Strategic Impact on Globalization Is a Process

Strategic Impact on Globalization

Globalization is a process that brought in changes in all walks of human existence the world over. The liberalization has created a global community and brought in the IT revolution and new forms of services like outsourcing. The changes in the world outlook and technology changes have changed the way business and international trade is done and has thus revolutionized the strategies and corporate behavior. It has ushered in new laws and environment concerns. The global community now is a different being and individual countries have now merged -- for example the European Union and many countries have now been fragmented -- as the former USSR. These have had a lot of impact in the process of globalization and some international events have been the results of globalization. Has any strategy impacted globalization? And what strategies have come to be created after the globalization and how globalization affect management strategies is worth considering.

Global Problems and Strategies:

As far as the United States is concerned, the globalization issue that began with the free trade concept did bring benefit and also controversies. The process that was initiated in the 1970s came to be a reality in the 1990s. However from 1973, the globalization process has altered the U.S. economy. The experts have blamed globalization for the stagnation, fall in wages, downsizing and other ills. The fact that there has been a mass exodus of U.S. firms either by outsourcing or by investing capital in developing economies, has created changes in the domestic labor standards. There is no doubt that globalization caused some job loss, that pertained to the unskilled labor-intensive industries. These industries were replaced either by imports or by overseas investments where labor was cheap, or by outsourcing work especially back offices to the developing nations. However it is argued that employment opportunities on the other hand grew in the service sector at a higher wage level with a lot of new IT related jobs and also jobs in the expanding export market and industries. (Zupnick, 1999)

While these are reassuring, the true power of growth is measured in terms of a nation's income. Thus economic power is seen in the growth of GDP and global presence and military might. One of the true causes of the speeding up of globalization was the political and the economic strategies that were followed. The collapse of the U.S.S.R. especially beginning with the presidency of Gorbochev with the Peristroika and the Glasnost paved way for a global unity never seen before and the Soviet Union collapsed. (Shimko, 2008)

This paved way for a greater say for America and the European Union became a possibility. The subsequent unification of Germany and the creation of European Union did not dent the leader position of America because these nations did not rise as predicted after the unification. European leaders have to now consider the European interests and their national interests and the new Union's economic and monetary integration has not yet been achieved. Globalization has changed the political and social equations that require different strategies now. For example globalization caused the third world countries to open their markets thus opening markets with billions of consumers for the U.S. products and in reverse bringing out the best competitors not only in other countries but to the U.S. economy itself. Now China is predicted to become a global power by 2050 and there will be a polarization of the world. There would be triple set of polarization, of the U.S. And the west, China and weaker India being the three big countries that would matter in the world. India is perceived to be weak in the triangle. (Virmani, 2006)

India is also starting in the same path in emerging as a great economy power with emerging expertise in commuting and electronics. India suffers some defects like a very inefficient bureaucracy and a very poor infrastructure and the growth may not match China which is growing faster. (Frankel, 2006) Thus the controlled development as in Indian and Chinese economy can make them grow but there would be still a lot of interdependence in the world. In future with the growth of Asian nations the American markets may find that it has to adjust and produce commodities that are demanded by these emerging economies. (Hiemstra, 2006) The strategy in approach to these nations, their rising power and global reach require strategies from governments, corporate enterprise and individual decision makers to plan policies and strategies.

Impact on the Global Front:

One of the important strategies that have come up in the purchase and supply chain management is the concept of environment -- pollution and hazard. Globalization has brought the problem of both producing and purchasing products that have been certified green. Thus there is on one hand the firm's necessity to institute measures designed to maintain high levels of environmental protection. The changes came about in the patterns of investment and the market liberalization which resulted in increased consumption and production and therefore much lowered environmental quality. Sound environmental policies have on one hand perceived to be the method of maximizing the benefits of free markets. Environmental policies usually enhance trade. (Organisation for Economic Co-operation and Development, 1998)

Concern for the environment thus has become a major strategy in supply and purchase and also has become the mainstay of globalization processes. Green Purchasing and the principle of Environmentally Preferable Purchasing -- EPP, is based on the purchase and supply of products and services that have very negligible negative environmental impacts not only in the processes but also even in transportation and in recycling or as waste. Green purchasing is now a part of corporate practice. It began in Germany with a green public procurement activity in followed by other countries like France, Denmark, UK, Sweden and Japan. This strategy seems to have given the Multinationals an edge in the global field and thus companies like Nokia, Sony, Ford, TRW, Motorola, IBM, Sun Microsystems, all have adopted this strategy that has had impact on their international suppliers, where the suppliers had to invest more capital to upgrade manufacturing to meet the green standard. (Shah, n. d.)

