What We Have Learned From Many Years Of Globalization

2840 Words12 Pages
What We Have Learned From Many Years of Globalization Advancements in the past thirty years have had a profound impact on globalization. Advances in technology, including the internet, have helped facilitate decreased transaction costs, increased access to international financial markets, and lower transportation costs. International deregulation of financial markets has increased the ease cross-border flow of capital, which has increased foreign direct investment and facilitated currency exchange. Multilateral trade agreements, including the 1986 GATT for trade in goods, and the 1995 GATS for services, have facilitated cross-border trade of goods and services among most countries. (Lecture 3/11). All of these advancements helped change…show more content…
As part of their strategy, Wal-Mart often goes directly to the manufacturer to eliminate “middle-men”, forces suppliers to negotiate over a single price, and has strict guidelines on the negotiation process, including requiring the use of negotiation rooms and limits on buyer-supplier contact. Additionally, Wal-Mart is known for having open-bidding, where suppliers are forced to live-bid against one another for the lowest price. (Frontline) For suppliers, these cost pressures have caused a “race to the bottom,” which forces suppliers to reduce costs wherever possible. (Gereffi 2005:2). Furthermore, the “race to the bottom” strategy forces many US suppliers to shift production to Chinese factories, which is why 80% of the 6000 factories for Wal-Mart are located in China. The cost pressure has also created a “survival of the cheapest” mentality among Chinese factories, and “places enormous pressures on wages, working conditions, and profit margins at the factory level,” Once the price is negotiated, Wal-Mart has also revolutionized the ordering process by consolidating the global supply chain. Since Wal-Mart goes directly to the manufacturer, it has changed the supply chain to a demand-pull model, where manufacturers make products when ordered by Wal-Mart (19). One implication of the consolidation of the value chain has also been the creation of Chinese “supply chain cities”, which are cluster cities focused around the manufacturing economy. (34) Not only do
Open Document