Globalization is a process of integration of regional economies and cultures into a global network of trade (Jason, 2006). Nations integrate into the international market in terms of technology, trade, capital flows or investments. Economic globalization refers to the increase in national interdependence of economies through an increment in international trade. This is the process of promoting economic integration between economies of different countries with the aim of establishing a global market. Through economic integration, nations get a wider access to the world economy and their dependence on local resources declines. This results into economic growth and development (Stiglitz 2003).
Through economic integration, nations get a wider access to the world economy and their dependence on local resources is reduced. It can be in the form of Free Trade Agreement (FTA) or world trade organization (WTO). These are trade organizations that encourage trade among different countries. Economic integration makes international trade easier through the removal of trade barriers and tariffs. This can be through protection of investors in order to promote their capital investments. With economic integration, good and services, labour and capital find their way in the country where they are be put into maximum use (IMF staff 2008).
A key element in globalization is growth in international trade, sometimes referred to as world trade (Jason, 2006). It can be defined as the exchange of goods, services or capital between different countries. International trade plays a very crucial role in ensuring continuity of globalization. However, international trade is subject to certain limitations in the form of trade barriers. This take many forms including but not limited to import licenses, quotas, subsidies, tariffs and non tariffs barriers, and embargoes. Most of the trade barriers use the same principle; they impose some cost on trade so as to raise the prices of the goods in question (Saving 2006).
Free trade is a policy in trade that enables countries or traders to transact without government interference. This results in economic growth and development. Increase in the mobility of factors of production faces some negative challenges especially because of the economic pressures in the global market. Today, the global economy has increased to significant levels and all this have been facilitated by trade agreements. Several factors influence globalization which includes: socio cultural, technological, economic and political factors. Globalization can also be used to refer to the national movement of culture, languages and ideas.
International finance is a branch of economics that deals with exchange rates and foreign investment and their effect on international trade. It also looks into international capital flows, deficits in trade and international projects (Wolf 2005). International finance can be said to be a branch in international economics that studies the currency changes, and the future of international trade. In recent years, the international financial market has been experiencing increases brought about by globalization. This paper looks at effects of globalization that affect Nissan motor company based in the United States. It will also look at the measures that the company has taken to address these effects.
The Automobile Industry
The automobile industry is one of the industries that are advanced technologically (Spatz 2010). With the increase in economic integration, low-income countries have managed to venture into the global market more so on division of labour thereby putting a lot of competitive pressures on the counties relying on the tradition production of automobile. New automobile producers have emerged from central Europe, Asia and Latin America.
The German and Japan automobile industries have gone to the extent of outsourcing for labour intensive segments to improve their value chain on the national level. Globalization has changed the face of automobile industry especially in the countries that relied on traditional production. In the world, there are three major automobile production countries that have for a long time been relying on traditional production; these are the United States, Germany, and Japan. With globalization, competitors have entered into the automobile industry forcing the traditional producing countries to adopt new technology and skilled labour.
The automobile industry is now flooded with new producers and exporters of its products and this has been made easy because of availability of outsourcing of skilled labour. According to United Nation Conference on Trade and Development (UNCTAD), the automobile industry is one of the sectors that have taken advantage of globalization. (UNCTAD is an intergovernmental body that was established in 1964 for the purpose of dealing with trade, investment, and development issues with the United Nation. Its headquarters is in Geneva Switzerland and currently it has 193 member countries from all over the world and 400 staff members).
This view is supported by the increased network of alliances among automobile companies and also the increase in shareholding within regions and between regions (Anon “From remarks at an UNCTAD conference” 2003). Since 1990s, many automobile companies have been merging with others while others have acquired some of the small companies (both suppliers of input and end-producers) in order to increase their competitiveness in the global market. The increase in the number of new producers and exporters of automobile end producers resulted from foreign direct investment (FDI) through multinational companies especially in low-income countries (Diehl 2001).
For instance, out of all the FDI stock held by German automobile company came from low income countries. These stocks have been increasing with time and have enabled the company to make more investments in Europe and Asia. FDI have played a very crucial role in the automobile industry not only in German but also in other parts of the world for instance china. However, despite this new move, most automobile companies continue to be dominated by large national companies (Neven 1995).
