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Globalization and Information Technology on the Computer Industry

Abstract

The benefits of the effects of globalization have been tremendous over the last thirty years. The emergence of new technologies has brought about efficiency in the research process, production and the distribution of goods and services. Globalization has reduced the cost of communication and interactions between businesses have been made possible. This paper will look into the effects of globalisation in relation to the motor vehicle industry in Japan.  Central to the focus of this paper are the changes that have taken place in the automobile industry in Japan and their underlying causes.  Focus will also be given to how information communication technology has contributed to the restructuring of automobile industry in Japan, and how the industry has over the years responded to globalisation to reach the current position of leadership in the auto industry, bringing immense benefits to society through innovation of quality and affordable automobiles. The paper will address the challenges faced in the process of realizing globalization and the possible solutions are recommended. Attention will also be give to the role of government and civil society organizations in the process of globalization.

Introduction

Globalization refers to is the reduction in the autonomy pf individual states due to the gradual increase in the global interdependence among states, individuals and social economic organizations. The advent of the era of information technology has gradually integrated the nations of the world into the global economy. The rise in globalization is attributable to the spread in the use of information technology networks. The current globalization is driven by knowledge and technology, unlike earlier ones which were based on ideology.  In reference to James (2002), the influence of information technology on globalization takes into account not only the numerous forms of information technology, but also the embodiment of globalization in several dimensions, the most outstanding of which concerns the volume of international trade as a percentage of world output and the extent to which that trade is a component of foreign direct investment, FDI (p.1).  The flow of capital to poorer nations implies creation of employment and elevation of the standards of living.

Before looking at the benefits that society has gained as a result of globalisation, it is imperative that the areas that globalisation has affected the most and the ways in which these effects are manifested be looked into. Kenney and Florida (2004) on the effects of globalisation, state that globalisation can be divided into four major dynamics which include: the globalisation of markets; the globalisation of production; the globalisation of ownership and the globalisation of products (p.55). The globalization of markets refers to access to market that are beyond a corporation’s country of origin, while globalization of production refers to the establishment of production units in other countries other that the country of origin. Globalization of ownership is the ownership of corporations by shareholders from various nations. This is made possible through mergers, acquisitions or takeovers.

Globalization fosters the development and spread of technologies, especially information and telecommunication technologies that allow for the free flow of information all over the world. Apparently, globalisation is closely intertwined with international and migration resulting in the transformation of economic relations and structures among and within countries. This interconnection is promoted chiefly by the expansion, rapid spread and use of information technology. According to James (2002), information technology influences international trade and foreign direct investments by reducing the transactional costs, thus leading to the increase in the volume of international transactions, between independent buyers and seller as well as large multinational corporations (p.1). In reference to a World Bank report on globalisation (2009), closely linked globalisation to the spread of democracy and democratic institutions in the world (p.7).  This means that the most competitive shall win.

The globalization of market opens doors for competition top set in. those companies that will have superior products can effectively compete with other companies beyond their national boundaries. According to Richard and Florida (2004), the Japanese automakers to penetration of the United States market in the 1960s and 1970s through exports, which coincided with the short-lived rise in gasoline prices, was a remarkable success compared with the low quality Ford’s Pinto and General Motors Vega (p.56). As a result of the new found market I n the United States, motor vehicle production in Japan rose from an insignificant 300, 000 units in 1960 to about eleven million units in 1982, which besides the strengthening Japan’s largely protected domestic market of about 5 million units and exports of about 6 million units, elevated Japan to dominate in world finished vehicle exports by a wide margin (p.57). Japan maintains the lead in the automobile industry due to heavy investment in research and development. The quest for global competitiveness will drive corporations to conduct research therefore coming up with superior technologies and innovations that can improve society. 

Research Findings and Discussion

The Japanese automobile industry became globally competitive due to focus on lean manufacturing and rapid development which producers to achieve high standards of quality with low defects and high output per worker.   The success of Japanese motor vehicles purely rested on their competitive productive system and their attention to quality improvements that involve lower inventories, timely part deliveries, high performance work organization and continuous improvement programs for enhanced quality and productivity. The mass production of quality motor vehicles by Japanese automakers ensured that the society enjoys the availability and use of quality motor vehicles.

