The Effects of Globalization on Business Processes – SWOT

Introduction 

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Globalization has a drastic effect on the approach to business process within an organization that is competing in the domestic as well as global market stage as argued by Philip Kotler and Kevin Lane Keller (2005). This is naturally because of the fact that the microeconomic factors influencing the overall business process in an organization has a macro impact due to the impact of globalization as argued by Gerry Johnson and Kevan Scholes (2003). This makes it clear that the management decision-making at the strategic level as well as operational level play a critical role in the overall effectiveness of the organization’s performance in the global arena of the chosen business sector.

This is further justified in the arguments of Richard Lynch (2003) who argues that the efficiency of managers and the management decision-making is the key for an effective performance and sustainable competitive advantage achieved by an organization. In this essay a critical analysis on the need for proactive approach by managers to address global competition is presented to the reader.

The essay commences with the SWOT analysis of the global business environment for a given organization capturing the key elements that are common industry wide. This is followed by the analysis on the role played by the managers in addressing the highlights of the SWOT analysis (proactive or reactive) with examples from different business sectors is presented by the author. 

Globalization 

SWOT Analysis 

SWOT analysis presents the strengths, weaknesses, opportunities and threats faced by an organization in the given industry as argued by Gerry Johnson and Kevan Scholes (2003). Since this essay is focused upon the globalisation and its impact on an organization, the SWOT analysis presents the key factors that are common to global business market that are critical to decision-making for a manager in an organization. 

Strengths

  • Supply chain integration
  • Cost Savings through outsourcing
  • Increasing profit margin through importing finished products for retail from Far East

Weaknesses

  • Communication gap and cultural differences between parties involved that are geographically separated
  • Business Continuity Requirements
  • Human resource related issues

Opportunities

  • New markets to compete
  • Potential for combined deployment of development strategies in the global arena
  • Efficient market segmentation and product innovation

Threats

  • New entrants from Far East
  • Lower profit margin with price-based competition
  • CRM and outsourcing

The aforementioned key points are analysed in the light of managers’ proactive or reactive approach to decision-making and the net result on organizational benefits in the next section. 

Managers’ decision-making: Proactive or Reactive? 

Gerry Johnson and Kevan Scholes (2003) argue that managers play a vital role in the strategic decision-making for the efficient business process within an organization both at the strategic level as well as at the operational level on a day-to-day basis. At the operational level, the manager plays the key role on deciding the resource allocation requirements against the demand whilst the strategic decision-making is more towards proactively driving the organization’s core business process to delivery excellence. This is further justified by Richard Lynch (2003). 

The key advantage of proactive management and decision-making by mangers in case of the supply chain integration is the ability to deploy the pull strategy thus enabling the demand-based production in the organization as argued by Jacqueline McLean (2006). The ability of the manager to decide the level of production and enable proactive operational decision-making will thus enable the organization to effectively manage its fixed costs overhead by reducing the expenditure on raw materials procurement and storage as argued by Malcolm J. Saunders (1997).

Alongside, the effective supply chain integration will not only enable reduction in fixed cost overhead but also provide the management to ensure that the overall business process adheres to a lean management strategy where its can effectively respond to a sudden fluctuation in the market demand. 

Outsourcing is argued as a key advantage in the cost savings strategy of an organization as argued by Jacqueline McLean (2006). This is because of fact that the costs associated with the production and management at Far East as well as the operation costs are lower compared to those in the west. The increase in the outsourcing of the call centres to India since the dawn of the twenty-first century is a classical example for the aforementioned (Jane Griffiths (Ed), 2006).

Another example for outsourcing is the production of the fashion goods for retail in the West outsourced by leading brands including NEXT, Marks and Spencer, etc., to China which is predominantly focused upon the reduction of the production costs whilst ensuring quality and delivery assurance (Philippa Drewer (Ed), 2006). 

In the aforementioned scenarios, the role of the manager and proactive decision-making is to identify the potential for outsourcing a specific business process or manufacturing segment within the organization to another country not only as an early starter but also ensuring the quality and service level agreements are met as argued by Jacqueline Mc Lean (2006). This approach is also treated as the best practise for the efficient management of the manufacturing outsourcing to the Far East whilst the reactive approach to outsourcing where the manager’s decision to outsource will be in response to costs and pricing demands, the performance is deemed to be poor as the supplier bargaining power eventually increasing the costs as argued by Jacqueline McLean (2006). 