Korea was the first country to set up an indigenous automobile industry which was able to penetrate the global market. This was contrary to Spain automobile exports which focused mainly on the high-income countries, Korea’s end products focused on all regions. The traditional producers especially from German and the United States were to some extent affected by the competitive forces emerging from Korea forcing them to integrate with other countries especially the low-income countries (Spatz 2010).
Effects of Globalization
One of the effects of globalization is the increase in global warming. As production increases, a lot of gases in released to the atmosphere because most companies, not to mention the automobile company, use the fossils fuel as a source of energy. The fossil fuels are the commonly used non-renewable energy resource. There are many different forms of fossil fuels such as coal, natural gas and petroleum (Lim 2001). These fuels have been used for along period of time since industrial revolution. They are easy to use because they just need an easy combustion. Although they are easy to use, this combustion results to air pollution which greatly affects the environment.
Global warming is the increase in the temperatures of the earth’s air surface and the subsequent increase in the water levels that is, oceans and sea levels increase. It results from numerous human activities that emit gasses that prevent the radiation of sunlight back to the atmosphere. The sun’s rays are prevented from reaching the earth’s surface by the ozone layer found in the atmosphere. Through global warming, this layer is weakened thereby allowing the harmful rays from the sun to penetrate to the earth’s surface. When these harmful rays get to the earth’s surface, they absorb most of the moist that helps in the growth of vegetation (Cubby 2009).
Some of these gases are released to the atmosphere through natural process although most of them result from increased human activities. When Fossil fuels are burned, they release carbon dioxide into the atmosphere. The consumption of fossil fuels by the energy infrastructure is one of the greatest sources of greenhouse gases which are responsible for recent global warming and climate change concern (Ferraro et al 1998). In cases where the air is polluted by green house emissions then these green house gasses break the reflected sunlight radiations from reflecting back to the atmosphere, leaving them just at the earth’s surface. This increases the earth’s surface temperature (Union of Concerned Scientists 2010). This is not only harmful to human beings, but to all living organisms including plants and animals.
Solution to the Problem of Global Warming
Anticipated carbon dioxide emissions gradually augmented from 1988 to 1995 and it is probable that it may increase further by the end of this year (National Greenhouse Gas Inventory Committee, 1997). An agreement known as Kyoto protocol was ratified in Japan, on 11 December 1997 that recommends for adoption of clean technology. The main aim of the protocol was to ensure that emission of green house gases (carbon gases) was reduced by 5% (below their level in 1990) by the end of 2010.
Holding back the increase in emissions, as agreed under Kyoto protocol, is going to necessitate grave changes in management. To control the amount of carbon dioxide released from industries, most governments have put strict regulatory measures such as the use of the cap-and-trade. This is a market based method for controlling carbon dioxide emissions by use of tradeoffs and incentives. In this method, an aggregate cap is sought in all the energy sources which are then allowed to trade among themselves as a way of establishing the source that emit a lot of pollution to the environment (National Greenhouse Gas Inventory Committee 1997).
Firms are allowed to emit emissions into the environment up to a certain limit and further discharge is fined (Fischer 2010). However, the volume of emissions can not exceed the aggregate cap and firms which require more permits should buy from the firms that require fewer permits. The cap-and-trade mechanism uses an absolute structure, in that an allowance must be redeemed to the authorities for every unit of pollution produced.
Since Vehicles are known to release a lot of carbon dioxide in the air, Nissan motor vehicle may not be able to produce effectively under the cap-and-trade mechanism. To address this problem Nissan motor company has introduced zero-emission vehicles. Nissan uses effective technology to manufacture its vehicles and sells then at an affordable price for the consumer According to the US environmental agency, Nissan electric cars (LEAF), is leading in terms of environmental friendliness and it is the first electric vehicle that is mass-produced with zero emissions (Dewees 2008). Its technology is based on four rights, that is, proving products using the right technology, at the right time, in the right place and for the right value to the customer. The company believes that, it has a social responsibility as a global automaker and that is to provide right technology and at the same time meeting the customer and the society needs.
On August 2, 2009, Nissan motor company organized a ceremony to celebrate its completion of the new headquarters which were given the name Nissan Global Headquarters. The ceremony was held in Mianato Marai 21 district, Yokohama, Kanagawa. This new headquarters is more eco-friendly than the old one and with it, the company has managed to reduce approximately 27% of carbon dioxide emissions between 2007 and 2009. The building has been ranked the highest by the Comprehensive Assessment System for Building Environment Efficiency (CASBEE) organization in terms of reduction of carbon dioxide emissions.
