much more than the same funds invested in production. In these conditions, high competitive advantage depended not on the amount of capital investments, but on the ability to properly organize the logistics process and conduct continuous development of logistics.

Increased requirements for the quality of product distribution processes

Increased requirements for the quality of the processes of selling finished products, caused by tough competition, led to the same requirements from manufacturers to suppliers of raw materials, materials, components, and semi-finished products. As a result, a complex system of connections between various market entities was formed, which required the improvement of existing models of organizing supply and sales, the ultimate goal was the development of logistics. Due to this, the following were actively developed:

  • methods and models of optimal placement of warehouses;
  • determination of optimal consignments, schemes of transport routes;
  • general integrated development of logistics.

Unification of the rules and norms of foreign economic activity

Measures were taken to unify the rules of foreign economic activity, to simplify the passage of customs barriers, control and technological procedures at border crossings. The development of logistics was influenced by:

  • concentration of transshipment and warehouse points in the context of the integration of the economies of countries;
  • creation of international distribution centers; 
  • new transportation technologies (for example, intermodal) and information processing;
  • the use of automatic systems for reading and addressing goods.

Operations Management and Location of Manufacturing Facility

The decision to locate production facilities directly affects the profitability of the organization. Many companies from developing countries such as China, India and Taiwan are active in global value chains in high-tech sectors of the economy. For example, in China, Foxconn is one of the clearest examples of this process. 

The company itself and its manufacturing units located in mainland China are owned by Hon Hai Precision Industry Co. Ltd. Foxconn is the world's largest manufacturer of electronic equipment (electronics contractor), as well as components for many leading companies. In particular, it manufactures a full line of Apple products, products and components for Dell, HP, Sony, Intel and Microsoft. Foxconn manufactures products that meet the strictest international quality standards. 

It is the ability of international companies to separate and move fragments of the production chain in space that has led China over the past 30 years to gain a reputation as a "global factory" of multinational corporations.

Impact of Globalization on Inventory Management Process

Inventories are goods or materials that a company intends to sell to customers for a profit. Inventory management, which is one of the most important elements of the supply chain, is the tracking of inventory from the manufacturer to the warehouse, and from there to the point of sale. The goal of inventory management is to have the right product in the right place at the right time. This requires comprehensive inventory information to know when to re-order, how much to order, and where the stock is stored.

Globalisation and technology, along with consumer empowerment, are changing the way we manage inventory. Supply chain operators will use technologies that provide valuable insights into how to improve global supply chain performance. They will anticipate anomalies in logistics costs and productivity before they occur and have an understanding of where automation can provide the benefits of scale up. In the near future, these technologies will further change the inventory management process:

  1. Artificial Intelligence 
    Intelligent and adaptive AI will improve inventory accuracy and reduce waste.
  2. Internet of things
    The data collected from IoT sensors will provide information about the location and status of stocks.
  3. Blockchain technology
    The disparate parties will be linked together through a single and immutable system of recording all transactions.
  4. Smart Order Management
    Supply chains will leverage inventory awareness for more accurate demand forecasting and automation.
  5. Quantum computing
    Unprecedented computing power will help solve problems that were previously considered unsolvable.

Total Quality Management (TQM) in Terms of Globalization

The quality of products in the general case largely depends on the level of requirements for competitiveness and quality established by regulatory and technological documentation, the ability to successfully implement business processes at enterprises, the quality of resources purchased for the production of products, mechanisms and methods of production management, labor and organizational decisions. Business processes include:

  • main processes, including organization, production, sales, logistics, planning, development, procurement, service, marketing; 
  • service processes (fuel and energy supply, communications, repair, installation and adjustment of equipment, transport, work with personnel, information services, documentation, etc.);
  • processes for monitoring the competitiveness and quality of production processes, manufactured goods, processes for performing labor functions and duties by personnel.

In modern conditions of competition, there is an urgent need to monitor the study of consumer demand and the degree of consumer satisfaction with the quality of goods sold, expanding segments and market horizons. Information on consumer demand and satisfaction is the basis for selecting targeted quality requirements and decision-making processes.

Other Consequences of Globalization

  • The globalization of the world economy affects all states, in particular, determining the development and diffusion of technologies between countries, the use of labor, the manufacture of goods and the supply of services and investments. As a result, parameters such as competitiveness, labor productivity and production efficiency in general change. Thus, world globalization has become the main trigger for the growth of international competition.
  • The growth rate of foreign direct investment today is incredibly high and significantly exceeds the indicators of world trade. Largely due to these investments, shifts are taking place that directly affect national economies: industrial restructuring and technology transfer, the formation of global enterprises.
  • Due to the impact of globalization on the world market, trade in services (managerial, legal, informational, financial, etc.) is becoming the main factor in trade relations between countries. Thus, as of 1970, the export of services accounted for no more than 33% of foreign investments. Today this figure is already 50%. The most important commodity in the context of the globalization of the world market is intellectual capital.
  • As a result of deepening internationalization, one can observe an increase in interaction and interdependence between the economies of states. Thus, world globalization and some kind of integration are taking place, the formation of a single international economic system as a new structure. The centers for the process of globalization of world finance are the three largest economies: the United States, Western Europe and Japan.
Henrique Bertulino
Head of Customer Success

Mens Sana in Сorpore Sano. Holistic organic lifestyle)