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ME413: Industrial Management - Yogesh Kulkarni

Unit 6 : Globalisation
Lecture 1
Globalization Drivers

Overview on the Globalization


of Markets
Technological advances have
altered the international business
landscape. Raw material?
Production? Consumer?
Globalization refers to the
interconnectedness of national
economies and the growing
interdependence of buyers,
producers, suppliers, and
governments, around the world.
One large marketplace for goods,
services, capital, labor, and
knowledge.

What is Globalization?
The IMF defines Globalization as the
growing economic interdependence of
countries worldwide through increasing
volume and variety of cross border
transactions in goods and services and of
international capital flows, and also
through the more rapid and widespread
diffusion of technology.
Where and how Globalization has
impacted following domains?
Agriculture: Raw material?
Production? Consumer?
Sports: IPL?
Shopping: Amazon, AliBaba

The Death of Distance


Period

Medium

Speed

1500 to
1840
1850 to
1900
1900 to
now

Human/Horse
powered
Steam locomotives
Oil based

10-15 kmph

Communications (traditional media


and the Internet)
Technological advances in
transportation
Population mobility, especially of
labor

Globalization of Business
Globalization is a mind-set which views
the entire world as a single market
Globalization encompasses
Doing or planning to expand
business globally.
Locating facilities irrespective of
national considerations.
Obtained from the best source
anywhere in the world.

History of Modern
Globalization
Signs of Globalization can be found in
ancient history as well. Silk route?
Huan-Tsang? South Indians in
South-east? Territorial attacks?
Modern Globalization
The period 1870 to 1913 : a
growing trend, Raw material, East
India Company
The late 1980s: More momentum
from the political and economic
changes. Capitalism, fall of
Communism
In India, 1991 is when Dr
Manmohan Singh under leadership
of Dr Narasimha Rao, gave boost
to Globabalization. What did they
do?

50-70 kmph
100-500+ kmph

Apart from Distance, dismantling of


communication barriers. Fueled by
Internet and other technologies
(transport); rapid liberalization (policies)
in emerging markets.

Globalization of World
Economy
Drivers of Globalization
International trade (lower trade
barriers and more competition)
Financial flows (foreign direct
investment, and debt)

Essential conditions for


Globalization
Business Freedom: No unnecessary
government restrictions like import,
foreign investments etc.
Facilities: Availability of
infrastructural facilities.
Government Support: In the form
of policy and procedural reforms.
Resources: Technology, managerial
expertise, company and brand
image, human resource etc.
Competitiveness: Such as low costs
and price, product quality, product
differentiation, technological
superiority, after sales service,
marketing strength etc.

Orientation: A global orientation.


Bottom of Pyramid. Auto-Rikshaw
by Bajaj in South East

Information and
Communications Technology
(ICT)
Profound advances in computers,
digital technologies, telephony, and
the Internet.
To optimize their performance,
managing operations around the
world.
ICTs opened the global
marketplace to firms that
historically lacked the resources to
internationalize.

Manufacturing and
Transportation Technologies
Manufacturing @ low cost, via
computer-aided-design of products
(CAD), robotics, and IT-managed
production lines.
Fuel-efficient jumbo jets, giant
ocean-going freighters, and
containerized shipping.
The cost of international
transportation has declined
substantially.
Managlyan per km cost?

Lecture 2
Issue Related With Globalization

Consequences of Market
Globalization
Societal
Contagion: Rapid spread of
financial or monetary crises from
one country to another
Loss of national sovereignty (which
language survives?)
Offshoring and the flight of jobs
Effect on the poor
Effect on the natural environment
Effect on national culture
Firm-level
Countless opportunities for
internationalizing firms
New risks and intense rivalry from
foreign competitors
More demanding buyers who source
from suppliers worldwide
Greater emphasis on proactive
internationalization

Internationalization of firms value


chain

Consequences of Market
Globalization
Integration and
interdependence of national
economies: Lowering trade and
investment barriers.
Rise of regional economic
integration blocs: Free trade
areas: EU, ASEAN
Growth of global investment
and financial flows : FDI,
currency trading, and global capital
markets.
Convergence of buyer lifestyles
and preferences: Emphasis on
lifestyles found in the U.S., Europe,
or elsewhere. Firms market
standardized products.

