Bottleneck Essay

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Bottleneck is the “narrow part of a bottle near the top.” The literal meaning aside, the term refers to “a place or stage in a process at which progress is impeded” and was first used sometime between 1895 and 1900. It is used in varied contexts at present: software/ internet, road traffic, logistics (of office work), supply chain, even music (to portray the sliding effects on guitar strings). This term is becoming increasingly significant in global business as large businesses and multinational companies (MNCs) are operating around the world, more so now that ever before. Any sort of bottleneck in the global supply chain (of whatever product) hinders the productivity and efficiency of the whole chain.

To conduct business globally, firms work to facilitate coordination to maintain liaisons all over the world. Technology has also made transportation cheaper, allowing the best rates for various steps of production to converge to make the final product. With large MNCs, firm boundaries that once seemed lucid now appear blurry because of the MNCs’ multi-layered networks and relationships with many business partners and stakeholders. For instance, different geographic or product divisions in an MNC frequently need to be handled differently to address their varying environmental milieus and strategic frameworks. The interdependence of these very different divisions in the overall production and/or supply chain makes the chain vulnerable to the ever-increased possibilities of bottlenecks. For MNCs pursuing either a global or transnational strategy, hindrances can come in the form of ecological hazard, power failure, political unrest and violence, shipping disaster, etc. This situation in the production or supply chain is akin to shutting down a lane on a highway. It inevitably slows down all other working lanes, just as an obstacle in any major division of an MNC slows the entire chain—creating a global business bottleneck.

One major example of a global business bottleneck can be traced back to the August 2006 closing of London’s Heathrow airport. As a precaution to potential terrorist attack, all incoming flights had to be either cancelled or diverted to other airports; all the carry-on baggage had to be checked one by one with the support of a limited number of machines; all passengers on flights leaving the United Kingdom (UK) were searched by hand and their footwear was X-rayed for safety. This led to substantial delay at all UK airports, and subsequently further delays for international travelers who only had transit at Heathrow. Thus, with the shutting down of Heathrow, bottlenecking happened in all other airports.

Yet another global bottlenecking situation can be dated back to September 1999, when Taiwan experienced a 7.6-magnitude earthquake, followed by five strong aftershocks. Serious damage was evident throughout the country, thousands were killed, and infrastructure was damaged. In the days following the earthquake, the computer industry faced troubles internationally, because Taiwan was one of the largest sources of computer chips. The computer chip industry of Taiwan was shut off for weeks, causing a steep rise in silicon chips’ prices; and that had adverse consequences on the whole industry. It was estimated right after the quake that while Taiwan’s losses could amount to $1–2 billion, another $1 billion of losses would be incurred by the United States. The Taiwan earthquake impacted the Indian computer industry as well. In 1999, 55 percent of computers in India were either purchased from the “gray” market or assembled in India after various parts had been imported from Taiwan and Korea. The trend of lowering prices of personal computers in India (in the pre-quake time) stopped right after the quake; in fact, the prices temporarily moved upward during the post-quake period.

While bottlenecks caused by natural disasters cannot be maneuvered around, troubles such as power failure or communication gaps (due to cultural and even linguistic differences in various locations in an MNC) can be better managed. Obstacles to production caused by power failure simply require having enough backup resources to continue the work. For example, Bangladesh is a developing country with severe nationwide shortages in electricity supply. Despite that, the Square Group of companies decided not to fall prey to the sporadic electricity supply and created a small plant where it generates enough electricity to continue work uninterrupted. It did not take Square Group long to reach the break-even point, and the benefit of a reliable electricity supply remains. With the increasingly diversified locations and production units of large MNCs, communication gaps and disparities in the understanding and evaluating of company strategy cannot be escaped. These gaps, however, may be better bridged as new techniques are incorporated into the workplace.

Bibliography:

  1. American Heritage Dictionary of the English Language, 4th ed. (Houghton Mifflin, 2006);
  2. Christopher A. Bartlett and Sumanta Ghoshal, “Global Strategic Management: Impact on the New Frontiers of Strategy Research,” Strategic Management Journal (v.12, 1991);
  3. “Heathrow Shut to Incoming Flights Amid Terrorism Fears,” Australian Broadcasting Corporation, August 10, 2006, www.abc.net.au (cited March 2009);
  4. Navika Kumar, “Taiwan Quake Rattles Indian Computer Industry,” The Indian Express, November 14, 1999, www.indianexpress.com (cited March 2009);
  5. “With U.S. Chip Industry Facing Aftershocks from Taiwan Earthquake, Deloitte & Touche Advises Hi-Tech Companies to Check Insurance Policies for Contingent Business Interruption Coverage—Industry Trend or Event,” Edge: Work-Group Computing Report (October 11, 1999).

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