Most Efficient Resource
A definition that can be given for the term “Globalization” is demand seeking the most efficient resource anywhere in the world. The implication of the use of the adjective “efficient” is that it is not all about the lowest $$ purchase price.
Granted there may be advantages to be gained from the labor arbitrage, however, the greater gains are achieved through the careful selection of global partners that enable the business to gain;
• Shorter time to market for new products,
• Higher productivity/ efficiency (e.g. 24/7 service),
• Consistent high quality,
• More efficient utilization of capital.
Early in this century the business strategy was vertical integration. This gave rise to such examples as the Ford River Rouge facility outside of Detroit, Michigan. This giant facility took in raw material (iron ore, coal, etc.) and processed them into finished automobiles.
Later in the century, the shift was to “contract engineering/ manufacturing”. The shifting of work to third party businesses that specialize in specific types of engineering and/or manufacturing disciplines. An example is the early IBM personal computer. All of the sub-assemblies from printed circuit boards, to enclosure fabrication, to software operating system were performed by others. Design engineering, final integration and test were performed by IBM.
Globalization is an extension of that shift with the added implication of establishing partnerships or alliances. Instead of the traditional “arms length” relationships, strategic alliances which share core capabilities will achieve greater competitiveness. These alliances, which leverage global talent, will be able to transform their businesses and the markets they serve.
Summary: In today’s rapidly evolving markets, it is no longer possible for a business to do it all successfully. Expanding the strategic thinking to in compass global partners with complementary core capabilities, offers the ability to offer the customer superior price, performance, and time to market.