1.2.2 Globalisation of production
As Hill (2005, p. 7) explains,
The globalization [sic] of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production ... to lower their overall cost structure and/or improve the quality or functionality of their product..
Firms will invariably choose production locations that minimise cost. Figure 1.1 provides an example of the multi-national locations used to manufacture sections of the new Airbus A380 aircraft, whilst Figure 1.2 shows the international suppliers of the contents of the Ukrainian Big Mac burger. We examine those factors which minimise cost and maximise profit in the next section and in a later section near the end of Chapter 1.
Figure 1.1 The globalisation of production of the Airbus A380
Source: Examiner 2004, p. 1.
Figure 1.2 The global components of a Big Mac in Ukraine
Source: Czinkota et al. 2005, p. 11
Activity 1.1
Visit the website of the Globalisation Guide at http://www.globalisationguide.org for an excellent review of globalisation. In addition to an explanation of key concepts related to globalisation, the website provides a wide range of web links to other globalisation resources.
After working through this website, write your own definition of globalisation.
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