Cost Drivers Of Internationalisation
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Over the last decades, the continued internationalisation of production and the organisation of complex production networks into global value chains (GVCs) have fostered the relevance and spread of standards. While standards were initially concerned with the quality and compatibility of intermediaries, they have increasingly included an orientation to the production process. Social and environmental standards have the potential to foster sustainable supply chains and to empower small and medium-sized enterprises (SMEs) to integrate into GVCs and international markets. However, as many SMEs struggle to implement sustainability standards, emerging and developing countries raise concerns about discriminatory effects and standards as technical barriers to trade.This study examines the incentives and challenges that SMEs face in the adoption of sustainability standards, using evidence from five new country case studies from Brazil, China, India, Indonesia, and South Africa in triangulation with secondary data and existing literature in order to derive policy considerations. The key driver for standards implementation is demand for sustainably produced goods and services through GVCs and export markets, new domestic markets and public procurement. Yet implementation and certification costs impede the adoption of standards, as these (essentially) fixed costs weigh particularly heavy on smaller firms. Against this background, access to finance and the size and productivity of firms are also identified as two relevant constraints. Another important challenge is the lack of awareness among firms about sustainability standards, their relevance and their value to businesses.Most importantly, demand for sustainably produced goods and services has to be raised through the appropriate public procurement strategies and through promotion of SME integration into sustainable GVCs. Mutually beneficial cost-sharing schemes with lead firms and the development of multi-stage certification processes by standard setters that verify and reward first steps in transition to full compliance, could mitigate the problem of implementation and certification costs. Information platforms such as national voluntary sustainability platforms under the auspices of the United Nations Forum on Sustainability Standards (UNFSS) can bridge the information gap for SMEs. It is also crucial to involve financial institutions: development finance institutions should take a leading role and embed standards compliance into the terms and conditions of lending contracts, while central bank requirements could strengthen sustainability criteria in the credit assessment among commercial banks.
Although output and trade continue to increase in absolute terms, trade intensity (that is, the share of output that is traded) is declining within almost every goods-producing value chain. Flows of services and data now play a much bigger role in tying the global economy together. Not only is trade in services growing faster than trade in goods, but services are creating value far beyond what national accounts measure. Using alternative measures, we find that services already constitute more value in global trade than goods. In addition, all global value chains are becoming more knowledge-intensive. Low-skill labor is becoming less important as factor of production. Contrary to popular perception, only about 18 percent of global goods trade is now driven by labor-cost arbitrage.
Moreover, the share of trade based on labor-cost arbitrage has been declining in some value chains, especially labor-intensive goods manufacturing (where it dropped from 55 percent in 2005 to 43 percent in 2017). This mainly reflects rising wages in developing countries. In the future, however, automation and AI may amplify this trend, transforming labor-intensive manufacturing into capital-intensive manufacturing. This shift will have important implications for how low-income countries participate in global value chains.
Until recently, long-haul trade crisscrossing oceans was becoming more prevalent as transportation and communication costs fell and as global value chains expanded into China and other developing countries. The share of trade in goods between countries within the same region (as opposed to trade between more far-flung buyers and sellers) declined from 51 percent in 2000 to 45 percent in 2012.
That trend has begun to reverse in recent years. The intraregional share of global goods trade has increased by 2.7 percentage points since 2013, partially reflecting the rise of emerging-market consumption. This development is most noticeable for Asia and the EU-28 countries. Regionalization is most apparent in global innovations value chains, given their need to closely integrate many suppliers for just-in-time sequencing. This trend could accelerate in other value chains as well, as automation reduces the importance of labor costs and increases the importance of speed to market in company decisions about where to produce goods.
Instant and low-cost digital communication has had one clear effect: lowering transaction costs and enabling more trade flows. But the impact of next-generation technologies on global flows of goods and services will not be as simple. The net impact is uncertain, but in some plausible scenarios, the next wave of technology could dampen global goods trade while continuing to fuel service flows.
In goods-producing value chains, logistics costs can be substantial. Companies often lose time and money to customs processing or delays in international payments. Three sets of technologies will continue to reduce these frictions in the years ahead.
Additive manufacturing (3-D printing) could also influence future trade flows. Most experts believe it will not replace mass production over the next decade; its cost, speed, and quality are still limitations. But it is gaining traction for prototypes, replacement parts, toys, shoes, and medical devices. While 3-D printing could reduce trade in some specific products substantially, the drop is unlikely to amount to more than a few percentage points across overall trade in manufactured goods by 2030. In some cases, additive manufacturing could even spur trade by enabling customization.
Rising Internet penetration and the growing popularity of online shopping are the main drivers for the surge in demand. While the Internet penetration rate and the number of Internet users shopping online in China were seen at 47.9% and around 360 million, respectively, at the end of last year, we believe these metrics could rise to over-65% and 700 million over the long run. Since Alibaba is positioned as the leading player in the Chinese e-commerce market, with around 80% market share, we expect it to heavily leverage the growing demand within this market.
The Cost Globalization Drivers is more involve in economics aspect. Cost drivers are usually decided productivity capital which also can know as distribution of capital standardized. A company set a cost of capital are usually to achieve the goal of various department and the cost globalization can decide the capable of company to competition with others. (Lardbucket, 2012)Although the world economic turndown may bring effect to the firm but it is also an opportunity for AirAsia. As we know, the turning bad of global economic will cause the aircraft leasing price reduce about 40% , the leasing of the aircraft dropping that means the AirAsia may lease the aircraft cheaper and reduce their cost. This may increase the income of AirAsia or reduce the ticket price to attract more customer to choose their company. In other word, different currency in various country also impact the globalization cost. For example, the business that involve in overseas market can be affect by currency in the way importing or exporting goods from Asia to Europe because Asia country currency are usually different with Europe. The payment may influence by currency rate exchange. The exchange rate may bring positive or negative influence to the firm. To solve this problem multinational companies are usually using dollar as trade currency and also depend on international market rates. (Hardy, 2017) In AirAsia company, they are using dollar as indicate aircraft operating lease expenses. From the studies we know that the weakness of Malaysia Ringgit is key element that impact company decide to use dollar to indicate in US dollar. (Reuters, 2017) Logistics is also very important to a firm. Logistics is defined as a process packed and deliver the goods or service to the customer to satisfy their needs. For international business, the logistics is not just easy deliver the goods from manufacturing facilities to customer doors. The multinational company logistics included send the goods to warehouse from manufacturing facilities and pack the goods in warehouse confirm the number of goods that customer needs, confirm which counties are they going and finally distribute out. The movement of product is very important, the inefficient logistics way may directly influence companies profit or cause the loss of company. (Craig, 2019) Although AirAsia is an aircraft company and its main duty is not to product and sold the goods all around the world, but sometimes the aircraft components or others consumables also need to import from other country or supplies, this process may involves logistics. Based on AirAsia is a low cost carrier company, they are trying to reduce the cost from all aspects. An efficient logistics way help company cut down a lot unnecessary expenses. AirAsia Group is discovering the potential logistics business with the help of EasyParcel which is a company using online parcel delivery services. (Saieed, 2019) EasyParcel is a logistics service platform that allow customer to check for delivery rate and what delivery way is most economically. (Yan, 2019)
Which of the following describes a situation where the costs of making products/services available across borders relative to their final value are low?A. Scale economiesB. Transferable marketingC. Scope economiesD. Favourable logistics 2b1af7f3a8