Consequences of Market
Globalization
Globalization of production:
Low labor-cost locations such as
Mexico and Eastern Europe.
Globalization of services:
Banking, hospitality, retailing,
business processes, Back office,
Banglore-ed!!
Worldwide reduction of
barriers to trade and
investment: Partly facilitated by
the World Trade Organization
(WTO). Subsidies American/Indian farmers
Market liberalization and
adoption of free markets:
Opening of China and the former
Soviet Union, roughly 1/3 of the
worlds free trade.

Rapid Spread of Monetary or


Financial Crises
Beginning in late 2008, the world
economy experienced a severe
financial crisis
Emerged when pricing bubbles
occurred in housing markets
Home values crashed and many
homeowners could not repay their
debts.
What is this Crisis called?
Who all got bankrupt??

Loss of National Sovereignty


MNC activities can interfere
social-political systems.

Some firms are bigger than the


economies of many nations (e.g.,
Wal-Mart, Shell).
Counter argument: MNEs less
powerful (e.g., the US auto
industry declined as foreign rivals
from Japan and Europe entered the
US market. Some day, Wal-Mart
may be overtaken by a giant
Chinese retailer).

Employment
Offshoring and the Flight of Jobs.
Jobs are lost as firms shift services
abroad, in order to cut costs and
obtain other advantages.
Firms benefit, communities and
industries are disrupted.
Effect on the Poor. In poor
countries, while Globalization
usually creates jobs and raises
wages, it also tends to disrupt local
job markets.
MNCs may pay low wages, and
many exploit workers or employ
child labor. Sweat Shops? Apples
case?
Globalizations benefits are not
evenly distributed.
India is alleged to have stolen
(Banglored) US jobs. Who is
stealing ours? Per hour rate?

Effect on the Natural


Environment
Harms the environment by
promoting industrialization and
other activities that generate
pollution, habitat destruction, and
other environmental harm.
As China and India industrialize,
Developed nations are asking us to
curb pollution
In Mexico, the government is
gradually adopting policies to
protect the air, water, etc.
Indias attempts? Pollution index?
Bharat IV norms? CNG? Diesel
subsidy?

Effect on National Culture


Opens the door to foreign firms,
global brands, unfamiliar products,
and new values.
Consumers buy products modeled
according to Western countries,
especially the US. What was idea
of Party before? BheL, now?
Birthday celebrations?
National identity may be lost to
global culture. Clothing?

Obstacles to Globalization
Government policy and procedures:
Our policy and procedures most
complex, confusing. Vodaphone
case?
Ease of doing business.
Permissions? Maharashtra?
Ethics-Trusting, the commitment.
Indians?
High Cost: High cost of raw
materials, finance, poor
infrastructural facilities like port
etc., Waiting at Tolls for trucks?
Poor Infrastructure: Golden
Quadrilateral? Low cost airlines?
Private Railways

Obstacles to Globalization
Obsolescence: The technology
employed, mode and style of
operations etc.
Resistance to Change: Against
modernization. Strikes, Swadeshi?
Poor Quality Image: Chinese
products? Indian? German?
Delivery Problems: To keep up
delivery schedules. IT Project
management.

