FREE online courses on Information Technology - Chapter 5 MANAGING INFORMATION TECHNOLOGY - The Impact of Globalization on Business

 

There are a number of impacts of globalization:

¨       Rationalized manufacturing. Firms manufacture in locations with a comparative advantage for the type of manufacturing involved.

¨       Worldwide purchasing. Firms can purchase worldwide for their operations giving them a great deal of leverage over suppliers.

¨       Integrated customer service. A multinational firm is likely to have multinational customers and can provide all locations with the same level of customer service.

¨       Global economies of scale. Size if managed properly, provides for economies in purchasing, manufacturing and distribution.

¨       Global products. Consumer firms have worked especially hard to market global brands such as Kellogg's cereals and beverages like Coke and Pepsi.

¨       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.

¨       Subsidizing markets. The profits from one country can be used to subsidize operations in another.

¨       Managing risk across currencies. With floating exchange rates, doing business in many countries can help reduce risks.

 

One conclusion from the list above is that global business creates greater uncertainty and complexity. To handle these challenges, the firm will need faster communications and information processing. It will have to rely more on IT to manage the organization.