Environmental issues and the issues of trade with low-wage countries have been the stalemate between the developed and developing countries. Globalization brought in the fears that the dependence for services and manufacture with lesser competitiveness will bring down the high standards to be compromised to accommodate the developing country. Globalization strategies for firms it was feared would see the firms in the developed nation to developing countries because of the lower costs and less concern over the environmental standards. (Organisation for Economic Co-operation and Development, 1998)

Thus the major outcome of globalization has been the green purchasing strategies and higher product standards. The general strategy that firms follow is to purchase only products that are certified to have originated -- and/or are environmentally friendly -- like being non-toxic or being recyclable. The mandatory requirement to disclose the nature and the attributes of the supply -- based on the eco-labeling process and in service industry has metamorphosed into higher behavior standards. This has resulted in a number of practices including audits and product stewardship. There has also been the evolution of the ISO 14001 and the EMAS standard have brought in compulsory complaisance procedures which originated strategies for the global competition but is now the basis of international commerce. (Shah, n. d.)

These percepts created primarily changes in the way the various nations reacted to the requirements. Economic considerations have been the major issue. The other issues to globalization made European Union -- EU from 1995 cause an economic partnership with the countries abutting the Union based on the political security, finance, and taxation. This led to the creation of free trade area -- FTA in 2010, which set in motion the process of liberalization. Some sectors have suffered on account of the global changes the world over and many sectors have been reorganized. For example in the EU the agricultural sector has been hit by liberalization on account of disparities between the EU scale and the Mediterranean Partner countries. (Pietrobelli, Sverrisson, 2003)

The strategies that created globalization and the post liberalization economic integration of some countries and the disintegration of others have created a basis of security and social development. This also has its negative side especially in the manufacturing sector. Strategies by the companies which were global and which wanted to expand also gave rise to the modern methods of production and distribution. Thus the corporate bodies have been responsible for the changes in the global community. One of the examples we could use would be where an automobile manufacturer increases the sale as a part of the growth strategy without first increasing or at least making provision to increase the service potential of the company's garages. In this case, for each car sold (success of the strategy) there will be a problem created and overload at the maintenance side of the company (constraint). (Drejer, 2002)

Thus it is important to evolve strategy that not only is based on the variables needed to make it successful in achieving the objectives for which it is designed, but also must be designed with the thorough knowledge and strengths of the institution. The strategy that evolves must always be based on a much unbiased knowledge of the competence of the units involved in executing the strategy. Drejer (2002) calls this as 'Competence-Based Strategy.' This, according to him must be a separate decision that ought to be taken after the base strategy has been worked out as a separate variable that could indicate the soundness of the strategy. Competency measures not only encompass the competencies of the firm in terms of a competitive advantage but also in terms of the challenges that it will have to overcome and a clear assessment of the capabilities of persons or units involved in implementing the strategy. The market competency and the inner capacity are the key elements in this type of analysis. (Drejer, 2002)

The important thing is that the company was able to keep pace with the changes in the technology which has left many others behind. The advancement in technology and information processing has created new types of competitive strategies to seek out competitive advantage. These factors have brought in corporate changes and management.

Corporate Changes:

Strategy is a part of any venture and even primarily of existence. It is a means of survival for any living being and in the case of corporations it is a part and parcel of the completion. Every corporate entity or business must have a well designed objective of their business. The objective or goal forms the basis of the corporate feeling about goals and strategies. The interactions of factors responsible for the concepts going one way or other resulting in the choice of a particular strategy could be a result of reactions of individuals making the selection according to their nature and propensity, and this provides a minimum choice and adaptation, and therefore not suitable to be considered in the light of corporate strategy. The strategic choice of which we are now concerned has a much bigger meaning and process. Organizational strategy as is defined by Klein (1998) is the summary of the principal characteristics and interrelationship of an organization. It includes the method of informing decisions and the strategy analysis that goes into the taking of informed decisions. This must not be confused with habits that are formed in the routine course of work, and usually such habits get termed as strategies. (Klein, 1998)