Obstacles to Globalization
Small Size: Not able to compete
with the giants of other countries.
Even the Big Indian companies are
small compared to the
multinational giants.
Lack of Experience, cartels
Limited R&D and Marketing
Research. How many Univs get
funding? why not?
Growing Competition: The
competition is growing from
everywhere. English speaking?
Trade Barriers: anti-dumping,
Alphanso in Europe

Factors Favouring
Globalization: India
Human Resources: Largest pool of
scientific and technical manpower.
Cheap.
Wide Base: Can support a variety
of business.
Growing Entrepreneurship:
Planning to go international in a
big way. Tata.
Growing Domestic Market: More
purchasing power, expanding
middle class
Niche Markets: Opportunities
abroad present in the form of

market niches. Nurses, Science


teachers?
NRIs: Resourceful - capital, skill,
experience, exposure, ideas etc.
Brain Drain, Brain Gain
Contribution of the overseas
Chinese, Shanghai. Half-an-hour
tour observations

Lecture 3
Job Migration (Include?) By
Globalization

Why Do We Care ( Now)


About Globalization?
Density of economic Globalization
greatest since First World War
Pace of change is more rapid
Perceived links between
globalization and:
Rise in the skill premium
Increased unemployment of
unskilled

Nikes Foreign Factories


Nike has 100s of factories in Asia,
Latin America, and elsewhere
Nike has been criticized for paying
low wages and operating sweatshop
conditions.
However, consideration must be
given to the other choices available
to people in those countries.
MNCs are making efforts to
improve working conditions

What is the story for poor


global migrants?
Poor are not welcomed into
Fortress Europe as elites are
Take great risks (perhaps without
knowing)
Exploited by people-traffickers,
spend their life savings
Vessels used to cross the
Mediterranean from Africa are
unsafe, thousands have drowned
Poor Mexicans heading for the
USA, or Burmese entering
Thailand. India?
In Globalization money and goods
can move easier than people
Easier for people with money and
skills to migrate. Which talents
other than IT?

Migration: the special case of


the EU

As one of
the
four
freedoms
of the EU,
each European citizen
may take up
and pursue
employment in the
territory
of another
member
state
The EU is
made up of
27
states
(nearly half
a
billion
people)
Members
include Germany, the
UK, France,
Poland and
Estonia
Anyone
can
work
and
live
anywhere!

Cultural Hybridism
When two cultures meet (e.g. as a
result of migration or globalising
forces) it is not necessarily true
that one set of cultural preferences,
beliefs and practices will always
overwrite and replace the other
(this has sometimes been called
McDonaldsisation)
Instead, a new culture can develop
which is a mixture or hybrid form
of the originals
The process of change is called
glocalisation

Think...
Scale (internal or international?)
Consequences (for whom? what
type?)
Complexity (there are elites to
consider, as well as poor migrants)
Critical thinking (do we see
exporting or re-writing and
re-imagining of cultures?)
An unfair world (when the rich can
move about more easily)
Citizenship (are we global citizens
or Foreign Nationals?)

Lecture 4
Web-based enablers for
Engineering and Management

From Poland to the UK

Motivation

VOLUME 650,000 Polish have


How/Where Engineering and
entered the UK (2004+)
Management leverage Web based
CHARACTERISTICS They bring
technologies?
a range of skills and occupations,

Web 2.0?? (Html vs Ajax wrt page


including dentists and builders
updates, collaborate/share, social,
DEMOGRAPHICS The majority
webapps, blogs)
are aged 18-30 and significant

Examples of changes in Education


numbers are having children while
due to Web technologies (MooC,
in the UK
Moodle, Khan Academy, class
LONG-TERM Many will remain in
webpage, GRE online, Univ
the long-term but many more claim
applications, Virtual
they will eventually return to
Experimentations)
Poland
NEGATIVE CONSEQUENCES
Why Web?
Poland suffers from economic and
social losses as a result of this
Cost Reduction
migration
IBM web conf : saving $375million
POSITIVE CONSEQUENCES
on training and travel
Remittances are sent back to
Lockheed martin : Web to connect
families to Poland
to 80 suppliers
FURTHER CONSEQUENCES
GE: detecting poor loans (data
The Polish government is recruiting
mining, machine learning)
Indian workers to help it prepare
Kinkos : Replace 51 training sites
for Euro 2012 football
with e-learning, $51 millions per
championship
year
saving
(Source:

http://www.guardian.co.uk/international/story/0,,2110439,00.html)
Gains

Customer Satisfaction: Gilbane :


manage large construction projects
over web, increase in sales by 15%
Productivity: Updated sales and
inventory via web thru 100 sales
person
Time reduction: British Petroleum:
Post problems on net and win cash
prizes: Reduce Gas station
renovation time by 50%

