Globalization

What is globalization (supply chain context)?

The development of an increasingly integrated global economy marked by free trade, free flow of capital, and access to lower-cost foreign labor markets.

What is landed cost?

The total cost of a product from factory to customer, including product price, transportation, insurance, customs duties, brokerage fees, and overhead.

Why do firms globalize their supply chains?

To leverage comparative advantage, reduce costs, access specialized technology, diversify risk, and expand markets.

How does labor affect globalization decisions?

Firms seek countries with lower labor costs or specialized skills to reduce unit costs.

What does the U.S. primarily export?

Natural resources and commodities such as grain, animal skins, and scrap metals.

What does the U.S. primarily import?

Finished goods.

Why are low-labor-cost countries attractive to firms?

They offer unit cost savings.

What costs must be considered beyond labor?

• Transportation and delivery costs

• Import duties and tariffs

• Brokerage fees and insurance

• Overhead and total cost of ownership

Why is landed cost important in global sourcing decisions?

Because low production costs can be offset by high transportation, duty, and compliance costs.

How do security concerns impact global supply chains?

They may discourage firms from engaging in global trade or increase costs and complexity.