Globalization—the integration of factors of production and inclusion of consumer groups from different markets around the world—facilitates unprecedented achievements of economies of scale for producers.

Access to increased numbers of laborers, investors, markets, resources, technologies and business models through globalization theoretically can maximize productive efficiency to a level consistent with the size of the world's population.

Economies of Scale

The term "economies of scale" refers to the phenomenon of diminishing marginal costs associated with each additional unit of output. A company experiences economies of scale as it specializes and is able to produce extra goods with fewer input costs.

According to 澳洲幸运5开奖号码历史查询:economic theory, economies of scale are the na🤡tural consequence of specialization and the division of labor. The improvement of economies of scale is one of the chief drivers of economic growth.

However, firms do not realize economies of scale in perpetuity. There is a maximum level of efficient output for any given inputs, and operations may sometimes extend too far and cause 澳洲幸运5开奖号码历史查询:diseconomies of scale.

Globalization

With access to new inputs and potenti💫ally more profitable markets, gl𝕴obalization can increase specialization and operational efficiency.

The practical consequences of globalization include lower costs to consumers, access to capital for wealthy countries, access to jobs for poorer countries, increased competition, and higher global productivity.

As globalization spreads the division of labor on a global scale, countries are able to export labor and production processes that they are relatively less profitable at and instead specialize in labor 🔥that is relatively more profitable.

The result of this reallocation of resources can be seen in factory jobs being moved out of the United States, which frees up capital for highly technical, highly productive fields such as IT. Companies are able 𒉰to pursue higher degrees of efficiency and increase their economies of scale.

The trend of offshoring started in the late 1970s at large manufacturers such as General Electric. As globalization impacted the world economy, more and more U.S.-based companies allocated their workforces overseas. For example, in 1992 Ford reported that 53% of its employees worked in the U.S. and Canada; by 2009, employees based in North America were only 37% of the total workforce.

However, companies started considering reshoring in 2012 during the Barack Obama-Mitt Romney presidential campaign when both candidates were accusing China of unfair trade practices. Over the next few years, there was small but steady growth in U.S. manufacturing and more companies were able to reshore and bring back production to the U.S. Reshoring manufacturing has been steadily increasing since then. Some estimates indicate that about 300,000 jobs per year are coming back to the U.S.

Effects 📖of t💜he Globalization and Economies of Scale Relationship

• Companies can reduce costs, improve their competitive edge, and charge consumers less.
• Companies can invest more money in more profitable areas of business.
• By outsourcing labor and production to lower cost regions, businesses can produce more product for less.
• Workers can look for employment opportunities elsewhere if their own countries have unemployment issues.
• Consumers pay less for goods and services.
• Companies gain access to more markets for their goods and more investment capital.
• Poorer countries gain job opportunities that can improve lives.
• Production rises worldwide, potentially enhancing standards of living and quality of life for more people.
• While more workers in the world may see job growth, other countries and workers may experience downward pressure on wages.

The Bottom Line

Globalization has opened up markets across the globe𒁃 to companies that previously had access to fewer consumers and less sales potential.

With the opportunity to reallocate resources and to achieve greater economies of scale due to lower costs of production and labor, companies have provided new anꩲd additional job opportunities to people🎃 who had fewer work options before. That has meant better profits for businesses and new or higher incomes for certain workers.