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THE POLYMER BOOKSHOP®
CD-Books & CD-Articles on Polymer Science, Technology & Marketing |
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The Polymer Bookshop Books & Articles on CD-R | CD-Articles & CD-Books | Companies' news | PU applications |
| Two articles in this section: |
| 1-Globalisation and International investment |
| 2-Globalisation, its worrying aspect |
| 1-Globalisation and International investment |
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Globalisation is a business strategy which has made
fans as well as foes. To its fans, it has a dynamic meaning, closely associated to the spread of industrial development, entrepreneurial opportunity, wealth and social prosperity. Its foes relate it to the tarnished concept of neo-colonialism. In this article, we expose a concise description of the strategies business people and companies may follow to penetrate international markets. In this context globalisation is related to developing international markets with the aim of investing in such markets. The new products are solely absorbed by the new markets. We begin with the assumption that a company is a source of a new product, at least new to the market it eyes for or, an original service, and, it aims at expanding its business activities in countries other than the one where it already possesses production lines. |
| This topic will be the subject of a new CD-Book. For information please contact GEM-Chem. |
| 2-Globalisation, its worrying aspect |
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In the previous article globalisation has been
associated to business cooperation, international investment and, the development of
national industries and economies.
However, there is also a rusty and disturbing side to the coin. The bright aspect of globalisation is tarnished when it becomes synonymous to outsourcing. A very simple example is that of a company, operating in a developed country. This company produces a product requiring a component Z in its final assembly. The manufacture of this component is subcontracted at OEM's spread all over the country. Some subcontractors receive a larger share of orders than others but still, all run their businesses successfully and, have employees on their payrolls. The possibility exists that the subcontractors buy minor consituents of Z from other manufacturers. It won't be unusual either, if every manufacturer squeezed the price of his supplier for his own benefit. This picture of the manufacturing, negotiating, selling and buying loop is an important pillar of the country's economy and a major component of the welfare of a section of its population. However, suppose, it is decided, by the company's management, that the final product can be manufactured in a less costly way and, therefore generate a better profit margin when component Z is imported from manufacturers based in a country where the working force receives a fraction of the salaries of the local employees and, where the state, expects a minimum of social contributions, taxes and insurances from its citizens and industries. If this strategy is satisfied, the immediate consequence is that the OEM's, producers of component Z, will come across financial problems unless they diversify their business activities. The most extreme and eventually, dramatic consequence, is that some of the OEM's stop their activities, shut down their facilities and lay off their employees. Even if a minority of the OEM's were to go banckrupt, would also be a disaster to several people and to many families. Such events, would result in a reduction of the purchasing power of a corresponding section of the population, among them perhaps buyers of items including component Z, which by now is subcontracted in a country with a cheaper workforce. An extreme case, would be the transfer of the whole manufacture of the product abroad. In other words the product with all its components, will be made in a developing country, with its country of origin, becoming a net importer. It is obvious that the above example can also reflect the situation in a division of a multinational, which, for the sake of enhancing its profits decides to transfer the manufacturing facilities of one of its products to a "cheap" country. |
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Who profits from this aspect of globalisation? The example above, clearly suggests that the winners from the manufacturing or trading shift, from expensive to cheap countries are the profit takers. In this bracket are, of course included, the company's owners, its shareholders, if a stock exchange quoted company is concerned, and, finally, its top executives who will collect the profits at the expense of the workers' and low level employees' jobs and wellbeing. There are also silent winners. It can be easily thought of the workforce in the country where the company has transferred its activities and, perhaps of the consumer who will buy the same product, this time imported, at a lower price. The validity of the latter argument, however cannot, be fully guaranteed, since profit maximisation is the name of the game. This game, when well played is neither illegal, nor is it a new one. Even before its formalisation, in print, by Adam Smith, in the " Wealth of Nations", history, exposes several examples, of social ups and downs, which forced industries to relocate from country to country because of their chase for profitability. Reference can be made to the spinning and weaving industries and the upheavals it subjected northern europe to, in the middle ages. But is it fair to look far in the past, standing on the pedestal provided by an era so advanced as ours, or does history repeat itself, for the sake of profit maximisation. It seems as if history is repeating itself, but at the same time our society has evolved and in its own bumpy way tends to suppress the extremes of the past. We may compare the situation, of the labourers of England's industrial revolution age, so vividly described by Karl Marx in his "Das Kapital", to the low paid and badly treated children labourers and prisoner workers of some far eastern countries. Fortunately, and as a result of our world's social evolution, multinationals subcontracting in third world countries treat their workforce well. They also contribute to the development of such countries. In any event, this argument does not give solace to those who have lost their jobs to low paid employees in cheaper countries. Multinationals are still eager to have their products manufactured by low paid employees to increase their profits even if they have to amortize new investments. Is there a need for a pressure group to stand against profit maximisation when it is the result of greed and disproportionate obsession for profitability, if it can be defined, or is it the role of the democratic system to automatically do so by instituting trade rules, quotas and industrial policies, fairer to companies and to their employees. Trade agreements can still be a viable tool to dissuade, local industries tempted by outsourcing or, threatened from the flux of unfairly cheap imported goods, the added value of which comes, solely, from low paid labour. Unfortunately, such situations are anticipated too late, by governments and political institutions. |
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Is there an end to globalisation? The answer is yes, but it might not be very near. After the second world war, imports to Europe from Japan were the cheapest. Those days are gone. Imports from Japan no longer compete with products made in Europe or the USA on a price basis but, primarily, on quality grounds. Furthermore, Japanese multinationals have their own manufacturing sites, in Germany, the UK, the USA. Japan's development has been supported by protectionist policies backed by a nationalistic consumer mentality. But international trade has contributed, slowly, to the collapse of such trade barriers. Japan was followed by Taiwan, Hong Kong and Korea as sources of cheaply manufactured goods. But their times have also elapsed. Those countries can no longer be considered as potential threats to european and american jobs. The development of their economies has lead to a local cost of living that, very often, exceeds the cost of living of the most expensive european countries. Now the attention of multinationals, industrialists and profit maximisation followers, turns to China, India, Thailand, Vietnam etc. even if cheap countries still exist in Europe. The latter will mature very fast to become attractive in the long term. Sooner or later, the abrupt development era of all those countries will come to age. However, one can still think of Africa, which despite its deep social problems and political unrest has an appreciable potential in order not to escape from the globalisation game. The end game, as far as one can see, will start taking shape when the cost of living and workers' salaries will become even all over the world. In other words when the globe will ressemble a single country and, when products, high and low tech, will compete only on quality grounds. |
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For information and comments, contact Dr Demosthenes Kyriacos, GEM-Chem, E-mail: dk@GEM-Chem.net ; or phone +32-2-7710649 D.Kyriacos has worked at Upjohn, GE and ICI in international TS, Sales and Marketing. He holds a B.Sc.(Distinction, Honours, Univ. award of Chemistry) from Alexandria, a M.Sc.course,(ICI scholarship award) in Polymer Technology and, a Ph.D. from Loughborough (UK) as well as a MBA (excellent, corresp.USA). D. Kyriacos is the founder of DK Business Group and GEM-Chem. |
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GEM-Chem compose and publish CD-books and CD-Articles on Polymer Science, Technology and Marketing. |
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GEM-Chem implement projects on company organisation, return to profitability, international marketing, technology and science. |
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