Downsizing and Globalization Essay Example | Topics and Well Written Essays - 3000 words

Downsizing and Globalization - Essay Example This paper presents a critique of the globalization and downsizing, and the reasons why organizations engage in these strategies. Downsizing Strategy Downsizing is a management strategy that involves reduction of an organization’s labor force as a result of corporate restructuring that is focused on maintaining competency in a highly competitive environment. Mergers and acquisitions are among the significant drivers for downsizing. For instance, the acquisition of PeopleSoft by Oracle led to a reduction in the number of employees by 5,000 in a bid to increase efficiency in the new organization. PeopleSoft’s revenue had been declining as a result of the economic crises that significantly affected the profitability of UK firms in 2007 (Blackburn, 1999). However, mergers and acquisitions may necessitate downsizing due to duplication of roles among employees from the merging organizations. The dominant organization tends to retain a greater share of its human resources whil e selecting few employees from the other organization, mainly those with specialized skills that may help in maintaining competitiveness (Kothen et al. 1999). Revenue management is focused on maintaining high revenue while keeping costs at the lowest level possible. Downsizing is among the key strategies for revenue management since organizations find it easy to reduce the workforce and utilize the remaining employees maximally. The operating environment is under constant changes that may affect an organization’s profitability if drastic measures are not undertaken. For example, globalization of industries has increased competition as foreign firms establish subsidiaries globally. Local industries in the global economies are faced with challenges with regards to product quality and production costs. For example, Spar (2003) observes that the cost of labor in China is low compared to some developed economies such as US and the UK. Foreign companies have therefore established s ubsidiaries in China where they produce at lower costs and then sell their products to other economies where the cost of labor is high. This trend has significantly affected industries operating in such economies since they have to minimize spending on labor to effectively compete with organizations that have taken advantage of the Chinese labor market. They have been compelled to lay off workers as well as calling for early retirement (McCann et al. 2008). Technological advancements have significantly influenced the need for organizations to downsize. Organizations engage in innovations to maximize production and increase efficiency. However, some innovations reduce labor-intensive work thereby reducing the need for workers. For example automation of processes increases speed and efficiency in production compared to human labor. Moreover, the recurrent expenditures of maintaining human resources are avoided since the machines require an initial capital outlay and occasional mainten ance. Many organizations globally downsized after introducing computers in their processes. This was a significant development that increased efficiency and accuracy in record keeping as well as service delivery to customers (Froud et al. 2000). Efficiency improvement involves reduction of the excess workers that perform tasks which have little contribution to the organization’