Question

In: Operations Management

How does Globalization impact your business model - internationalization, off-shoring, reshoring?

How does Globalization impact your business model - internationalization, off-shoring, reshoring?

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Expert Solution

Globalization brings many changes to the economy, business, industry and society in many ways. These changes come from the changes in the business models and advancements in the business functions. When the business adapts the strategy of expansion through globalisation, it can no more work with the same business model as it worked locally. Globalization can increase competition as the new location will already have a market for the products you enter with. Hence facing the competition and surviving in it will require a change in the business model.

Customizing product to the local tastes and preferences, identifying low-cost manufacturing strategies and increasing business scope through technological advancement are some ways in which companies can change to face the competition. The business model for maintaining the supply chain will change. The relationship with supplier and distributor will be based on the channel through which products are exported to the new market. The business practices will also face changes wherein the employees' scope of work will be more diversified working for a global firm. Use of information technology will become the source on which many business functions will depend.

The change in the business model after globalization will also depend on the model adopted for the expansion strategy. Under internationalization, the business will design products and services and operate internal functions such that they facilitate global expansion. The product will be designed such that they can be easily used by other countries or changed such that they are accepted by the countries based on their customer preferences.

Off-shoring is the production and manufacturing of products in the host country such that the cost of manufacturing, cost of labour and transportation can be saved. In this process, the whole business model will have to be set up in the new country rather than changing the processes in the local business practices. Reshoring is the process of returning the manufacturing back to the home country. It is the opposite offshoring. It requires designing of business model such that they can help in manufacturing for the international business in low cost and products such that they are desgned based on internaltional tastes. This process can help in boosting the ecnomy of the lcoal country by expanding business processes locally rather than in the foriegn country.


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