Psychology and Globalization Complex Relationship

Question: Discuss about the Psychology and Globalization for Complex Relationship. Answer: Introduction: The world has become a global village over the years. With the introduction of globalization in every aspect of life, the world has become small. Life has changed drastically across continents. Economies have taken a large leap towards growth. Globalization refers to the process of communication and integration among the citizens, organizations, governments of different countries, driven by trade and investment and supported by information technology. Globalization has impacts on economy, culture, environment, political systems, economic development and well-being of societies throughout the world (Knight, 2015). For thousands of years, people have indulged in travelling across the countries and continents for the need of buying and selling products, which is the base for todays international trade and globalization. As nations developed, organizations formed and they have invested in companies in other countries. The trend has grown multiple times after the First World War (1906). C ountries entered into agreements for international trade and other economic policies for the benefit of the global economy (Collier Venables, 2012). Today, economies have developed a lot due to this wave of globalization. In regards to this, we will discuss the effects of globalization on a multinational company, Costco (Retail Supermarket). Costco and globalization: Costco Wholesale Corporation is an American warehouse club, which provides merchandise of various products of various brands at substantially cheaper prices. It is designed to assist the small-to-medium sized businesses for reducing cost of purchasing. Individuals can also buy from Costco provided they have membership. It is a membership-only multinational retail supermarket. Currently, Costco is the largest membership-only warehouse club in US, and second-largest in the world, after Walmart. It is headquartered in Issaquah, Washington. As of Nov 20, 2016, Costco operates 723 branches all over the world, including 8 in Australia. In 2015, it has sold approximately $1.3 billion worth of merchandise in Australia (Minahan, Huddleston Bianchi, 2012). Costco Wholesale Australia Pty Ltd is the Australian section of the Costco USA. It is headquartered in Lidcombe, New South Wales and has employee strength of 2355 approximately. Costco operates in retail industries of supermarkets and grocery stores, fuel and consumer goods in Australia. According to The Australian, approximately 150,000 Australians have taken Costco membership since the opening of its first local store in 2009 in Melbournes Docklands (Minahan, Huddleston Bianchi, 2012). Costco first began its operation in Seattle, Washington in 1983. It merged with The Price Company in October 1993 and formed Price/Costco, Inc., and brought about the membership-only concept in their business. Price Enterprises changed its name to Costco Corporations in 1997. In 1999, Costco Companies Inc. changed its name to Costco Wholesale Corporation, listed as COST in NASDAQ. It has started to spread its operations in the international market since early 2000s. Now it has branches in USA, UK, Canada, Mexico, Australia, Japan, South Korea, Taiwan and Spain (Minahan, Huddleston Bianchi, 2012). Costco is one example of globalization of retail industry. It started as an American corporation, but overtime it followed the globalization process to become a multinational retail warehouse giant. In the new century, integration and interdependency of international economies started, to achieve more prosperity within obligatory rules by the government, imposed to avoid the problems that arise in an open market. This promoted semi-global markets and led the way for globalization of markets. Studies on cross-border integration and other factors show todays globalization level is only 10 to 15 percent (Grinin, 2012). Aspects of globalization: There are two aspects of globalization the globalization of markets and the globalization of production. Globalization of market refers to the assimilation of distinct and diverse national markets into one international market. The organizations with chain outlets represent this type of globalization, for example, Cocacola, Starbucks, KFC, MacDonalds, Walmart and many more. Costco also falls under this category. On the other hand, globalization of production refers to the acquisition of factors of production from places around the world to gain the benefit of the cost differences and quality of the factors. Companies do this to lower their cost of production and supply quality products in the domestic and international markets. Volkswagen, Boeing and many computer hardware companies fall under this category (Herrera, 2012). In the past few decades, there have been significant developments in the economic policies and technologies, which led to a increase in international trade and investments. Migration also increased leading to economic development of nations. For instance, international trade volume has risen by 20 times since 1950, and, in two years, from 1997 to 1999, the flow of foreign investment got almost doubled, from $468 billion to $827 billion. Thomas Friedman represented this wave of globalization as farther, faster, cheaper and deeper (Herrera, 2012). Globalization also led to liberalization of economies. Post Second World War, especially in the past two decades, nations have started to adopt trade liberalization policies. That led to increasing production capacity and new scope for trade and investments across the globe. Governments entered into agreements to reduce the commercial barriers and promoting trade and investment in foreign countries (Grinin, 2012). Hence, to take the chances for new opportunities in the foreign markets, organizations started to invest, build factories, produce and make marketing arrangements to capture the international customer base (Marsella, 2012). Costco has applied this logic in its operations. It studied the foreign markets and took the opportunity to expand in the international markets with different product merchandise. To understand the impact of globalization on the business operations of Costco, let us first have a glance on its business strategies. It sells bulk products at a lower price. The small to medium sized businesses and large families are the target customers. Costco does not carry multiple brands, apart from their home brand, Kirkland Signature label. This