Cost Management

The term Globalization is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology.

The term Global Economy refers to an integrated world economy with unrestricted and free movement of goods, services and labor trans-nationally. It projects the picture of an increasingly inter-connected world with free movement of capital across countries, also. The concept of a global economy cannot be understood in isolation. For this, globalization needs to be defined first. Globalization may be defined as the integration of production and consumption in all markets across the world.

It is a widely accepted view that globalization would not only benefit all countries across the world but would also work towards the betterment of the economy as a whole. Country specific economic and political decisions are being taken on a global scale in todays world with global considerations becoming more important than narrow provincial ideals.

A Global Economy also leads to a shifting of jobs from the developed countries to the Third World Countries as wage rates are much lower here. This allows companies of the advanced nation to grow exponentially. For example, we might find computer chips produced in China be exported to USA for designing which may be subsequently used in Japanese computers supplied across the world. This process is called outsourcing and leads to exploitation of workers in Third World economies where income inequalities already exist.

Nonetheless, a global economy may be beneficial for the world at large. This may result in the economies of the world fighting issues such as global warming, climate change and environmental degradation collectively and effectively.

Engineering economics, previously known as engineering economy, is a subset of economics for application to engineering projects. Engineers seek solutions to problems, and the economic viability of each potential solution is normally considered along with the technical aspects.

In the U.S. undergraduate engineering curricula, engineering economics is often a required course. It is a topic on the Fundamentals of Engineering examination, and questions might also be asked on the Principles and Practice of Engineering examination; both are part of the Professional Engineering registration process.

Considering the time value of money is central to most engineering economic analyses. Cash flows are discounted using an interest rate, i, except in the most basic economic studies.

For each problem, there are usually many possible alternatives. One option that must be considered in each analysis, and is often the choice, is the do nothing alternative. The opportunity cost of making one choice over another must also be considered. There are also noneconomic factors to be considered, like color, style, public image, etc., and are called attributes.

Costs as well as revenues are considered, for each alternative, for an analysis period that is either a fixed number of years or the estimated life of the project. The salvage value is often forgotten, but is important, and is either the net cost or revenue for decommissioning the project.