92) How might a company benefit from the globalization of production?
Answer: The globalization of production refers to the dispersal of production activities to locations that help a company achieve its cost-minimization or quality-maximization objectives for a good or service. This includes the sourcing of key production inputs (such as raw materials or products for assembly) as well as the international outsourcing of services.
The globalization of production can benefit companies through the following ways:
1. Access lower-cost workers-Global production activities allow companies to reduce overall production costs through access to low-cost labor. For decades, companies located
their factories in low-wage nations to churn out all kinds of goods, including toys, small appliances, inexpensive electronics, and textiles. Yet whereas moving production to low-cost locales traditionally meant production of goods almost exclusively, it increasingly applies to the production of services such as accounting and research. Many European and U.S. businesses have moved their customer service and other nonessential operations to places as far away as India to slash costs by as much as 60 percent.
2. Access technical expertise-Companies also produce goods and services abroad to benefit from technical know-how.
3. Access production inputs-Globalization of production allows companies to access resources that are unavailable or more costly at home. The quest for natural resources draws many companies into international markets.