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Global Logistics Opportunities and Challenges

Western Europe consists of United Kingdom, Netherlands, Belgium, Luxembourg, France, Germany, Italy, Ireland, Denmark, Norway, Sweden, Finland, Austria, Switzerland, Portugal, Spain, Greece, Malta and microstates of Vatican City, San Marino, Monaco, Andorra and Liechtenstein. Western Europe is considered as major contributor of the European economy. Its determining characteristics are common currency, tax equalization, political homogenization and standards homogenization. Logistically speaking Western European markets offer a great opportunity for exploiting economies of the scale and size in moving goods throughout the Europe opting from a number of transportation modes. European transport networks have grown because of deregulation of transportation; shipments, optimal route and plan scheduling, and the development of national services. The number of long-distance transports has grown significantly with the largest share of freight transports as road transports. The preferred modes of transportation in the area are roads and rails, closely followed by sea freight. In addition, the ‘Chunnel’ links the UK with the rest of Europe reducing the transportation cost to a great extent. Source: (“DHL Discover Logistics,” n.d.-a)
The logistics systems in Western Europe are characterized more by political change associated with EU enlargement than by geographic features. In Western Europe transport, storage, packaging and administrative jobs are becoming noticeably more efficient due to uniform regulations. The transport networks are very well developed but average shipping distances have grown principally in the wake of the European Union’s enlargement. Outsourcing activities are increasingly affecting logistics in Western Europe because companies no longer consider logistics to be a core business. Instead, larger distribution networks are developing at a rapid pace. Global firms prefer vertical integration and go for direct marketing and distribution in order to reduce inventory and total logistics costs. The changes in the logistics sector have generated challenges of increased efficiency in shipping, packaging and labelling. Here, the reduction of customs processing plays a critical role. In addition, technological improvements throughout Europe are almost uniform and not just clustered in individual countries. As a result, order processing, inventory management, warehousing and IT technology are being further centralized. In nutshell, the competitive situation in Western Europe is intense as compared to the rest of Europe.
Japan has evolved into an economic powerhouse of Asia and created a highly developed logistics system in spite of challenging geographic conditions. On one hand, such a system is necessary to offset the Japanese islands lack of raw materials. On the other hand, it is the foundation for expanding the positive growth of the export nation. The country’s main manufacturing and therefore, logistics hub lies in a triangle around the cities of Tokyo, Nagoya and Osaka on the island of Honshu. Air transport, in particular, plays an important role here. The most important means of freight transport in Japan are road transports and coastal shipping. Almost ninety percent of the transport is carried by trucks. The role of rail transports is almost non-existent. But this could change in the years ahead. A portion of sea freight has been shifted to air transport in recent years. As a result of this shift, international air transports on trans-Pacific routes have climbed tremendously.
Compared with other industrial countries, Japan’s distribution system is very complex and inefficient leading to high distribution costs. Most aspects of goods distribution Source: (“DHL Discover Logistics,” n.d.-b) in Japan is tightly regulated by the government. Joint distribution is typical; competitors who make deliveries to the same businesses tend to use joint delivery capacities and trucks. The logistics market in Japan is opening up to international service providers which are already successfully competing against Japanese companies in areas such as storage, distribution and complex contract logistics. The major logistics challenge is traffic congestion in metropolitan areas around the industrial hub. Just-in-time systems require small and frequent shipments to meet customer requirements. The distribution system in Japanese market is characterised by non-store channels, carrying least inventory. It is helpful in introducing new products through mail order, catalogue sales, and tele-shopping. Shared distribution system is common among competitors. Uniform palletization is used to avoid complicacy in operations.
China China’s logistics market is opening up gradually to the outside world. Logistics enterprises are reorganizing and integrating in the competitive environment. It is more and more obvious that state owned, private owned and foreign funded enterprises are surviving and thriving in the competitive markets. With the increasing demand of logistics, the logistics service for enterprises is changing from low value fundamental services to the high value added services. Logistics infrastructure, integrated logistics, traffic and transportation, and delivery services provide huge investment opportunities. However, the related risks must be put into account, and firms should be cautious when choosing investment projects.
