Theodore Levitt, a Harvard Business School professor, is best known for coining the term globalization in 1983. In “The Globalization of Markets,” he explained how technology determined the international success of a company. Although Levitt is remembered for coining the term, globalization has been a key part of industry for hundreds of years.
Some historians argue that it was not Levitt, but Christopher Columbus who was responsible for introducing us to globalization. Columbus’ voyages to the new world brought new crops, trade routes and opportunities to Europe, which led to Europeans settling in the United States.
Columbus may have been one of the first to improve the economy by international trade on a large scale. However, as Levitt explained, in the past few decades there has been a boom in globalization because of technology. In manufacturing, developments in and out of the factories have impacted globalization—the process by which businesses and other organizations develop international influence or start operating internationally.
Ever since the first industrial revolution, rapid industrialization has impacted international business. In particular, advances in transport and telecommunications have had a huge impact. With increasing trade and communication, more companies are extending their reach across land and sea.
The modern manufacturing supply chain is centered around globalization. Every day, goods are transported across the globe by land, sea and air. Business activities, including outsourcing of logistics, facilities management, professional services and maintenance, can all be international processes.
With every major industrial and technological development, the characteristics of globalization have altered. In 2011, the term “Industry 4.0” was introduced by the German government and Siemens at Hannover Messe. Manufacturers are now automating their factories to shift away from analog and mechanical technology and realize Industry 4.0 with digitization.
As information technology (IT) and operational technology (OT) unite, companies are beginning to find new ways to connect. Data collected from suppliers, customers and the enterprise can be aligned with detailed production information, which means processes can be fine-tuned in real-time.
As the digital and physical worlds become more closely linked, machines, systems and people will be able to exchange information more efficiently. Industry 4.0 is not just revolutionizing manufacturing processes, but also having a powerful impact on the model of globalization by changing the workforce and increasing the ease of access to services.
Increased digital connectivity allows companies to use more complex, worldwide supply chains and data networks in their operations. Manufacturers are now replacing physical connectivity with digital links that are stored in the cloud.
Moving from the physical to the digital world allows more companies to collaborate internationally (Figure 2). Using cloud-based software, any member of staff in any geographical location can contribute to a design. This function is being increasingly offered in computer-aided design (CAD) software, making design a more collaborative process.
Businesses can also use increased digital connectivity to get the most out of their talent pools or international supplier networks, as expertise can be offered remotely and in real time. In many international companies, suppliers or staff members work in small clusters to increase the flow of ideas, which can be spread more widely using the cloud.
Operating in this way may means the international company of the future doesn’t need a significant physical presence across the globe but could operate from just a few locations.
Increased connectivity means that companies have to offer more to compete at a global scale. Manufacturers can no longer rely on physical location to win business and must instead focus on customization of products to meet ever-changing consumer demands. Keeping manufacturing and production flexible and incorporating automated technologies can cut production times and allow companies to respond more quickly, increasing competitive advantage.
Global trade has come a long way since Columbus’ first voyage to the new world. Industry 4.0 has revolutionized business operations both inside and outside the factory to improve the links between international businesses and to support globalization.