The transformation of Japanese automobile industry led to the rise in employment opportunities as well as the product output and the subsequent reinforcement of Japanese national economy. Without globalisation, access to quality vehicles by American society could not have been possible. Competition by manufacturers gives the consumers opportunities to make the best choice of the goods that best meet their needs at a price that they can afford. According to Wagner (2002), globalization required that producers and employees globally were to increasingly compete on globally integrated markets (p.166).

As noted earlier one of the ways in which globalization occurs is when multinational companies establish production units outside their countries of origin. Following the three year domestic sales slump that the Japanese automobile market experienced in the early 1990s, the industry had to come up with a new strategic response through restructuring and rationalization. This scenario presented a striking contrast, since the Japanese industry was known to be competitive and had posted a continued rise in profits from the 1980s. According to shimokawa (2010) the profits had fallen by half in most of the firms and others recorded even lower profits. Additionally, one of the factors that contributed to the shrinkage in Japanese exports and apparently a setback to globalization is the heightened trade friction with competitors. This was even compounded by the strengthening of the yen, which led to the deterioration in export earnings. The new strategy that the industry considered imperative was the internationalization of the automobile industry.

Taking advantage of the timely diffusion of the use of advanced technology in the lean system of automobile production, Japanese automobile manufactures stayed ahead of the competition.  Information technology in Japan permeates other sectors that are supportive of the auto industry such as the financial sector which avails money for investment, as well as the steel industry which uses IT both for processing and for product innovation. According to OECD (1998), Japanese automobile manufacturing firms took measures to gradually replace simple automated devices with numerically controlled tools, industrial robots and flexible transfer machines (p.148). The adoption of this technology afforded the flexibility needed for cost effective production of small volumes while at the same time not compromising on quality. The concept of electronification is rapidly changing product technology. Product and development of new strategies coupled with the direction of research and development. Besides some micro-electronics and IT-based innovation, these new technologies were also used outside Japan in   the United States and Europe and other component firms.

Different from the United States though, the diffusion of this technology was faster in Japan and was gradually upgraded as the demand for product variety arose.  The use of the lean and the integrated system in retailing is one of the best innovations. According to OECD (1998) the use of computer integrated production systems has made production engineering capable of assembling sub-assembled components from suppliers with minimum adjustment to robots (p.144). Being ‘lean’, and having a microelectronics and IT-based system, the performance of the automotive industry changed radically, due to increased productivity,  lowered cost of production influenced by reduced labor requirements,  the improvement of the product quality and increased flexibility of automobile production.

The Japanese competitive advantage also lay in their completely different system of producing and organizing automobile production, a system termed as lean production. The success of Japan was deemed as a second revolution, due to the fact that they replicated mass production which was introduced by Henry Ford. The kaizen principles, or the principles of constant improvement by employees at work, were deemed to be equally universal.  According top Hook and Hasegawa (2001), owing to the universalistic view that implied that any firm in the car industry could and should learn from the Japanese way in order to survive, drove the some German managers who were seeking to regain profitability to learn from the Japanese model (p.132).

It has been noted that rationalization and restructuring efforts from early 1990s not only focused on introducing Japanese style management and organization practices, but it also became radical and far reaching and tended to monopolize restructuring discussions. Japanese organization model organizes the workforce into teams who are the subjected to intense training, and they have to change tasks as frequently as possible on the factory floor hence ensuring that they are flexible and versatile. The training and experience for multiple skills and greater in the labor force as OECD (1998) indicates, improves the motivation of the worker and tends to reduce absenteeism (p.149).  The difference in the approach to research and development between Japanese corporations and other firms is that worker suggestions are valued and workers contribute greatly to research and development.

Hook and Hasegawa (2001) conclude Japanese economic success was vital in that it gave a decisive push for reform and served as an important instrument in the implementation of reforms in the German industry (p.136). The Japanese model of management was also adopted in other countries that Japan had out competed in the auto industry such as the United States and the United Kingdom. Many other emerging auto makers such as India, china, Russia, and other European and Asiatic countries are demonstrating the importance of successful globalization by adopting the Japanese production and management model.

