Global trade is also known as international trade. This can be defined as the movement or exchange of goods from one country to another globally. Foreign exchange enables buyers worldwide to buy French wines, Colombian espresso, Korean TVs, and German cars. The global exchange between countries makes the world economy where costs are affected by various factors, such as global opportunities, trade rates, legislative issues, and protectionism (Kain & Verma, 2018). Political movements can affect expenditure and representative wages in a single nation in another country. Because of such moves, the cost of imported merchandise to neighborhood customers on everyday items could increase or decrease.
Four global supply-chain strategies are used in the world. The first one is called no international strategies, and it refers to the firms that have no intention of being a part of global trade and are involved only in domestic operations. A multi-domestic strategy is the second approach, and it refers to companies with headquarters in one country while their operations involve multiple countries (Bowersox, 2019). For such a strategy, firms use separate, semi-autonomous supply chains in each global region, while their international operations are treated as secondary compared to domestic.
The third strategy is called global strategy, and it entails that the company’s headquarters coordinate global operations, while logistics and supply-chain operations occur in regions around the world. There are some advantages and disadvantages of such a strategy. On the positive side, the company that applies global strategy can concentrate on multiple local markets, fulfilling the needs of local customers while taking advantage of global brands and products. Some of the challenges include the difficulty in responding to global customers in an integrated manner and difficulties in scaling. Finally, the transnational strategy refers to companies that handle regional operations globally while using headquarters to optimize the firm’s effectiveness and performance. In this strategy, the location of headquarters may be functional; for example, manufacturing operations may be handled in Asia, while financial operations are located in Europe or the United States (Bowersox, 2019). Transnational strategy facilitates a global focus of solution development and delivery and demonstrates significant economies of scale. On the contrary, such firms can have difficulties responding to each regional market’s uniqueness.
One of the rationales for globalization is decreasing the cost of production. This can be done by involving low-cost-country sourcing. Seeking out suppliers in low-cost countries increases possibilities of sources diversification. Thirdly, globalization exposes a firm to state-of-art product and process technologies (Bowersox, 2019). Finally, companies that operate globally can increase their revenue by enhancing local presence in foreign regions.
Developing a global services strategy has several challenges in transportation and initiatives. First, the constraints that a company could meet include local content laws, restrictions, and price surcharges. Secondly, global services strategy requires higher complexity of planning to support the operations (Bowersox, 2019). Hence, the performance cycle structure, transportation negotiations, alliance, and information system integrations should be developed and implemented in the process.
Deciding to engage in global sourcing is a challenging task for many companies. Multiple factors should be considered when the company considers such a strategy. One of the primary factors is knowing and understanding of differences between the major geographies of regions selected for global sourcing. Each region has its own set of important characteristics for international business. Those characteristics include infrastructure development, human capital, and political environment. The infrastructure is important to consider as it involves the transportation rights-of-way and capacities, rail, ports, and airports. The infrastructure in the region must be able to support and provide opportunities for achieving business objectives.
Bowersox, D. (2019). Supply Chain Logistics Management (5th Edition). Mcgraw-Hill Higher Education (US).
Kain, R., & Verma, A. (2018). Logistics Management in Supply Chain–An Overview. Materials Today: Proceedings, 5(2), 3811-3816.