Source: (“DHL Discover Logistics,” n.d.-c)
In some parts of China, due to advancement in technology, the road network now approaches Western standards. Modern freeways have been built in the Pearl River delta as well as in Shanghai and Beijing. Parts of this network extend far into the country’s interior but the standards and quality of the road drops as we move away from the cities particularly in the areas located away from the metropolitan areas. As a result of the underdeveloped infrastructure outside the metropolitan areas, logistics costs are high in an international context. In comparison to other means of transport, the rail network is almost inappropriate for logistics operations due to poorly built rail lines. For example, a container takes five days to journey by train from Hong Kong to Shanghai (“DHL Discover Logistics,” n.d.-c). A transport by ship takes about the same amount of time, but is much cheaper. Rail transports play a major role only in the shipment of bulk cargo like coal or iron ore. As a result, rail transports are not particularly attractive to international companies for general logistics operations.
The key challenges for the Chinese logistics industry are:
Poor infrastructure: insufficient integration of transport networks, information technology (IT), warehousing and distribution facilities.
Regulation: exist at different tiers, imposed by national, regional and local authorities and often differ from city to city, hindering the creation of national networks.
Bureaucracy and Culture: companies need to build links with political agents at various levels. Moreover, it is difficult to repatriate profits back to home country.
Poor training: in logistics sector and the manufacturing and retailing sectors, both at a practical level, i.e., IT, transportation and warehouse as well as at a higher strategic level.
Information and communications technology: lack of IT standards and poor systems integration and equipment. At a very basic level, there is no consistent supply of energy.
Undeveloped domestic industry: logistics sector is fragmented and dominated by commoditized and low quality transport and warehousing, unable to meet the growing supply chain demands for industrial and commercial enterprises.
High transport costs: almost 50% more than Japan, Europe and North America, mainly due to high tolls on roads. Logistics costs (including warehousing, distribution, inventory holding, order processing, etc.) are estimated to be two to three times the normal.
Poor warehousing and storage: high losses, damage and deterioration of stock, especially in the perishables sector.
Regional imbalance: of goods flows from the developed east of the country to the more undeveloped west leading to higher costs for haulage companies which are then passed on to their clients.
Domestic trade barriers: besides lowered trade barriers such as tariffs and quotas for international shipments, there are still problems such as unofficial border tolls from an inland manufacturing location to a port city or vice versa.
Commonwealth of Independent States (CIS) and Eastern Europe Four out of fifteen former Soviet Republics belong to CIS are in Europe: Russia, Ukraine, Belarus, and Moldova. Eastern Europe is made up of Poland, Czechoslovakia, Hungary, Romania, Bulgaria, Serbia, Croatia, Slovenia, Bosnia, Macedonia, Albania, and the Baltic states of Lithuania, Latvia, and Estonia. The countries of Eastern Europe occupy a strategically central position on the continent and are located at Western Europe’s interface with Russia. As a result of the European Union’s enlargement to the east, they are increasingly serving as a bridge. As a result, many manufacturing companies have moved their production facilities to Eastern Europe for cost reasons. Logistics service providers entered either following these companies or to exploit the new markets by carrying out mergers or acquisitions. The opportunities for the companies interested in entering these markets vary significantly from country to country. Although, these countries have relatively well developed transport networks but they do not meet western European standards. Despite the rapid growth of road transports, railroads remain the dominant means of transport.
