Globalization of business has resulted in more opportunities in terms of factor availability and market creation. Manufacturers of goods and services have greater access to production factors like skilled human resource, technology, and raw materials. At the same time they have a more widespread market for selling their commodities. Globalization has also resulted in creation of sourcing companies focused on resourcing men and materials for business houses and industrial establishments.
Resourcing of men, materials or technology is done on a worldwide basis for benefiting manufacturers and consumers alike. Globalization has not only increased the options of sellers in the form of newer markets but also of consumers in form of greater options of finished goods. In this dual benefit scenario, for example a China sourcing company directly benefits manufactures of commodities and services, and consumers indirectly. Manufacturers are benefited because of availability of better quality resources at more affordable prices.
Impact of factor prices on consumer behavior
According to economic principles, the price of any material is adjudged by its demand and supply. In rudimentary terms, the price of any commodity or factor increases with its demand. Similarly, their price falls when there is an abundance of supply. Both buyers and sellers are bound by this interplay of supply and demand forces. Another vital consideration in this interplay of demand and supply is the price of finished product or service as enjoyed by end-users. With globalization there are several sellers of any product or service and a consumer has more than one choice. Out of the several alternatives available, an end-user is likely to choose an item that suits his preferences both in terms of quality and price.
Price being a crucial factor, sellers would always attempt to keep it within affordable limits of consumers. As competition does not allow too much variation in the end-user price of a commodity, sellers are prompted to reduce their procurement cost by sourcing factors that are cheaper: low priced raw materials, less expensive human resource, and affordable technology.
A constant lookout for factor markets
In an effort to keep factor prices within reasonable limits sourcing companies are constantly on the lookout for more affordable raw materials, technology, and manpower. Herein lies the efficiency of these companies. There are some markets or territories that are perennially abundant, while there are some which remain enriched for a particular period and then get defunct. Mineral deposits are one such example. Extensive mining has resulted in a poor reserve as on date. The same holds true for coal, iron, aluminium or any other metal for that matter.
These specialized companies explore one country after another for locating fresh source of ingredients, technology and skilled human resource. Here it needs to be understood that though mineral resources are more prone to get exhausted early, the same is not true for agricultural or farm products.
Sourcing companies usually operate from several countries across continents. Their exploration activities are not limited to raw materials only but also for technology and qualified human resource.