For Japan the 1970s were the height of the country’s economic upturn, with the high rise in exports to the rest of the then American-dominated free world. It is during these years that Japan ceased to be a debtor nation, and the balance of payments favored Japan due to manufacture of cars and electronic equipment such as radios. Shokinawa (2010) elaborates that the globalization effort occurred twofold: firstly it involved the expansion of local production capacity in industrialized nations of North America and Europe and secondly the extension of local production initiatives and cooperative division of labor to serve the populous china and south East Asian markets (p.59). The number of locally produced cars could soon rise to overtake the rate of production in the firms at home. The establishment of a production unit in the largest of Japan’s overseas automotive market was meant to not only supplement exports, but also a strategic environment where strategically important model types needed in America could be produced .the establishment of local production units in the United states is beneficial in that a new deal to increase the procurement of United states-made parts by Japanese auto makers has been signed.

In reference to Shimokawa (2010), the strategy of globalization in North America has taken three dimensions: firstly  the localization of management at factory level, especially those that pertain to human resources development, training, evaluation and quality control activities, secondly the expansion of procurement to broaden  the relationship with local suppliers in order to increase the level of local content (p.60).  In addition, the localization of the research and development related activities, giving the hosting country’s experts the opportunity to be involved in the design and development of the auto mobiles. The globalization of the Japanese automobile industry in this context has resulted in the creation of job opportunities in the United States, and apparently, many United States employees are assuming an increasingly central role in the areas of production at the Japanese transplant operations. The standard of living is also elevated by the availability of quality and affordable automobiles which can be used to create more value in other sector of the economy. The purpose of moving production to a new location is to tap the advantages of cheap labor. This is a strategy employed to enter into new markets and market segments, while taking advantage to reduce the cost of key success factors.

The impact of internalization of Japanese automobile industry has not been without challenges. Shimokawa (2010), shows that while the United States automobile industry deteriorated markedly in the 1980s in response to the effects of the first and second oil shocks in of 1973 and 1979 respectively, the Japanese automobile industry production levels reached 100 million units per year and became a strong international competitor, and as a consequence, there was increased protectionism in the United states and Europe (p.8).  The promotion and assistance of private manufacturers by the Japanese ministry of international trade and industry,  (MITI), attracted criticism from American businessmen, especially those involved in the stagnant and bloated American automobile industry claiming that Japan was employing monopolistic and other unfair trading practices.

The promotion of local industries b the Japanese government was through the liberalization of the financial markets so that investors in the auto industry could access loans or could raise capital through the capital markets. In addition, the Japanese government imposed restrictive tariffs on imported products that competed with what Japan produced. Of primary significance was the accusation that Japan was restricting its markets, making foreign imports too costly to compete with Japanese domestic products, the main discontent being about agricultural products. Japan had subjected imports to overly restrictive inspections, quarantines and tariffs that were discriminative of foreign firms. Shimokowa (2010) argues that Japan employed the strategy of subsidizing its products with a view to   capturing the market share, and not to drive foreign manufacturers to bankruptcy as had been alleged (p.65).

The prices of Japanese products abroad were cheaper than those of competing companies, the consequence of which was the accusation of Japan as having had intentions to destroy competition. Interestingly according to law (1991), the rise in demand in the United States and Europe for Japanese cars due to their high energy efficiency caused trade friction between the United Kingdom and France and Japanese companies. Subsequently, Britain asked Japanese companies to limit their share in the UK market to below 10 percent, while France requested them to maintain below 3 percent (p.104).  This move motivated Japan to establish car making units in these countries, since producing from within them will not attract criticism like when the cars are exported to these countries.

In addition, despite the employees being union-free, Japanese transplants occasionally face the challenges of resolving disputes and handling complaints from local employees. The pre-dominant view point was that Japan achieved superior labor productivity as a result of lower wages despite the subsidized land cots. Shokinawa (2010) indicates that the corporation has embraced the challenge though, and conducts major annual surveys and three smaller surveys in order to find out the potential sources of dissatisfaction (p.63).Besides minimizing disputes in the corporation such initiatives will boost the morale and pride of the employees, hence will feel valued and appreciated by their employer. This approach can be used as a model in employee management in other corporations.

