Computers in Society Week 13: Computers and Globalization.

Computers in Society

Week 13:

Computers and Globalization

Globalization

Globalization refers to the process of creating a worldwide network of businesses and markets. [Quinn 2011]

It involves international investment. The work to develop, manufacture, sell, and support a product occurs across multiple countries.

The Nature of Globalization

Globalization depends on computers and digital technology, especially high-speed, high capacity communications. Software and algorithmic techniques for logistics allows for the coordination of complicated supply and manufacturing operations. Fast communications and the ability to move large amounts of data allows managers to make quick decisions.

The Nature of Globalization (2)

Globalization is primarily a business and commercial phenomenon.

It is driven by efforts to find economic advantages and to profit from them.

Barriers to Globalization

Globalization is primarily a business phenomenon, but it requires crossing international boundaries. That involves governments.

The interests of government often agree with those of business. However, they can come into conflict in areas such as national security and employment policy.

Barriers to Globalization (2)

In order to deal with problems between governments, a range of international agreements have been negotiated.

In addition, international organizations have been formed to deal with conflicts that arise that are subject to the international agreements.

International Organizations

The World Trade Organization (WTO) is an international organization that helps develop international trade agreements and resolves trade disputes between nations.

In addition, there are two older international financial institutions, the World Bank, which makes loans to developing nations, and the International Monetary Fund (IMF), which works to stabilize international financial systems.

Trade Treaties and Agreements

The European Economic Union is an economic political union of the nations of Europe that regulates trade through a standardized system of laws.

The North American Free Trade Agreement (NAFTA) is an agreement between the U.S., Canada, and Mexico that creates a joint trading partnership.

Outsourcing

Outsourcing means contracting a business function to someone else [Wikipedia]. Outsourcing may be, but does not have to be, done internationally.

Outsourcing has occurred in various industries:

• Services• Software production• Engineering• Manufacturing

Outsourcing in ServicesOutsourcing in the telecommunications industry has been going on since at least the 1980s. Companies provided people to answer phones, take orders, or provide information for other companies that did not want to provide a phone center.

In the last decade, many phone answering services in the U.S. have been outsourced to India. While it has cut costs for companies, it has also generated many consumer complaints.

Outsourcing in SoftwareOutsourcing in the software industry has increased greatly over the last decade. Advances in communications and meeting technologies and the existence of a large, technically trained population primarily in India has led many U.S. companies to move routine software development work abroad.

Software engineering, architecture, and design activities have stayed in the U.S., but people are concerned that they could also move.

Outsourcing in EngineeringOutsourcing in engineering has followed a pattern similar to that in the software industry. U.S. immigration rules limit the number of technical workers who are admitted to the U.S.

Engineering work is spread over the world. Communications technology supports work that now can continue throughout the 24-hour day. As workers in one regions end their work day, workers in a time zone eight hours earlier start theirs.

Outsourcing in Manufacturing

The outsourcing of manufacturing work has caused the greatest controversy in the U.S. The reason is that it affects the largest number of workers.

Issues of national security are also part of the debate. Economic inequality in the U.S. is also a concern.

Outsourcing in Manufacturing (2)

Originally work was outsourced for cheaper labor. However, Asia in particular has developed the infrastructure to allow large manufacturing complexes to change rapidly as changes in product design require new parts, materials, and processes.

Logistics and supply chain issues play a key role now.

A Case Study

To explore the ideas about globalization, I would like to use Apple and Foxconn as a case study. Wednesday’s class will cover a series of articles from the New York Times that reasons that Apple moved production to China, and that documented the problems in plants manufacturing Apple products.

Apple and Outsourcing

For many years Steve Jobs was proud to claim that Apple products were made in the U.S. In 1984 he said that the Macintosh computer was “a machine that is made in America.”

The NeXT machine was made in the U.S. as well, and even in 2002 the later versions of the Macintosh were made in California.

Apple and Outsourcing (2)

However, by 2004 Apple began to move its manufacturing operations outside the U.S. Apple was not doing well then financially, and it made the move to cut costs.

According to an Apple executive, Timothy D. Cook, Apple’s CEO, believed there were two main reasons for moving production to Asia:

Reasons for Moving to Asia

• Companies in Asia “can scale up and down faster” than companies elsewhere.

• “Asian supply chains have surpassed what’s in the U.S.”

•Example: Glass Screens for iPhone

Other Benefits of Manufacturing in China

The scale of the workforce needed to produce the iPhone and iPad make it difficult to build in the U.S. The number of industrial engineers needed to oversee production is more than the U.S. workforce could support.

Even though production costs are a small part of the iPhone’s cost, the labor market issues remain a problem.

Other Benefits of Manufacturing in China (2)

For commodity products, low labor costs are important in assuring profitability (or minimal losses).

See, e.g.,

http://www.digitaltrends.com/mobile/android-and-apple-marketshare-versus-profit/

Where Does the Money Go?

The cost of manufacturing an iPhone is a small part of its price. Apple makes a large margin on its products (the margin is the difference between the cost of the product (design, manufacture, marketing, and sales) and its price). If the workers aren’t making this money, who is?

Apple shareholders and executives.

Environmental and Conservation Issues

The manufacture, use, and disposal of electronic devices has significant environmental impacts:

• manufacture requires the use of rare earth metals• manufacture involves the use of toxic compounds• use of electronic devices consumes substantial electric power

Environmental and Conservation Issues (2)

While there are efforts to recycle electronic devices, there are still a number of problems with the disposal of such devices:

• Not all devices can be recycled. CRT monitors and TVs are becoming hard to recycle, and unrecycled CRT devices are a severe pollution problem.• Recycling can release toxic chemicals into the environment• Recycling is often done in third-world countries where environmental standards are lax