Essay Paper on Effects of Globalization on Business
by Henry Warren
The article focuses on IBM and the increasing challenge that the decrease in its US labor force begins to pose. Since 2008 IBM stopped disclosing its US labor force. This, plus the fact that since 2003 there has been a downward trend in US employment and an upward trend in overseas employment, makes it clear that IBM has been no stranger to the impact of globalization (Lohr, 2012, January 1). Competition from Indian software companies and the benefits that outsourcing provides has undoubtedly conditioned IBM into hiring overseas instead of domestically. Upon reading this article it becomes clear that it touches on the concept of outsourcing, and naturally, globalization, which is a complex flow of trade and investment that links economies all over the world (Friedman, 2005, pp. 9).
First of all, it is important to know exactly what is understood by outsourcing. It consists on subcontracting the services of another company in order for it to take over a specific service (Lodestar Advisory Services, n.d., p. 3). Outsourcing is becoming a fundamental practice for major companies all over the world, and IBM is no stranger to this reality. It seems clear that in the past decade the company has shifted its business strategy in order to cope with the pressing demands imposed by globalization. Globalization has increased competition because it has decreased transaction costs, making products and services cheaper than ever. As globalization moves forward more is required from IBM in terms of staying ahead of its competitors, most of which are located in Asia (more specifically India). Today the company is well prepared and it has realized the great opportunity that has come by the hand of the internet (in the context of globalization, of course) (Clabby Analytics, 2008).
Today, people can make million dollar investments through a computer without actually seeing who, or what, they are investing their money in. Evidently then, with the development of the internet, a great sea of opportunity sprung for companies all over the world. Because of the internet, it is now possible to exploit the human capital in different parts of the world without having to pay as much (why? because it was possible to find qualified, and cheap, labor in different countries around the globe) (Fischer, n.d., p. 6). IBM is a frontrunner in the computer industry, and as such, it is well acquainted with the Internet and its virtues. And the truth of the matter is that it has used it to its advantage by restructuring its labor force and moving most of its production to India.
Fischer, S. (n.d.). Globalization and its challenges. Retrieved from http://www.iie.com/fischer/pdf/fischer011903.pdf
Friedman, M. (2005). The world is flat. United States: Farrar, Straus & Giroux.
Lodestar Advisory Services. (n.d.). “Outsourcing: What is it and what are the options?” Retrieved from http://www-935.ibm.com/services/au/igs/pdf/x33726_ibmgts_outsourcingwhitepaper_v2singles.pdf
Lohr, S. (2012, January 1). “Unboxed extra: I.B.M. and America’s Job Challenge.” Retrieved from http://bits.blogs.nytimes.com/2012/01/01/unboxed-extra-ibm-and-americas-job-challenge/
Clabby Analytics. (2008). “The globalization of IBM: IBM’s analyst insights 08 conference in Bucharest, Romania”. Retrieved from http://www.clabbyanalytics.com/uploads/IBM_Conference_–_Bucharest.pdf
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