The Eastern European logistics market is characterized by wide regional differences. While the Czech Republic, Slovakia, Slovenia, Hungary and Poland have made major strides, Romania, Bulgaria and Croatia are trailing far behind. The infrastructure is in even worse shape farther to the east. The road-based freight transports have limited ability to meet the demands of European industry in a cost effective manner. The causes of these limitations include traffic jams, the limited potential for expanding network capacity, rising energy costs and growing intermodal competition from railways. Eastern European harbours, particularly the major sea ports in Poland, perform a significant amount of trans-shipping and are being increasingly expanded. The European Union’s enlargement and the increasing transport volumes have resulted in intensified storage and distribution activities in the countries of Central and Eastern Europe. One of the major challenges is to overcome the barriers that exist between Eastern and Western Europe, including the transport infrastructure.
Foreign Market Entry Strategies Foreign market entry strategies are mainly categorized into:
Indirect exporting
Direct exporting
Manufacturing strategies
Cooperative strategies
Indirect Exporting Piggybacking An established international distribution network of one manufacturer may be used to carry the products of a second company without such a network. The second manufacturer is said to be piggybacking on the first in these cases. The first company has an established reputation and contacts in an international environment. It handles the logistics and administration costs of exporting for the second manufacturer. Piggybacking can offer many advantages to firms; such as cheaper and quick access to new markets, an established knowledge base of the foreign markets and economies of scale with regards to administration, shipping, marketing and distribution. Piggybacking may lead to unsatisfactory marketing arrangements such as lack of strategic fit, providing technical support, and after sales services for buyers potentially leading to disagreement. This method of exporting too is not ideal for building a long-term foreign market presence.
Trading Companies A trading company trades on its own account. It performs many functions as; buying and selling as a merchant, handling goods on consignment, or it may act as a commission house for some buyers. Trading companies match sellers with buyers and manage all the supportive functions such as export arrangements, paperwork, transportation, and legislative requirements. Firms initially choose this mode, because of TCs extensive contacts, experience, operations and long-term commercial relationships in many different trading regions in the world. After some experience in the international market, exporting firms want more control over decision making, so TCs are not their long-term partners.
Export Management Companies Export Management Companies are specialist companies that act as export department for a number of companies. They provide companies with access to foreign buyers, take orders from those foreign buyers, purchase finished products, and handle the transporting and distribution of the goods in the foreign market. Their core competency is in export logistics and deals with the necessary documentation and extensive knowledge of purchasing practices and government regulations in the foreign markets. This is a less risky and fast penetration strategy suitable for new entrants in the international market in the short-term. Disadvantages of EMCs include; export strategy conflict among both parties, lack of manufacturer’s control over foreign market decisions and market knowledge. Due to expertise in exporting, the EMC has complete control over all foreign market decisions. In addition, EMC may even export products that are in direct competition with each other. Therefore, manufacturers need to devote resources to monitoring the performance of an EMC and invest in managing the business relationship. As the manufacturer’s revenue from exporting increases, moving away from the EMC or eliminating EMC’s from the business may prove harmful due to lack of foreign buyer contacts or market knowledge or because of contractual agreements.
Domestic Purchasing Domestic purchasing is a method of market entry which involves the least company involvement. This export method often involves an unsolicited purchase request from a foreign commercial buyer. The company may not even have considered the export potential of their products until approached from the foreign buyer. In general, companies can use this method to sell off excess stock with the least inconvenience. It generates a relatively low level of revenue and the company is completely dependent on the foreign buyer. The company gains limited knowledge of the international markets, as it has no direct contact with them. The foreign buyer often picks up the goods at the factory gates and proceeds to transport the goods, market them, and distribute them in one or more overseas market.
Direct Exporting Distributors Export distributors differ from agents in that they take ownership and responsibility for the goods. Distributors usually take limited rights for the sales and servicing of a particular territory where they represent the manufacturer in all respects. The capital investment can be particularly high for a firm exporting goods requiring specialist handling. Due to this large investment both parties undertake to maintain a long-term relationship.