allows Costco to buy from a single vendor, thus lowering the price and marketing cost even more. A general Costco store carries approximately 3,700 distinct product varieties compared to a Walmart supercenter with approximately 1,40,000 varieties (Mora, 2016). It also does not store packing bags to lower its operating costs. Customers need to carry their own bags for shopping. Lighting costs are reduced on the sunny days to make maximum use of the sunlight during the daytime (Lukic, 2016). Costco uses shipping pallets to display products on the floor, rather than stacking them on the individual shelves (Minahan, Huddleston Bianchi, 2012). Effects of globalization: Australia adopted globalization in the 1980s. The economy was declining and unemployment rate was high prior to globalization. It has allowed foreign companies and investors to invest here freely, open up businesses, which led to efficient economy, competitive markets, improved quality of output, creation of jobs and thus, higher employment rate, innovation in technology and improvement in the living standards (Patel, 2017). We will discuss the effects of globalization in regards to the business operations of Costco. There has been increase in foreign investments in the country. Agreements with other nations led to opening of the economy for FDI s and trade relations (Martinez-Fernandez et al., 2012). Exports and imports both have increased significantly. For instance, Costco is a US-based corporation. While expanding its business, it has captured the economic scope of Australia and opened its first branch in Docklands, Melbourne in 2009 (Courtemanche Carden, 2014). Rate of employment increased in the economy. Since there has been a rise in the opening up of businesses, naturally more jobs were created in all the sectors like manufacturing, agriculture, service, mining (Jaumotte, Lall Papageorgiou, 2013). For example, with 8 branches in Australia, Costco has generated employment of approximately 2355 persons country-wide till date (Price, 2016). As a result of this growth in employment, living standards have improved, people have more money in their hands and liquidity has increased in the market. Hence, Costco has found it feasible to expand its stores in 8 locations in the country. People are now willing to spend money to maintain their living standards, which led to increased level of sales in the retail sector. Costco is a retail supermarket, selling multiple varieties of product in bulk and at a lower price. The supply vendors of Costco have experienced a surge in their manufacturing of the products and they sustain in the manufacturing industry by supplying to Costco only. Costco has followed the policy of diversification of investments in all their business strategy. They operate as a retail supermarket for all types of consumer goods including fuel. Since it is a multinational company, it can easily shelf a particular brand of a particular product from a different country. Exports and imports have become easier after emergence of globalization (Price, 2016). Problems: Studies on Costco have thrown some insights on its aspects. They face a few problems. Following are the major problem Faced: Variable membership cost Costco membership price is $60. People buy membership at $60, some never use it for inconvenience to shop, and some spend unnecessary more money to make worth of the $60. Individuals do not become interested to buy the membership due to the constraint of buying large. Since their price margin is very low, they must make part of their profit from the memberships. However, the price should be different for individuals and small families; and small-to-medium sized businesses and large families (Yang et al., 2016). Costco fuel is cheaper than its rivals. Even if its 15 cents less, people are lured by the small savings (Hinterhuber Liozu, 2014). They are willing to drive long way to save this little amount, because there are not many fuel stations of Costco. Costco sells in bulk. That is good for small-to-medium sized businesses and large families but not for small entities. Most of the time, people avoid going there due to the constraint of buying in bulk (Samuel, Shah Sahay, 2012). Costco is unbeatable for some non-perishable goods like pet food, toiletries, but not for some other things like food items. Buying in bulk ultimately leads to wastage of money and the product as well (Samuel, Shah Sahay, 2012). Recomendations: Costco has a wide range of problems. Following are a few recommendations that may help solve such problems. Costco must categorize the target customers and charge accordingly in order to make more people interested to buy the membership. Costco should open up more fuel stations and advertise their lower prices. Costco should introduce an option for buying little less, so that the customer base increases. Costco should put more emphasis on advertising its lower prices. Since, it is a competitive market, it is important to make customers aware about the offers and price discounts of the stores. To thrive in the industry and make profit, not only prices should be lower, but that has to be properly advertised also. Costco should opt for a viable operating strategy where there would be less wastage of resources (Samuel, Shah Sahay, 2012). Conclusion: Globalization has shaped the diverse Australian economy into an emerging and blooming one. It has impacts on all aspects of a business. In this highly competitive market, a company must take the global aspect of markets into consideration. The effect varies from one industry to the other. The dealings between countries also vary, so does the impacts on the businesses. There are other factors also which have impacts on the international and domestic business such as, culture, legal factors, immigration, terrorism, technological advancements, and infrastructural developments and so on. All of these together has led to an efficient and competitive economy. Organizations are improving their way of business and marketing which ultimately helps to achieve economic growth, and benefits the consumers most. In the discussion above, the effects of globalization on the company, Costco Wholesale Corporation, Australia, have been emphasized. Costco, a multibillion-dollar multinational wholesale w arehouse club, has taken the wholesale retail business to a new level. Knowledge of the Australian market and innovation of business strategies and marketing plans have helped them grow outside of the USA. 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