Global integration in supply chain management

ISCM:Globalisation

Globalisation and Capitalization

In order to address the implications of international service and supply chains in a capitalist global framework, one first needs to first briefly refer to the concept of global capitalism and its implications. The free market approach, in which the forces of the market work together as an invisible hand to regulate the interaction between the economic actors, using instruments such as competition and price formation, has been enriched in the last decades with the idea of globalization. Foremost, the idea of a free and liberalized market, associated with the invisible hand, is the primary argument in defense of globalization. This concept is rather modern and it is an umbrella term to reveal major changes occurring at all levels of life, including economics, politics, technological and even socio-cultural. However it is generally promoted as a source for further growth and development, disclaimers of the phenomenon state that it widens the income gap, creates poverty and even generates violent manifestations. "To its fiercest critics, globalization, the march of international capitalism, is a force of oppression, exploitation and injustice. The rage that drove the terrorists to commit their obscene crime (referring to the terrorist attacks of September 11, 2001) was in part, it is argued, a response to that. At the very least, it is suggested, terrorism thrives on poverty - and international capitalism, the protesters say, thrives on poverty too" (the Economist, 2001) global market is a market where most (or, in some regional cases, all) of the barriers in the way of flows have been eliminated. When referring to flows, we can include here flows of labor force, flows of capitals, flows of information or technology. What this meant in practice was that business became more efficient and better prepared for the market as they were able to be better connected to their resources, to their means of production or to their markets and customers. All of these processes occurred with the ultimate goal of increasing corporate revenues. "Search for global profits has always been the driving force behind this globalization. But the deeper inner logic of this process is capitalization on a world-scale" (Mehmet, 1996)

The same similar thing happened when it comes to the international service and supply chains. Once national and regional, now they turned global, which meant that the different parts and links forming the supply chains or the parts of the international service provided, could be better selected because of a better access to information, a better approach to knowledge and resources and a better perspective to making the most efficient decision when building the supply chain.

The basic scheme of capitalism, very briefly exposed, is that supply and demand meets freely on the market. While producers and suppliers come out with goods and services, demand and supply will help regulate the price for these goods, everything operated under the market forces and free competition. Moved in a global context, capitalism (global capitalism now) will simply imply, besides those discussed in the previous paragraphs, that demand and supply will turn to a global framework, now more adequate for company performance, given the reduced barriers. In this type of global framework we can integrate international service and supply chains.

First of all, international services are provided by those companies that are not specialized in the purely production part and here we can include anything from transport companies to banks, from insurance companies to logistics ones. The importance that they have is to ensure that activities outside the core basis of the producing companies are being outsourced.

On one hand, international service companies will increase the original price of the company, mainly because to the original demand, now one will also need to add the additional charges of the international service companies, acting as intermediaries. However, on the other hand, it is more viable for the original producing companies to outsource, due to a lower opportunity cost.

Again, this type of judgment is functional in a non-transnational economy as well, but in an international context, one tends to have an atomicity of potential international service providers, outsourcing can be extended virtually to no limits and, additionally, the overall costs of the producing company are likely to be much smaller. As shown, this only works in an international capitalist system, where supply and demand work freely on the market, only then is the producer looking for the lowest costs for his company in a global context and only then will he be determined to make the best choices in this sense.

On the other hand, the supply chains also enter the same judgment in an international context. As the mechanism and the composite actors and entities that take a product or service from its producer and deliver it to its final consumer, supply chains exist in the national as in a global framework. The reason and explanation for their existence is similar to the one use in the previous paragraphs when referring to the international service: in a (global) capitalism, competition and the forces of the market drive economic entities towards achieving the best performances for the company they lead.

In following this goal and approach, companies use the free market and the available global opportunities to provide the best solutions for their goals. At lower prices, driven down by the existing competition in the international market, producing companies are able to get their products to their customers at higher efficiency rates, eventually translated into better profitability rates. Again, all available in a global capitalist system, without which the existence of both international service and international supply chains would be redundant.