Another interesting element with the importing of the finished products from the Far East rather than outsourcing the production is the fact that the organization does not have the operating overhead at all thus making it clear it can increase its profit margin considerably as argued by Roger J. Calantone et al (2004). In this case also, the proactive decision-making to address the market demands ensuring that the overall business process is not affected with the re-engineering strategy is the key for a successful implementation within an organization to address the competition in the global arena.

Gerry Johnson and Kevan Scholes (2003) further argue that the proactive decision-making is not only to envisage the future trends in a market but to ensure that the organization is resilient to changes thus ensuring the ability to address fluctuations demand and change in customer interests. 

Addressing the weakness, it is clear that the proactive decision-making and management by the managers play a vital role in the mitigation of communication gap between the organization’s production/operations centres located in different geographical locations as argued by Roger J. Calantone et al (2004). Derek Torrington and Laura Hall (2003) further argue that the efficiency of the organization to perform effectively in a given target market depends upon the ability of the manager to bridge the communication gap between geographically separated entities of the same organization or collaborating outsourced organization in the manufacturing process.

Besides the communication effectiveness is the key element for the efficient production management and supply chain integration in the global arena. Thus the role of the manger to proactively identify the key areas of communications gap will help ensure the performance effectiveness of the organization. 

The business continuity requirements especially in case of geographically dispersed organization form a critical element for business process with minimal outage as argued by James C. Barnes (2004). From a strategic perspective, the business continuity management strive of an organization must ensure that its resilience backup is installed and tested at regular intervals of time as argued by G.A.

Zsidisin et al (2005). From the aforementioned it is clear that the role of the manager is to ensure that the business continuity infrastructure installed at the geographical locations are tested for resilience using pseudo business continuity tests individually and in a combined fashion. This approach will encourage the key staff members involved to get accustomed to the business continuity strategies of the organization thus eliminating surprises and weak response in case of a real business continuity requirement. Besides, it is interesting to note that the flexibility of an organization in the global market is the key for an organization’s ability to enter new markets and deploy its development strategies. This is further justified by G.A.

Zsidisin et al (2005) who argue that the supply chain integration and the efficient management of the production to meet the demands in the international market is a critical success factor for an organization. 

New markets for an organization competing in the global business market are infinite in nature as argued by Frances Brassington and Stephen Pettit (2003). This makes it clear that the strategic decision-making on the market choice and the strategy to enter the market requires vital contribution from the managers both at the strategic and operational levels. This is evident from the fact that the efficiency of an organization in establishing itself as a strong entity in new market segments depends upon the time, competition and demand factors associated with the market as argued by Philip Kotler and Kevin Lane Keller (2005). 

The failure of coca cola in promoting 3G in the UK drinks market as a Sprite-branded Energy drink (Mark Choueke, 2006) is a classical example where the proactive decision-making on the demands off the market and the brand image held by the customers to increase the sales in the target market. Alongside, the success of the Hilton Garden Hill Range of Hotels in the economy range of hotels in the global leisure market compared to that of Marriott group’s Courtyard Marriott (Caroline Kimber, 2001) further justifies the proactive response required from the managers to gain sustainable competitive advantage. 

The development strategies in the global market is the main opportunity for an organization to increase its market share through combined deployment or individually deploying product and market development strategies as argued by Gerry Johnson and Kevan Scholes (2003). This is because of the fact that through identifying whether the market segment lies within the existing target market group or the product promoted is an item on demand in the new market is the key for choosing a development strategy. Besides, in a global market, the ability of an organization utilize more than on strategy simultaneously requires the proactive approach from the managers to gain sustainable competitive advantage.

This is further justified in the arguments of Roger J. Calantone et al (2004) where it is clear that the service relationship and the identification of the development strategy for an organization in a given target market requires the proactive approach to managerial decision-making. Product innovation is argued as a critical element in the business development within an organization as argued by Frances Brassington and Stephen Pettit (2003). 

The fact that the product innovation is driven by market demand and the ability of an organization to give form to a specific demand in the identified target market makes it clear the effectiveness of managerial decision-making is critical. The key point of interest in this case is the ability of an organization to identify demands where the management involving marketing, product design and production managers act as a team to derive on a new product range as argued by Roger J. Calantone et al (2004).

