1. Economic Drivers Of Globalization
2. 5 Drivers Of Globalization

Jul 23

May 10, 2020 For example; from 1920 to 1990 the average freight and port charges of import and export has fell from $95 to $29. This huge difference in the transportation cost has contributed to the reduction in trade barriers and hence an increase in the globalization effect. Sep 17, 2015 The globalization of customer needs and the opportunities for scale and standardization it brings will fundamentally alter the economics of many industries. Economies of scale and scope, experience effects, and exploiting differences in factor costs for product development, manufacturing, and sourcing in different parts of the world will assume. Other cost drivers to globalization are the opportunity to build global scale economies and the high product development costs nowadays. (Ferrier, 2004) 5) Competitive drivers With the global market, global inter-firm competition increases and organizations are forced to “play” international. Cost Drivers of Globalization Although price isn't the only factor at play when consumers make purchasing decisions, it certainly plays a critical role. When companies compete on a global playing field, cost drivers are considerably more complex than in smaller, simpler markets.

Back To Home

Cost Driver

See Also:
Cost Center
Value Drivers: Building Reliable Systems to Sustain Growth
Direct Labor Variance Formulas
Direct Material Variance Formulas
Step Method Allocation

In accounting, the cost driver definition is a factor that incurs cost. Use cost drivers to allocate variable and indirectcosts to production activities or output. Include both indirect costs and direct costs to compute the full cost of production. Because indirect costs, such as variable overhead, are not directly traceable to production activities, allocate them according to a cost driver rate to apply these costs to production activities. Based on the activity of the cost driver, the cost driver rate is the rate indirect costs applied to production activities.

Download the free Know Your Economics guide to easily manage the factors incurring costs in your company.

Choosing Cost Drivers

An indirect or variable cost may have several possible cost drivers. Traditional costing methods allocate indirect costs to production activities based on volume of output. Conversely, activity-based costing allocates indirect costs to particular production activities related to that cost.

When deciding which driver to use in terms of allocating indirect cost, consider the cause-and-effect relation between the cost and the driver. In addition, consider whether or not the cost driver activity is easily measurable. It is also necessary to consider the cost behavior of the relevant cost. The relevant cost refers to the cost’s response to the activity of the driver. In addition, approximate the relationship between costs and cost drivers using regression analysis.

Use these drivers at differing hierarchical levels. For example, an indirect or variable cost may be relevant at the unit level, the batch level, the product level, the customer level, or the facility level. Once you determine the appropriate hierarchical level, choose a cost driver activity at that level in order to allocate the indirect or variable cost.

Cost Driver Rates

A cost driver rate is the amount of indirect or variable cost assigned to each unit of cost driver activity. For example, you may apply indirect overhead to direct labor hours as $50 dollars per hour. In this case, for each hour of direct labor required for production, the company would then allocate $50 of indirect overheadcosts to the production activities or output.

Cost Driver Examples

For illustrative purposes, below are some cost driver examples of indirect or variable costs as well as relevant cost driver bases for these costs.

If you want to check if your unit economics are sound, then download your free guide here.

[box]Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click hereto learn more about SCFO Labs[/box]

Source:

Hilton, Ronald W., Michael W. Maher, Frank H. Selto. “Cost Management Strategies for Business Decision”, Mcgraw-Hill Irwin, New York, NY, 2008.

There are two major drivers of economic globalization. One is reduced cost in transportation and improvements in the communications technology; other is the increase in the trade barriers which has led to increased investments across borders. Technological progress is one of the main causes of improvements made in the communications and transportations sector. Cost reduction in the transportation sector has also contributed significantly to the global economy. For example; from 1920 to 1990 the average freight and port charges of import and export has fell from $95 to $29.

This huge difference in the transportation cost has contributed to the reduction in trade barriers and hence an increase in the globalization effect . Due to the dip in the air freight and the technological advancement such as refrigeration; previously goods which were not tradable are now sold across borders. Fresh flowers, strawberries, live lobsters can now be sold from Asia, to Europe, America and Africa. The table below shows the decline in transportation costs during 1920-1990. This was the first era of globalization. Moreover, the table also shows how communication has improved with the advent of internet.

The figure on the next page shows this decline in the freight charges. Advancements in the communications sector have also contributed to the economic growth. For example; formerly a call from New York to London cost around $244. 65. However today it just takes almost $3. 32 . Internet and faxes have further reduced the communication costs. Many people say that the growth of globalization is now complete and that there can be no further changes made in the global economy. It is true, that the national borders are now diminishing due to globalization. Cultures are coming together and it is difficult to differentiate between many cultures.

Minitool partition wizard activation code. Don't use plagiarized sources. Get Your Custom Essayon

Drivers of economic globalization

just from $13,9 / page

For example; In Dubai women are seen in such fashionable westernized dresses that it is difficult to accept that it is a typical Islamic city. This change is also due to globalization. Economists say that, in economic terms there exist no international and geographical borders. It is virtually possible to conduct business all over the world. For example; the internet has eliminated the international borders and has made e-sales possible regardless of the target customers. It should however be considered that the government should not make any monetary or economic policies depending on only their past experience or only the present.

The monetary authorities are virtually powerless in the globalized world of today. The global economy can be studied at different levels. At the macro level the international organizations such as the World Bank and the policies of the International monetary fund can be studied. Many other organizations such as World Trade Organization, the International Labour Organization, The European Union and North American Free Trade Agreement also fall in this category. These organizations establish parameters and rules within which the global economy operates. Another level of global economic study can be the ‘meso’ level.

This constitutes the key building blocks of the global economy. These blocks are the countries and the organizations or firms. In most of the capitalism literature, countries are taken as the main element of the global economy. The global economy is the ground on which the countries and firms can compete. Many economists focus on the industrialized countries in order to measure the impact of globalization on economy, and others focus on the developing nations. The impact on both the set of countries is different. The developing nations are benefiting from globalization, as capital is coming in to their countries.

In contrast, the developed nations are the ones who are on a decline. For example; United States’ economy was one of the strongest a decade back. Today it contributes only 20% to the World’s economy. The reason for this is that America’s firms outsources majority of its unskilled and now even skilled labour to low waged countries. Another level for studying the global economy is at the micro level. At this level a lot of literature is available by the anti globalization activists. Many organizations are coming up with labour etc issues which have been developed due to globalization.

Remember. This is just a sample.
You can get yourcustom paper from our expert writers

Economic Drivers Of Globalization

Cite this page

5 Drivers Of Globalization

Drivers of economic globalization. (2018, Mar 11). Retrieved from https://phdessay.com/drivers-of-economic-globalization/