Enterprise management - CRM


Customer Relationship Management:
Customer care Back-office, Insurance,
Banks, Mobile companies etc
It costs 5 to 10 times MORE to
attract a new customer than it does
to keep a current customer
satisfied.
Marketers must be concerned with
the lifetime value of the customer
Sales : promotion
Customer Services
Call Centers
Data mining to find customer
behavior patterns

Enterprise management - ERP


Enterprise Resource Management:
Streamlining transactions, operations,
data flow.
Minimizing inventories
Shortening product development
cycle
Integrate Engineering, Production,
Finance, Distribution, Sales etc
Allows managers to look vertically
and horizontally across the
organization: Dashboard
Captures data from historical
activity and current operations,
useful in planning and controlling
operations, and in developing
business strategies.
Popular systems??

Web based product design and


development
Time to market, out-innovate
competition, ensure product quality,
outsourcing, customer service etc
Communication in Product design.
Collab Design research? Virtual
assemblies?
Cloud based analysis, FEA? Pay
per use licensing over web?
Configuration Management,
versioning?
CAD- PLM

Parametric, Autodesk, Unigraphics,


Dassault etc.

Web based Manufacturing and


Operations
Operations of Manufacturing shops,
chemical process plants, distributions..
Assistance in Planning, optimizing,
controlling, monitoring
www.CIMX.com collaborative
manufacturing across geographies
www.agile.com PLM with supply
chain partners
Embedded systems : single board
chips, with Sensors, GPS
SAS for decision support

Lecture 5

Integrated parts suppliers automobile component firms with


flexible production maintained at
capacity
Integrated service organizations:
Offering financial advisement,
accounting, insurance and banking
for many firms

Knowledge Management
Preservation of know-how critical
to knowledge-intensive companies
Dissemination
Wide-spread applications to add
value
Supply chains of knowledge agents
and centers

Engineering Management In New Organizational Changes


Millennium
Type one - Assemble and market

Emerging Future Trends

Customer Focus
Enterprise Integration
Supply Strategy
Knowledge Management
Changes in Organizational Settings
Population Diversity
Migration of Jobs

Customer Focus
Process (speed, transparency,
self-help)
Customer service
(quality/reliability - Service Profit
Chain Model)

products/ services to consumers:


retain core competence and
outsource others,
form Supply chains,
focus on customers needs,
become Virtual organizations
Type Two - Supply specialized
products/ services to client
companies:
build flexible production
facilities (e.g., cells) to
respond,
vertically integrated

Population Diversity
U.S. Census Bureau Prediction
(2004)

Women and minority attain key


positions

Enterprise Resource
Integration
Integrated Communications
Systems -Information sharing
Wireless Applications
Leveraged legacy systems

Supply Strategy
Work Outsource: Production,
back-office work, logistics,
after-sales customer service,
procurement, inventory
management, new product design,
and others

Migration of White Collar Jobs


to Other Countries
Job migration - Clerical, chip
design, customer service, software
programming, tax preparations
(jobs following procedures)
3.4 million jobs by 2015 to low
wages countries (China, India,
Ireland, The Philippines, India,
Mexico, and Russia)
Pressure on American workers How to justify the high wages with
the value they create?