Corporate changes have been amazing. One effect of globalizing and strategy change is the rise of new firms and small industries especially in the services sector. The de novo and the small firms have a great advantage over the giants because they can at low costs begin incubating radical innovations, but the large firms are slow at competency-enhancing improvements with the smaller firms having the advantage of mobility and easy creation of products and services, along with faster product of the decision making ability of the smaller firms have brought them into focus in the globalized markets where they are more effective. (Teece, 2002)

The global economy has thus created a firm level of competitive advantage, bringing in new methods of functions of management. There have been changes in finance with multinational finance and the deregulation of international financial flows has made the smaller supplier have competitive differentiation better wealth creation. There are now new goods -- around which strategies have to be deployed both by the corporate as well as national entitles. These new types of value creation are mostly as intangible assets. The modern day assets include knowledge and knowledge management strategies, along with intellectual property. The concept of assets has undergone changes with brands, and customer relationships being considered as assets. (Teece, 2002)

The economic boom that resulted in the changed status of the consumer along with the growth in technology brought about the changes we see in the economy today. The modern economy is highly customer oriented and retaining customer loyalty has become important. Hayes (1993) shows that the economic boom showed that customers were becoming more transaction oriented and were not keen on relationships. The shifting paradigm was different with the way banking was done. There was a shift in operational strategy with the commercial and investment banks. The investment banks served customers based on the volume of transactions done and thus a good relation was where there was sizeable transaction done by the client with the bank. There is a large difference between what the customer expects in a relationship and what the bankers especially the investment banker perceives is the model. (Hayes, 1993)

The changes with globalization have changed the customer and purchasers alike and in the case of a service sector the customer has changed in terms of expectations and this calls for a change in strategy. From the view of the customer needs, the services are evaluated in the light of usefulness and the meaningful way the interaction with the bank occurs. The change in technology has caused corporate to change their operational strategy and thus today technology plays a vital role in customer relations because a failure in communication and the customer causes the customer to leave. (Peel; Gancarz, 2002)

Thus technology and the growth of many avenues of service, is based on the changes that the world witnessed after the advent of the internet. The internet helped companies go global and have better customer relation and service. There are thus issues that need be addressed not only from the operational view point, that is the CRM in the shape of models like strategic, operational analytical or collaborative models but also in a better context that also include the customers. There must be something beyond these models that could be used into the banks system to benefit customer. (Buttle, 2008)

That globalization changed the strategy and strategies are based on technology and internet today cannot be denied. Under these changed circumstances the organizations themselves have undergone vast changes with online entities, brick and mortar companies and many companies providing services electronically rather than in person. Banks have switched to this mode and hence types of the organization also have a deep impact on strategies.

Strategies and Management:

Again we have to examine the type of organization. Is the organization sound and does it have the proper attitude and the functionality for strategic thought? An important step in strategic thinking is based on the attributes of the organization especially those that are in the line for change or redefinition. A strategy thus can be formed only considering those internal aspects of the company that have to be transformed if the specific strategy is implemented. Unfortunately it is not that simple. Strategic analysis will be simple if we could just identify two variables, one the problem to be solved, and second is it solvable at all. In considering the former we have to take into consideration controls, restraints, laws, and so on. This is more complicated than it appears because some of these variables are not amenable to prediction and we cannot be sure of the outcome. That being the case, Klein (1998) talks of a heuristic frame in which with related variables it could be possible to formulate a strategy for a single problem. (Klein, 1998)

Strategic decisions will thus relate to the whole business rather than its components. The divisions of companies may need to create specific strategies for the divisions and in this case each division could be considered as a unit of the strategy. Strategic decisions are based on a SWOT analysis and the outstanding feature of the decision is that they have to be unique. The objectives of the organization play a key role in determining strategy. The objectives themselves are a result of the strategic planning for the company. Ultimately the strategic thinking boils down to the rule that a strategic decision must achieve the requirement of allocating scarce resources to various departments of the company in such a way that the objectives are attained, and there is benefit to the company from their interaction. (Luffman; Lea; Kenny; Sanderson, 1996)