CHAPTER 2 (Notes)

CHAPTER 2
Global Dimensions of Supply Chains
 What are the reasons/rationale for global trade

and commerce?
- Absolute Advantage
Where an entity can produce a good or service more
efficiently (using fewer resources then another)
- Comparative Advantage
Where an entity can produce a good or service at lower
opportunity cost then another
 Contributing factors for global flows and supply

chain flows
These are the driving factors behind globalization around the
world.
- Population size and distribution | Urbanization
The global demographic landscape is undergoing significant shifts, with implications for economic development
and prosperity. The top 10 countries, notably China and India, account for a large portion of the world's
population, with India projected to surpass China by 2050. More developed countries face aging populations and
declining birth rates, leading to increased healthcare costs and a shrinking labor pool. In contrast, many least
developed countries have young populations, which could result in high unemployment and strain on resources.
One of the key trends reshaping the global demographic landscape is the rise of Megacities. These urban areas,
with 10 million or more inhabitants, are becoming increasingly prevalent, particularly in Asia. By 2025, Asia is
expected to have 18 Megacities, Latin America four, and North America two, while Europe is not expected to have
any. The growth of Megacities presents both opportunities and challenges. These urban centers serve as hubs of
economic activity, innovation, and cultural exchange, attracting businesses and investment. However, the rapid
urbanization and sheer size of Megacities pose significant challenges, such as transportation congestion,
inadequate housing, and limited access to basic services.
Urbanization and the rise of Megacities are also impacting global trade flows and supply chains. Businesses
operating in or servicing these cities need to adapt to their unique demands and opportunities. Overall, these
demographic trends have important implications for global business, including market size, capital flows, labor
availability, and the utilization of resources. Managing these challenges requires innovative solutions and
collaboration between the public and private sectors to ensure the sustainable growth and development of
Megacities.
How are population size, distribution and urbanization driving factors for
globalization around the world?
Population size, where people live, and how cities grow are big reasons why the world
is becoming more connected.
1. **Market size (more commerce) **: Countries with many people have big markets for
goods and services, so businesses want to sell there.
2. **Larger Labour Force**: A big population means more people to work, which can help
businesses grow and make more things.
3. **Migration and cultural Exchange**: Cities are places where people from different
backgrounds meet, share ideas, and create new things. This helps spread cultures and ideas
worldwide.
4. **Infrastructure development **: Big cities need good roads, internet, and other things to
work well. Building these things helps connect cities and countries.
5. **Political influence**: Big cities often have a say in how countries are run. This can
affect how countries work together globally.
6. **Technological innovation**: Cities are where new technologies are often invented.
These inventions help connect people and countries worldwide.
7. **Environmental Impact**: Lots of people in cities can lead to pollution and using up
resources. This can be a problem that needs global solutions.
In short, where people live and how cities grow play a big role in making the world more
connected through trade, ideas, and technology.
- Land and Resources

Besides labor, land, and resources are crucial for economic growth. These include energy,
food, and water, vital for economic viability. Technology, like desalination and fracking, can
help manage resource scarcity. Fracking has made North America a major oil and gas
producer. These developments, along with infrastructure investment and stability, will drive
future economic growth. Public-private partnerships could help reduce global economic
disparities, but stability and counterterrorism efforts are crucial.
- Technology & Information

Summary: Technology plays a dual role as both an internal change agent, enhancing
organizational efficiency and competitiveness, and an external driver of change,
akin to globalization. Its rapid development, particularly in information technology
and the internet, has reshaped competition and business models, leading to the rise of
new companies and forcing established ones to adapt or face obsolescence. The
availability of information has become a major force driving competition and new
business models, enabling companies like Amazon and Zappos to compete effectively
without physical stores. Technology, coupled with transportation services, has
facilitated global participation and expansion of supply chains through outsourcing,
allowing even small companies to participate in global processes. This shift has
transformed traditional organizational structures, creating opportunities for global
partnerships and participation.
*****One of the key impacts of technology as an external driver is the disruption it

has caused to established industries and business models. New technologies have
enabled innovative companies to enter markets and compete effectively against
incumbents, often leading to the demise of traditional businesses that fail to adapt. For
example, the rise of e-commerce giants like Amazon has revolutionized retail,
challenging brick-and-mortar stores to adopt new strategies to remain competitive.
(New forms of competition or new business models)
 Supply Chain in Global Economy

Global trade growth has been fueled by free trade agreements (FTAs) that
lift most tariff, quota, and fee/tax limitations on trade.
The best supply chains compete successfully on a national, regional, and
global basis.
Bi-lateral agreements – agreements between 2 nations.

Regional trade agreement – agreements with 3 more nations
 Micro perspective of Global Supply Chains

Success in the global marketplace requires development of a cohesive set
of strategies including product development, technology, marketing,
manufacturing, and supply chains.
- Supply chain perspective.

1) Strategically sourcing materials and components worldwide
2) Selecting locations for key supply centers and distributions centers
globally.
3) Looking at different ways to transport goods and companies that help
with this.
4) Understanding how governments affect global supply chain
movement.
5) Consider working with 3PLs and 4PLs.
- Customer Service Perspective

1) Standardizing processes but still allowing some customization.
2) Worldwide competition reduces product life cycle.
3) Companies change how they’re organized and how they do business.
when they use more outsourcing.
4) Globalization makes things more unpredictable and complicated.
 Supply Chain Security and Role of Ports

- Security measures
- Global Trade Flows
- Role of ports
 Free Trade Agreements
- NAFTA
- USMCA (2020)

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CHAPTER 2 (Notes)

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CHAPTER 2

Global Dimensions of Supply Chains

 What are the reasons/rationale for global trade

 Contributing factors for global flows and supply

- Land and Resources

- Technology & Information

*****One of the key impacts of technology as an external driver is the disruption it

 Supply Chain in Global Economy

Bi-lateral agreements – agreements between 2 nations.

 Micro perspective of Global Supply Chains

- Supply chain perspective.

- Customer Service Perspective

 Supply Chain Security and Role of Ports

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