Shareholders not solid owners, as


ideas in peoples heads can not be
chained down - risk factor
Virtual organization with changing
partners Collaborate, not
competing against competitors to
achieve win-win advantages
Some companies get acquired over
time

Migration of White Collar Jobs


to Other Countries
Caltex Petroleum - shifted service
and professional jobs from Europe
and U.S. to Ireland, Jamaica, India
and the Philippines
Bell Labs has large research centers
in Bangalore and Hyderabad, India
Sun Micro-System hired Russian
scientists for software and
microprocessors research.
Accenture (Anderson Consulting)
pays 1/3 to 1/4 of US wages to
Philippine workers
General Electric shifted some 1000
customer service jobs to New Delhi,
additional centers for handling
payroll, design and billing services
are planned
Texas Instruments has its
integrated circuits designed in
India, since 1986

Engineering Graduates
U.S. Census Bureau Prediction
(2004)

5 Countries: USA, China, India,


Mexico, The Philippines

Old Economy Companies


Rigid hierarchies and Clear
boundaries
Capital Intensive, fixed tangible
assets centered
Small price/book value ratios
Shareholders are owners
Functions are vertically integrated,
emphasizing self-sufficiency,
stability and incremental growth

Knowledge Economy
Companies
Flat organization with small core
and extensive alliance/partnership
networks, with fussy company
boundaries
Idea-intensive, with digitalizable
and commodity-like goods (data,
software, entertainment, cars,
computers, jeans etc.)
Focusing on time to market, cost
reduction through technologies
supplied by alliance
High market value to book value
ratios

Functional Integration of
Knowledge Economy
Companies
Cisco Systems -Performs all
administrative functions over the
Internet, owns only 2 of 34 plants,
handles only 10% of orders by
hands
Dell Computers - Has inventory for
6 days only
General Motors - Build-to-Order
system for cars in 10 to 12 days in
the future

GE
Jack Welsh/Jeff Immelt Continuous mobility
No back office- Digitize or
outsource those parts of businesses
not touching the customers

Characteristics of Modern
Companies
Solicit real-time customer feedback
(IoT)
Target market segment of one
(mass customized
products/services)
Induce customer loyalty with
personalization of customer
relationship
Adjust to diff employee
composition (temp/outsourced)
Organize team structures to remain
flexible
Assure instant Information flow
and efficient transactions
Do performance evaluation
constantly
Use advanced tools (resources
planning, enterprise integration,
supply chain management,
customer relations management,
web-based transactions,) to reduce
staff and improve efficiency
Pursue globalization pro-actively

Strategies To Make Companies


Great in New Century
Speed: Treat time to be more
valuable than money and buy for
speed

Talents: Attract, motivate,


empower and retain the very best
talents, as ideas are key assets for
any companies
Focus: Go for long-term market
position and dominance, rather
quarter-to-quarter performance
improvements
Customer Orientation: Follow
what customers want and create
customer-driven supply chains
Productivity: Outsource non-core
activities, buy technologies and
digitize the rest
Operations: Streamline
operations using advanced software
technologies to adapt to changing
marketing environment

References
Where did I get some of this
info from?

NPTEL - Management Science I


( IIT-Madras)
Dampson Dandy George,
Trends in Education & School
Management in Ghana, Univ of
Education, Winneba
Patil Sarkissian, Jan 2002, The
Differences Between
Administration and
Management
Gultekin, Engineering
Management
Shamaile Nabi,Principles of
Management and Scientific
Management
Sam C. M. Hui, Engineering
and technology management
Tanu Chadha, Management
Richard Daft, Management
Robert Lussier, Management
Fundamentals
Griffin Moorhead, Group
Dynamics
Boundless Lecture Slides
Plunkett, Cengage Learning

http://en.wikiversity.org/wiki/Princi
Introduction to Marketing,
Norlina Ali
Examples of Research in
Marketing (2015). Marketing
Research Tutorial
Basic Economic concepts
http://www.conejousd.org/

Riesenberger
Globalization http://business INTERNATIONAL
environment.blogspot.in/2009/02/globalizationMIGRATION IN A
trends-in-indian-economy.html
GLOBALIZING WORLD ,
International Business: The
David Greenaway and Douglas
New Realities, 3rd Edition, by
Nelson
Cavusgil, Knight and
Copyleft

Send suggestions to yogeshkulkarni@yahoo.com

Globalisation and migration, Dr


Simon Oakes
Engineering Management in the
New Millennium, CM Chang