Agents Export agents are usually individuals or firms operating in a foreign market, contracted by the firm, and paid a commission to obtain orders for the product. After entering into a contractual agreement, sales targets are usually agreed with agents by the firms. Agents are usually contracted to carry non-direct competing products therefore providing a lower exposure to risk. Although agents are the cheapest and quickest form of market entry, the long-term profitability is moderate to low with a short payback period. Agents can be beneficial to the company in that they have local market knowledge, established relationships and provide adequate feedback regarding further product or market development strategies. Agents do not owner goods which limits their motivation to improve performance. They can take the form of brokers, manufacturers’ representatives, managing agents and compradors performing specific functions (Cateora

Rural To Urban Migration In India Economics Essay

Introduction Geographically India is divided into 28 states and 7 union territories. There is a tremendous difference in the combined population size across the state. India constitutes around 30 percent of the total population, which is around 309 million persons were migrants based on place of last residence (Bhagat, 2005).
As a result of rapid economic growth for past few decades, since the initiation of economic reforms in 1990, India has been experiencing the rapid urbanization flow from rural to urban migration. Urban population growth in the developing countries is far more rapid than the population growth generally, about half the urban growth is accounted for by migrants from rural areas. Cities in developing world are growing more rapidly that developed countries (Banerjee, 1983). Inequalities, insecurity, humiliation, agony, poverty and human unhappiness are also multiplying due to urbanization. These main problems will make worse, especially when aided by population explosion and increasing migration. The total population of India is 1028 million consisting of 532 millions males and 496 million females, according to 2001 census (
In this essay we are going to discuss; what drives Migration? How many migrated? What effects does this have? This essay will cover the migration of persons within states or between the states based on crossing geographical boundaries. Firstly we will cover the rural to urban migration which shows us the demographic structure of migration within India. This will assess the different steams’ of migration at all India level over a decade. This will give us a brief description when was the migration of people at the highest peak. Below data consist of 1991 and 2001 censes. Secondly, we are going to study the patter on migration between intra states, which will show is the migration flow. This data even covers the male and female ratio of migration between states. This flow can tell us about the development structure and their migrated population of that particular city or area. Thirdly, we are going to talk about the labour and the employment oriented migration, which will help us to know why migration takes place to that particular state or city. Even will explain the education level, with which we can differentiate the skilled and non-skilled labour migration.
We are going to discuss the affects of urbanization to both urban cities and rural cities, which lead to social and economic disorder. Which leads other side effects to the city and its development? Even factors affecting the rural agricultural areas. Lastly we are going into little more deep affects on the Indian society, which leads to nuclear families. As Joint families is a silent feature of Indian society and how urbanization is leading us to westernization. This topic will address the above discussion by reviewing some of the major theoretical and pragmatic findings concerning migration from rural to urban migration. In discussion I have given my practical experience, which helps us to know present situation of India. Then the conclusion, urban cities should plan about their development of infrastructure according to the migration ratio. We should have a strong plans and their successive operation for the benefits of poor migrants is now very important. The only we will be able to handle the effects of urbanization and bring upward transformation.
Rural to Urban Migration Migration from one area to another in search of improved livelihood is a key feature of human history. While some regions and sectors fall behind in their capacity to support populations, other move ahead and people migrate to access these emerging opportunities. Industrialization widens the gap between rural and urban areas, including a shift of the workforce towards industrializing areas.
Migration from Rural to Urban areas expands due to the following three factors: natural growth of population, reclassification of rural areas as urban in course of time and rural to urban migration. Around 2/5th of the total urban growth in the Developing countries is accounted by the rural to urban migration (Gugler, 1988). More than a half of the urban labour force works in the informal sector of low-skilled, low productivity, often self-employed jobs in pretty sales and services. Any social policy that affects rural and urban incomes will persuade by migration; this will affect the economics of the state or the income distribution and even the population growth. The Harris and Todaro model says that creating job opportunities in the urban areas can actually lead to an increase in unemployment by attracting more migrants than the new jobs (Harris