International migration has also been a great challenge to globalization since illegal migrations erode the sovereignty of states.  According to Hook and Hasegawa (2001) with the rising globalization, there has been interplay among private market forces and Japanese society’s tolerance or otherwise of immigration and the governments efforts to regulate immigration to accord with or resist the forces of globalization (p.12). The free movement of goods and services is imperative for the process of globalization to be smooth. Even of more critical necessity for globalization is the flow of labor across political boundaries. The movement of people from one nation to another will facilitate the transfer of technology and expertise thus the host community has a long term benefit of gaining technological know-how.  In addition, the local community will benefit from the corporate social responsibility initiatives that the companies will be engaged with.

The companies have also established programs through which employees can record their complaints anonymously by phone with the company pledging to respond to them. The use of third party to listen to employees’ complaints and implementation of the recommendations made, coupled with occasional roundtable meeting between employees and the management and the use of democratic avenues to involve employees in decision making activities in the company are helpful unbiased approaches in dispute resolution. At the same time, suggestion activities and quality controls have been used in other automobile firms, such as Honda. The quality control are incorporated into comprehensive efforts called voluntary improvement program, the objective of which is to find out how and why certain problems occur and to build strong foundations and disciplines that will act as models in solving problems of the same nature in future. Shokinawa (2010) iterates that companies also target to create a kind of environment in which quality control becomes a natural and consistently used element of corporate culture (p.64).

The negation of the lean production practices with a view to meeting the demands of the growing market through creation of new models and mass production of existing ones, worked against the industry evidenced by the sharp rise in fixed costs. This means that much investment was done on research and development. These advanced methods of dispute resolution in firms are the products of globalization and the quest for sustainable competitive advantage and developing a global brand name. In the process, the highest quality products are manufactured and the best customer care services are offered thus boosting the quality of life. The disadvantage with this though is that infant industries that may not have reached levels of competing favorably with multi nationals will be phased out of the market, or will be merger, acquired or taken over by multinational companies. In view of protecting infant industries, a country may be forced to enforce protectionism laws, scuttling the efforts to promote globalization.

Part of the challenges that auto makers face and have had to restructure in order to mitigate the growing adverse effect is global warming. Most affected are the developing countries that have experienced the adverse effects of droughts, famines, heat waves, rising sea levels and floods, all these attributable to global warming. According to Ijioui, Emmerich and Ceyp (2009), the fear of global warming in the year 2008 coupled with the drastic rise in raw material and oil prices triggered the response of the automobile industry (p.187).  The consumption of oil products began to change and preference shifted to more ecologically intelligent products. According to law (1991), the passing of the energy plan and bill rendering illegal the sale and manufacture of cars with energy efficiency under the stipulated standard, stimulated commercial demand for Japanese cars with high efficiency (p.104). Auto makers that seek sustainability in the global market have to comply with the green energy requirements. Interestingly, due to the challenges of global warming in the recent years, the responsibility of automobile companies has expanded to include ways of controlling green house gas emissions.

In reference to shimokawa (2010), the twenty- first century automobile industry faces challenges that go beyond the confines of automotive technology such as the prevention of global warming and commitment to zero emission as part of the collective effort on issues that pertain to global environment, eliminate wasted resources and environmental degradation through mass production, sales, disposal and the provision of safe transport system (p.4).  The emergence of these new challenges in the world and the commitment of the players in the automotive industry to curb their devastating effect on the global environment through corporate social responsibility are beneficial to society. Multinational companies in rich and developed nations take huge amounts of capital. Climate change conventions and the Kyoto protocol requires that companies in industrialized nations, which cannot cut the emission of green house gases, should establish clean energy projects in developing countries that are suffering the devastating effects of climate change.  Government and civil society as well are responsible for mounting pressure on the companies that emit green house gases to take responsibility for their actions, failure to which punitive measures will be taken.

