Realities of Globalization for Companies Capstone Project

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Transportation and Logistics Management

Tanya Combs

"Globalization is the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flow, and more rapid and widespread diffusion of technology" (International Monetary Fund -- quoted by Rushton, et al., 2007)

Globalization's impact on the world economy, in particular on the logistics and transportation management of the economies of the world, has been momentous. World trade has grown at "double the growth of GDP" over the past 15 years or so, and for developing nations, their share in world merchandise trade has skyrocketed by over 31% since 1950 (Rushton, 2007). More trade -- knocking down barriers to economic interaction -- means stronger economic growth, and globalization has stimulated trade; specifically it has helped the freight market enjoy healthy annual growth rates up to 10% annually on an international basis (Rushton, 22). The rapid development in information and communication technology allows must faster "…movement of data and transactions, as well as lower transport costs" for both air and sea freight (Rushton, 22).

Thesis: This paper reviews and critiques the literature that relates to the enormous impacts that globalization has had on the nations of the world. The advances in information technology, the increasing strategies used to remove trade barriers -- and the enormous impact those dynamics have had on the transportation and logistics industries -- will be brought into focus in this research. Aspects reflecting the downside of globalization will be presented in this paper as well.

What Are the Drivers that Propel Globalization?

Importantly, trade has driven the globalization movement, and the increase in trade has facilitated an exchange in "…cultures, politics, goods and services" between nations that previously had no interaction (Rushton, 21). Trade would not have been such a big player in the positive side of globalization without the enablers to trade -- international treaties.

The 1944 GATT treaty (General Agreement on Tariffs and Trade), for example, has been a key impetus to more trade and has resulted in the cost of ocean freight to drop by "over 70% since the 1980s" (Rushton, 22).

In 1995 the World Trade Organization (WTO) superseded GATT, and promoted vigorous trade activity between member nations. The WTO worked to resolve disputes between nations, remove harmful tariffs (taxes on goods being traded), and put together global free trade agreements (Rushton, 22).

The North American Free Trade Agreement (NAFTA) was established between Canada, Mexico, and the United States, and removed many tariffs and fees; this stimulated free trade between those North American neighbors.

And the European Union (EU) was established on November 1, 1993, which formed an economic association of European countries into a "…barrier-free market for products and services," as well as a common currency for transaction consistency (Rushton, 22).

Because of free trade, lower transport costs and faster communication, there have emerged more complex and "lengthy supply chains," Rushton points out on page 23-24. More supply chains bring along with them significantly more transportation in order to keep products moving from marketplace to marketplace. Along with the increased growth of the transportation industry, there is necessarily a growth in the management and logistics fields.

For example, the logistics people need to be able to have a handle on "all inventory," including raw materials, finished goods and "…goods in transit" (Rushton, 24). Are the products flowing to the right place according to the time table previously established between the manufacturer and recipient of goods? This question is a key issue for partners in the global supply chain, and when suppliers know exactly where their inventory is at every moment in the movement of materials, they have a solid grasp on how profitable their transaction will be.

Globalization and Information Technology

Bryant University "Senior Capstone Project" leader Benjamin Lawlor presents the research that shows there are six processes of globalization -- relating to doors globalization has opened up and how it works. Those six are: a) speeding up the movement of "capital, people, goods, images and ideas" worldwide; b) "intensification of the links, modes of interaction and flows" that make the world interconnected; c) the reaching out to -- and stretching out of -- cultural, political, and social economic practices; d) a sense of "interdependency of the global and the local landscape…" (what is done locally now has affects globally); e) values, goods and cultural trends now come from and are shared by many countries around the planet, not just from Europe and the United States; f) "Westernization" is not as powerful as before because people "customize their own ideas" and what's done in the U.S. Or UK isn't as meaningful because ideas and values move back and forth around the world, originating in Asia, South America, and Africa as well -- not just from Western countries (Lawlor, 2007).

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The term "internationalization" is used as an alternative to globalization in the peer-reviewed Journal of Marketing Management. Companies that were launched in the age of the Internet are called "born-global," because they target markets from their very inception and they don't follow the more traditional "sequential process" of internationalism. For firms (small or medium) that are not born-global but are getting into the global marketplace after having been a traditional, local or regional company, they may benefit greatly from the Internet (Matthews, et al. 2012).

The pace of a firm's international growth, once it becomes skilled at using the Internet, is typically must faster. As a players in the global marketplace, a company now has "marketing intensity" in the form of "greater development of international knowledge, which in turn leads to… greater sales and market share" (Matthews, 737). Moreover, in addition to the process of internationalization, the authors point to greater "interactive communication with consumers" which plays an "essential role" in building relationships between buyers and sellers" in the global marketplace (Matthews, 737).

Meanwhile, there is a "correlation" between the skyrocketing growth of the world's population and the "acceleration of technological progress" (Qureshi, 2013). Technological progress allows the world to "support more people' and because the population increases there is an increased "flow of new ideas" which in turn powers the "engine for further technological development," Qureshi explains on page 190.

An example of how information and communication technologies (ICT) impact the global community is found in the story of Mexico and healthcare for its citizens. Many technological advances in the offering of healthcare originated in the "first world" (the U.S., Europe and elsewhere in the "west"). However, countries that were or are in the third world (like Mexico) have taken that information -- through the use of ICT -- and today Mexico has "universal health care" (Qureshi, 190). Ironically, the United States still doesn't have universal healthcare even though through ICT a third world country like Mexico does have it. This is a perfect example of how information technology delivers important ideas and strategies for better living to globally remote countries.

Other examples of the tremendously positive impact that information technologies have had on commerce and transportation are presented in Rushton's book, International Logistics and Supply Chain Outsourcing: From Local to Global. First it should be noted that there are still developing countries that are not fully up to speed when it comes to ICT access, and several organizations have taken steps to remedy that lack of ICT access. The WTO and the International Telecommunications Union have employed strategies to being new and economically helpful technologies to developing countries in Africa, Asia, and elsewhere, Rushton explains.

The advent of e-commerce -- another feature of ICT -- has opened up new opportunities for marketing goods, and this allows "business-to-business" (B2B) transactions. These transactions have had a powerful impact on the buying and selling of goods globally (Rushton, 28).

Globalization Transportation and Logistics Management

Because of globalization, logistics providers face situations that are much different from what they face years ago, according to the peer-reviewed journal Economics and Management. The supply chains, for one thing, have become "longer and more complex"; and for another, the competition has become more intense because "barriers to trade have been gradually reduced" (Cepinskis, et al., 2010).

The important consequences resulting from the trends toward globalization within the global logistics systems include the following: a) global logistics is generally considered "one of the driving forces of economic growth and social development"; b) transportation is "central" to logistics, and it operates as "an enabling mechanism"; c) the services that freight transport offers have become "more critical"; d) accommodating new technologies, markets and organizational structures "requires change"; and e) because there has been a need for "greater efficiencies" this has made it more urgent for the development of "more seamless" markets to minimize delays in freight movements because routes are rarely hindered by "national or modal boundaries" (Cepinskis, 48).

Managers in the field of logistics must understand the "motivation of global logistics decisions," because global market logistics rely very heavily on the "performance of infrastructure owned and operated by the public sector" (Cepinskis, 48). Knowing….....

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