The new building uses fresh air from the outside and this helps it to save on energy consumption used by air-conditioning. With the new headquarters, Nissan has been able to save more than 18% of fresh water in 2009, by harvesting rainwater and putting miscellaneous drainage systems for processing used water to be re-used for watering plants or as for sanitation. With the new water recycling process Nissan was able to save 21.6 million litres of water in Barcelona in 2008 which represented a 20% reduction in water consumption from the previous year (Anon. “Nissan motor completes Eco-friendly Global headquarters” 2009)
Automotive companies often receive criticisms as a result of environmental degradation that emanates from the automobiles that they produce as well as the manufacturing processes of these products (Cramton & Kerr 2002). Almost all automobile companies use fossil fuel in their production and they also produce vehicles that use fossil fuels. As we all know, fossil fuel is a non renewable resource and once it is exploited it can not be replenished (Anurag 2006).
This has prompted the companies to take responsibility by formulating and implementing strategies that are aimed at improving the global environment (Cramton & Kerr 2002). Since early 2009, the United States under President Barack Obama, and other countries have been increasing their spending on conservation of the environment. These regulations are aimed at enhancing the production of fuel-efficient vehicles.
It was estimated that, if all automobile companies agreed to produce fuel efficient vehicles, then the level of carbon dioxide emissions would reduce by 25% come the year 2020 and the fossil fuels would be preserved. Currently, the world is changing at a very high rate and the economic situation continues to deteriorate, not to mention the growing environmental measures that are becoming a challenge to many businesses. To overcome these challenges, companies have to come up with creative environmental technologies in order to increase and strengthen their global competitiveness (U.S. Department of Energy 2010).
Nissan Green Program
Nissan automobile company is in the process of making more innovations to help the company achieves its environmental action plan, otherwise referred to as Nissan Green Program 2010 (Nissan sustainable report, 2010). The purpose of this program is to see that, a sustainable environment is achieved to enable vehicles and people to coexist with nature. The process of production of motor vehicles involves the use of resources that are powered by fossil fuels, for instance diesel. Nissan is a global manufacturer of automobile which takes a lot of care to identify the impacts that the production process may have on the environment and takes necessary measures to minimize the negative impacts such as emission of carbon dioxide.
The ultimate goal of Nissan automobile company is to minimize the environmental impact caused by its operation and also from the Nissan vehicles to significant low levels that can be absorbed by the earth through natural practices. Nissan Company has realized the importance of maintaining a healthy environment and it now aims at being the leader in environment conservation. This can only be achieved through the adoption of proactive measures that reduces the impact of the gases released to the environment both through its operations and the vehicles produced.
Use of Innovative Technology
The company aims to be a “sincere eco-innovator”. It has involved itself in vigorous activities all of them aimed at achieving a sustainable environment. Many innovations have been made by the company on ways of reducing the impacts caused by its vehicles on the environment (Union of concerned Scientist (USC), 2010). Nissan has defined three critical issues that it wants to address; reducing the emission of carbon dioxide, reducing other emissions that may contaminate with the air, soil or water bodies and last but definitely not least, recycling of resources. Nissan gives reduction of carbon emission the first priority and it is in the process of addressing the same (Bhagwati 2004). According to the Nissan sustainable report produced in 2010,
Technical innovation is essential for reliable progress in reducing CO2 emissions. We are unlikely, however, to reduce them to sustainable levels with technology alone; this will require cooperative efforts by all of society. Even in the area of technology, we cannot pursue only CO2 reductions. We will not achieve real sustainability unless consideration is given to basic performance and cost, allowing the technology to be put into widespread use. Based on this awareness, Nissan considers the environment from the perspective of the entire lifecycle of its vehicles, and is working to reduce CO2 emissions in all its corporate activities. We have made zero-emission vehicles the core of our strategy in our product range in particular, and we want to turn these environmental challenges into an opportunity to contribute to a sustainable society (p5)
To reduce the use of fossil fuel and the emission of carbon dioxide, Nissan introduced QCT-C (Quality, Cost, Time, and CO2) management. The element of CO2 (C) was added to the traditional QCT to signify the efforts being taken by Nissan to reduce CO2 emission. Nissan has already set targets for the reduction of carbon in all areas of operation so as to create a new value for both the society and consumers (Hively 1996).