Civil society in Japan has played a great role in highlighting the problems that crises in corporations can bring. Civil society can actively challenge crises that arise from corporate or government activities since it is independent of both the state and the market.  In reference to Schwartz and Pharr (2003), civil society in industrialized democratic nations, like Japan, are concerned with such issues as straight forward purchasing of goods and services in the market (p.13).  The civil society has always been involved in the political and social reinvigoration of Japan. The globalization of the automotive industry in Japan brought along with it relative weaknesses upon consumers and citizens.

According to Bunker and cicantell (2007), the relative power of corporations over citizens and consumers as far as crises are concerned such as pollution are dictated by Japan’s political economy. This weakness of consumers and citizens resulted in high prices in domestic markets, formal and informal limitation on imports and the operation of cartels that restricted competition. They also protected inefficient firms and state agencies at the cost of the consumers. The existence of some sort of civil society groups acted to oppose unfair trade and to lobby for the promotion of fair trade both locally and globally. The work of civil society is to ensure that corporations are following the laid down business procedures and that they carry out their business in a manner that is ethical.

Conclusion

In summation, globalization is a means through which the world can realize high standards of production. As companies grow to the level of competing globally, focus on research and development is imperative if the products are to be competitive. Having looked at the case of Japanese automobile industry, it is evident that internal control and effective management and not the availability of low cost employees are what counts in the realization of efficiency and competitiveness. It is noteworthy that globalization presents a platform for leading and competitive firms to set standards that other firm in the same industry can emulate, thus raising not only the quality of the goods produced, but also the standard of living of the consumers. This is made possible since globalization breaks international boundaries and allows customers to access goods and services of their own choice.

Globalization makes easier the process of technology transfer. Information technology is an agent of efficiency in almost every industry as its use results in the cutting of transactional costs. Use of robots in car making for example saves on manpower expenses and promotes efficiency as well. That a global company must be competitive means that the employees it absorbs must globally competitive. This means that globalization promotes the transfer of expertise through cross border establishment of production units. Exceptions though exist, in circumstances when a company may pay very low wages.  Although the setback of diminishing domestic industries exists, the flow of FDIs from rich nations to developing nations means that jobs are created for the citizens of the host country, thus elevating their standards of living. The removal of international trade barriers implies a wider market and hence a larger volume of trade for competitive companies.

Therefore, the bottlenecks such as sour labor relations, industry protectionism, and unfair competition through limiting access to markets, hoarding of technology for the purposes of exploitation and limited access to some market due to limited technology should addressed. Policies and laws should be put in place to ensure that access to the benefits of globalization is a reality for, if possible, all nations. Civil society, which acts as an unbiased party in trade and government should be involved in making laws that will govern globalization. The presence of civil society in the context of globalization will help lobbying for the removal of oppressive labor laws, besides generally acting to ensure that fairness is observed.  For highly globalized companies, the creation of products and international operations should take place in autonomous organizational units, with specific market, legislative and technical know-how. The combined effect of a strong corporate culture, values, and eagerness to learn new things and flexibility are the preconditions for a globally competitive organization in the future.

References

Bunker, S. & Ciccantell, P. (2007). East Asia and the global economy: Japan's ascent, with implications for China's future. Baltimore: JHU Press.

Hook, G. & Hasegawa, H. (2001). The political economy of Japanese globalization. London: Routledge.

Ijioui, et al. (2009).Globalization 2.0: A Roadmap to the Future from Leading Minds. Heidelberg: Springer.

Kenney, M & Florida, R. (2004). Locating global advantage: industry dynamics in the international economy.  Stanford CA:  Stanford University Press.
James, W. (2007). Driving from Japan: Japanese Cars in America. Jefferson, NC:  McFarland.

Law, C. (1991). Restructuring the global automobile industry: national and regional impacts. London: Routledge.

OECD. (1998). Science, Technology and Industry Outlook. OECD Publishing.

Schwartz, F. & Pharr, S. (2003). The state of civil society in Japan. Cambridge: Cambridge University Press.

Shimokawa, K. (2010). Japan and the Global Automotive Industry. New York, NY: Cambridge University Press.

Wagner, H. (2000). Globalization and unemployment. Heidelberg:  Springer.

 

 

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