This chapter will enable you to:
Explain the nature of globalization Assess the pace and extent of globalization
Explain the importance of globalization for organizations and countries Analyse the factors inhibiting globalization
Analyse the factors driving and facilitating globalization
Case Study Globalization and Dell
The globalization process involves the establishment of economic, political, social, and technological links among countries. This case illustrates how one company, Dell, got involved in, and profited from, the process of globalization. It shows: how Dell took advantage of the freeing up of cross-border trade and investment to set up a global supply chain across five continents and to penetrate foreign markets; how it had to adjust its products to different country contexts and how its production methods have been influenced by foreign firms. its machines in its own plants but outsources the supply of many components such as motherboards and CD/DVD drives to other companies and, as a result, is heavily reliant on foreign suppliers like Samsung of South Korea, Infineon of Germany, Foxconn in China, the Dutch firm Phillips, Nokia in Finland, and Sony of Japan. The whole production operation from the design to assembly stage can involve a dozen countries. The Dell Notebook illustrates the complex global nature of Dell’s supply chain. The machine was designed by Dell engineers in Texas and Taiwan and assembled in Malaysia from parts made in China, the Philippines, Germany, Singapore, Costa Rica, Israel, India, Thailand, and Mexico. Dell’s production system aims to minimize the number of components held in stock. It does this by applying principles of lean manufacturing and just-in-time production first employed by Japanese manufacturers such as Toyota.
Dell, based in Texas, is the world’s second largest manufacturer of personal computers and has grown very fast. In the ten years up to 2007, sales increased from US$5 billion to US$57 billion. Profits are around the £3 billion mark. The company sells over 100,000 computers every day, most of them direct to the final customer via the internet.
Dell’s decisions about where to locate are driven by the desire to minimize costs and to extend the build-to-order, direct sales model around the world. Dell has taken advantage of the reduction and removal of barriers to trade and investment to locate in regions and sites that best meet its needs. Given the necessity to have production and support capabilities in the major markets, the company selects specific locations based on a combination of factors including the quality of labour and its cost—the company located in Ireland where labour cost were less than in most other members of the EU—now it is considering locating to one of the new EU member states in Eastern Europe, such as the Czech Republic, where workers are welleducated but much cheaper and less strongly unionized than in other EU countries; the quality of transport and telecommunications infrastructure—its sites in Tennessee are located close to major roads and to a Federal Express distribution centre—the availability, quality, and cost of telecommunications bandwidth are also factors, especially for call centres and data centres; access and proximity to markets—Malaysia is centrally located for markets in the Asia-Pacific region; government incentives— Ireland offered a low corporate tax rate, support in finding land, building facilities, and training employees and per capita ‹
The Global Supply Chain
To manufacture its products, Dell coordinates a global production network that spans the five continents of North and South America, Europe, Asia, and Australasia. Dell assembles most of
CHAPTER ONE GLOBALIZATION
‹ grants for each employee; avoiding barriers such as tariffs...