1. ADVANTAGES OF GLOBALIZATION FOR THE MANUFACTURER
For the manufacturer, globalization can mean the opportunity to benefit from economies of
scale, synergistic benefits, geographical advantages, and the advantages of scale. own market
power.
According to the scale economy theory, the average cost per unit decreases as the quantity
of goods or services provided increases. Expansion abroad and business growth are the main
strengths for achieving economies of scale and achieving significant cost savings for the unit cost
of production, sales system costs (sales, marketing), and supply costs incurred. In this way, the
process of utilizing the results of research and development activity is accelerated, while
innovation is promoted. One could say that new price-cutting opportunities are available, allowing
the company to maintain its competitiveness.
The experience curve can be used to analyze cost reduction. The experience curve shows
that unit costs are decreasing while output is increasing.
The range economy entails lowering unit costs as a result of the sale of a diverse range of
products. The benefits are primarily recorded along the logistic chain. When expanding the product
line, one should avoid the negative phenomenon of lower quality. The use of range advantage
appears particularly in the case of newly conquered markets or when production is diversified,
when the global company leverages its experience in other markets or for other products. These
synergistic effects may also arise as a result of interactions with customers, suppliers, or foreign
technology partners.
The differences caused by the specifics of each region can be profitably exploited by
employing cheaper or better outside factors of production, through production movement abroad,
or through imports, representing a third category of globalization benefits. Market globalization
accounts for strong market positioning. Thus, undertakings may eliminate certain current or
potential competitors through investment or strategic alliances. Large corporations can change
their purchase prices, improve their supply conditions, and even monitor international
technologies.
Globalization benefits multinational corporations, which include the international
production system in their own network. These organizations strive to maximize the opportunities
provided by the existence of certain factors of production that can be advantageously exploited in
the production process. The thesis that globalisation and competitiveness are complementary is
developed on the basis of advantages (Pricop and Tanţău, 2003, p. 23). This is due to the rapidity
with which technological changes occur, given the sharp reduction in product life cycle and new
orientations of leader organizations toward research and development, which is becoming
increasingly important. The new technologies are only the beginning of an innovative process that
will be rapidly disseminated within the multinational corporation and, eventually, around the
world, contributing to increased economic performance in various countries.
In terms of supply, the main tasks are to reduce costs. Several experts believe that the first
link in a profit-making chain would be supply. Organizational competition has resulted in the
technological revolution. The unprecedented advancement of technique and technology laid the
groundwork for a new type of protection, both competitive and fair, taking into account
environmental protection, consumer health and safety. To avoid certain obstacles imposed by
regulatory requirements in some countries, large transnational corporations have had to establish
global standards for environmental protection. These concerns tend to spread to the global
economy, which benefits "environmental health" in particular, as well as development in general.
2. DISADVANTAGES/DRAWBACKS FOR THE MANUFACTURER
A number of risks that may occur should be considered before deciding to launch the
company on the foreign market. A lack of customer preferences in a specific market may result in
an uncompetitive and unappealing offer to them. Organizations must decide on the type of country
on which to focus their attention, taking into account factors such as political stability, external
debt, exchange rate stability, bureaucracy, corruption, customs duties and other tariff and non tariff
barriers, copyright compliance and costs of adapting the material resources to the specific products
of the market concerned.
Political stability is required for attracting foreign investment. One can still feel the negative
effects of the overthrow of certain regimes, which have historically resulted in nationalization
processes and reduced opportunities for transferring profits in the country of origin of the
multinational corporation. A high level of external debt may necessitate changes to the tax and
interest mechanism, which may have a negative impact on flat profits operating in these markets.
Currency fluctuations have also limited commercial activity and corporate investment in foreign
currencies.
Bureaucracy can be a barrier to global corporations through regulations pertaining to foreign
capital investment, such as ownership of a firm's share capital participation by a local partner, an
important representation of local managers to its management, the need for a transfer of technology
and know-how, and imposing a quota of processing components locally to replace their imports.
Corruption is a phenomenon that has a negative impact on the growth of global corporations.
Frequently, representatives of the State Administration request funds for specific services. To
promote business, removing tariff and non-tariff barriers is a priority of the European integration
process. Customs duties are still used to protect domestic industry, which creates real barriers to
multinational corporation expansion. Customs import licenses or certificates that limit or delay
business development fall into the category of non-tariff barriers.
Industrial piracy is a widespread phenomenon that is especially harmful to companies that
invest heavily in research and development. Global corporations must ensure that their products
are not easily imitated and then promoted by low-cost advertising.
Another factor that should not be overlooked is adapting its resources to foreign market conditions.
Certain preferences differ from those encountered in the multinational corporation's home country,
and ignoring them can have a negative impact on the financial plan and image issues.
The biggest disadvantages of operating globally are as follows:
Operating in different markets in terms of consumer behaviour, traditions, their
expectations and attitude;
Operating globally may bring a strong competition; in each market the global companies
face both the global competitors (with the same financial strength and size) and the local
competitors, enjoying the advantages provided by the legal rules of the country concerned, the
loyalty of some nationalists consumers and the deep insight into the local psychology
respectively;
Higher expectations from the public: thus, global corporations need to show an interest in
environmental protection, human rights, country regulations, a.s.o. Every mistake turns into a
huge scandal, well publicized, followed by boycotts, events and protest marches against them,
which causes damage to corporate image and leads to sales decrease;
Managing a corporation of millions of dollars and dozens of branches across the globe
can be difficult in terms of central management; each error management costing millions of
dollars.
Reduced flexibility compared to smaller firms.