When the different stages of a production process are carried out in different countries, a form of global integration is being developed. The global integration of the production process is usually understood as economic globalisation. This internationalisation process is a result of strategies, such as specialisation, cost-cutting, innovation in manufacturing processes and marketing, outsourcing, sub-contracting, in which only the economic aspects are considered, putting aside human development.
Economic globalisation is largely dependent on the general principles of the division (specialisation) of labour. For example, think about a European printing company that, in order to reduce costs, decides to move part of its production process to Ningbo (China) and keep the rest in Europe. Therefore, the production process is divided between China and Europe. Now, additionally, assume that the company buys an international patent on design stickers—marketing innovation strategy that allows the company to achieve its main competitive advantage: product differentiation—from United States to be used in company’s products. Final assembly and sale of the finished products is carried out in Europe. Through this internationalisation strategy the European printing company can sell cheaper—delocalising part of its production to low-cost production area—its differentiated product—acquisition of international patent on design stickers—and enhance its competitiveness in Europe.
In the above example, we get a glimpse of what is usually understood as globalisation:
- Delocalisation of part of the production process abroad, which result in a staff reduction in the home country and job creation in the destination country. Obviously, costs of producing abroad will be lower than those for equal production in Europe, consequently implying poorly-paid jobs in the Chinese manufacturing location. Perhaps in the name of competitiveness the European company is employing sweatshop
- Transfer of money out of Europe to the United States as a fee for intellectual property rights related to the purchase of the international patent.