Many automobile companies have realized the need to conserve the environment and are now producing vehicles that utilize other sources of fuels such as ethanol rather than relying on the fossil fuels. Honda Company has recently been named as the world’s ‘Greenest automaker’ by the union of concerned scientists and has received awards for the same (King 2010). Nissan has introduced new vehicles called electric vehicles (EVs) which are run on a battery that does not release carbon dioxide (Anon. “Electric cars and noise” 2009).
An example of a recent version of the electric vehicles is the Nissan LEAF which was introduced in August 2009. This vehicle uses a lithium-ion battery which emits very little volume of CO2. The sale of this vehicle is expected to commence in December this year and Nissan plans to market it first in Japan, the United States and the European countries. The sale of Nissan LEAF is expected to boast the company’s sales since it will be offered at an affordable price (30,000 Euros). Nissan has also introduced another model of the EV vehicle known as the Land Glider which was launched during the 41st TOYKO Motor Show held in October 2009 (Sperling & Gordon 2009).
With the diesel powered vehicles, Nissan motor company has recorded a growth in its sales revenue in the EU countries and expects to make more sales once the electric Nissan LEAF is launched in 2011. Nissan has been able to venture in 13 Europeans countries some of them being, Denmark, Finland, and Italy. In 2009, Nissan sold almost 500, 000 vehicles across 40 markets in the European countries. In United States, Nissan’s diesel powered vehicles occupied 25% market size in 2009 and this is expected to increase by 4.5% in 2011 once the electric LEAF is launched in the market (Sperling & Gordon 2009).
According to a reported tabled on April 22, 2008, Nissan motor company recorded a sales volume of 1,088,000 from the sales of its Continuously Variable Transmission (CVT) equipped vehicles. It managed to meet the target which had been set under the Nissan Green Program 2010. In August 2007, Nissan announced the launching of advanced sulev-standard clean diesel which would meet the standards in California of low- emission vehicles.
Previously, the company had announced another clean diesel technology that met the Tier2Bin5 emissions standards in the United States. With this technology, Nissan is optimist that, it will be able to meet the SULEV-standards in California. However, to meet these new standards, Nissan had to reduce emission of hydrocarbon from its vehicles by 90% and to reduce NOx levels by 70% (Anon. “News and events; the all-new Nissan Micra” 2010).
Globalization can be defined as the process through which many nations integrate with each other in form of trade. Through globalization, nations are able to trade with each other in a global market. Globalization has resulted in the mobility of factors of production thereby making production of goods and services easy and faster. Nations are assured of a ready market for their products and the fear of lack of markets has now faded.
Many governments have gone to the extent of abolishing trade barriers enabling nations to trade freely with each other. The automobile industry is one of the industries that have benefited greatly from globalization, it has become easy to purchase cars from virtually any country and this has resulted in increased competition. With competition, the price of vehicles has gone down although their demand is still high. Many automobile companies have been established for instance we have, the Honda Company, Toyota and the Nissan motor industry.
Some automobile companies have merged with others in order to fight with the problem of competition. Others have acquired smaller companies in order to increase their production capacity. There has been an increased production of motor vehicle and their demand has also increased significantly. This has resulted in the increase in carbon dioxide released in the air resulting in an increase in green house gases. Accumulation of green house gases causes global warming which weakness the ability of the ozone layer to prevent the harmful rays from the sun from reaching the earth’s surface.
To address this problem, Nissan Company has introduced “zero-emission” vehicles which use other sources of energy such as ethanol. Another global effect that affects Nissan Company is that of environmental degradation. Fossil fuel is a non renewable energy resource which can not be replenished once it has been exploited. With the increase in automobile production, available fossil fuels may soon become extinct. Also these fuels release a lot of carbon dioxide that pollutes the air.
To address this issue, Nissan has introduced other types of vehicles known as electric vehicles that use batteries which releases very little amount of carbon dioxide. The sale of these cars is expected to start towards the end of the year and it is likely that, they will attract a large population. With the current level of literacy and the advancement of technology, almost every person has been cautious of his/her health and the need to conserve the environment and the electric vehicles are the solution to the current effect of globalization in the automobile industry. It would be good for Nissan if it concentrates more on the zero-emission vehicle, for instance, those that use battery because very soon the fossil fuel vehicles may become outdated.
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