It is thus evident that the proactive approach by the managers is the key for successful implementation of the product innovation. This is because product innovation as a reaction in a given target market is actually the response to a product introduced by another competitor thus second-lining the product in the target market loosing the early starter advantage as argued by Frances Brassington and Stephen Pettit (2003). 

The key threats identified in section 2 justify that management effectiveness is necessary to not only address the organizational elements but also the key external elements that affect organizational performance in the global market as argued by Gerry Johnson and Kevan Scholes (2003). The case of new entrants from the Far East is treated as a threat mainly because of the increasing entry of sellers from Far East into the clothing market through online retailing and whole sale marketing to retail stockists in the western markets as argued by Jane Griffiths (2006). 

The key requirement for the manager in the aforementioned situation is to ensure that the organization does not loose its profit margin through efficient pricing and to ensure the company positions itself as competitive brand both in quality and price within a given target market. Alongside, the new entrant threat from the Far East poses the threat of loosing market share in the global market because of the increasing dependence on the import of goods from the Far East by western conglomerates that are sold with an added profit to its target markets in the west. This profit margin is narrowed drastically because of the relatively lower pricing from the new entrant from Far East.

Therefore, a proactive approach from the managers is essential to ensure that the competition posed by new entrants from the Far East is mitigated effectively. 

The price-based competition in the global market is one of the key areas where proactive decision-making from the manger is critical for achieving competitive advantage in the target market. This is justified by Gerry Johnson and Kevan Scholes (2003) because pricing is an area where the quality and corporate identity along with the brand image is communicated to the customers in the target market. Hence through strategically positioning the company’s brand in the given target market, the price-based competition can be mitigated to a greater extent since the customer loyalty to a given brand can be utilised for sustaining the market share.

The major threat with outsourcing the service related activities of the business to Far East is the poor service quality that has a direct impact on the customer relationship strategies of an organization in the global arena. 

The role of a manger is to constantly track the service performance and identify key areas of improvement which can be used for strengthening the customer relationship with the customers. It is evident that the management decision-making in proactively tracking the performance of an outsourced call centre and its impact on the customer loyalty can increase the service efficiency of the company. This will eventually forge strong customer relationship with the customers thus ensuring sustainable competitive advantage in the target market.

Hence, to conclude the essay it is clear that the proactive approach to management and management decision-making by managers is the key for an organization’s success in the global market. This is applicable across all levels of management within an organization. 

References 

  1. Caroline Kimber (2001), Strategic integration of customers and channels, Journal of Financial Services Marketing, Jun2001, Vol. 5 Issue 4
  2.  Derek Torrington and Laura Hall (2003), Personnel Management – HRM in Action, 
  3. FT Prentice Hall G.A. Zsidisin et al (2005), An institutional theory perspective of business continuity planning for purchasing and supply management, 
  4. International Journal of Production Research, 8/15/2005, Vol. 43 Issue 16 
  5. Gerry Johnson and Kevan Scholes (2003), Exploring Corporate Strategy – Texts and Cases, 
  6. Prentice Hall Jacqueline McLean (2006), Big Opportunities Begin with Small Steps, British Journal of Administrative Management, Feb/Mar2006 Issue 51 
  7. James C. Barnes (2004), AA guide to Business Continuity Planning, 
  8. John Wiley and Sons Jane Griffiths (Ed), (2006), Call Centres – Market Assessment 2006, 
  9. Key Note Ltd Malcolm J. Saunders (1997), Strategic Purchasing and Supply Chain Management, 
  10. FT – Prentice Hall Mark Choueke (2006), Coke plans 3G cuts to boost Relentless, Marketing Week, Vol. 29 Issue 47 
  11. Philip Kotler and Kevin Lane Keller (2005), Marketing Management – 12th Edition, 
  12. Prentice Hall Philippa Drewer (Ed), (2006), Clothing Manufacturing- Market Report 2006, Keynote Ltd Richard Lynch (2003), Corporate Strategy, 
  13. FT: Prentice Hall Roger J. Calantone et al (2004), Internationalization and the Dynamics of Product Adaptation—An Empirical Investigation, 
  14. Journal of Product Innovation Management, May2004, Vol. 21 Issue 3

 

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The effects of globalization on business processes - SWOT. (2017, Jun 26). Retrieved January 29, 2022 , from
https://studydriver.com/the-effects-of-globalization-on-business-processes-swot/

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