ECONOMIC TRANSITION - GLOBALISATION

• Cultures in different countries becoming similar in terms of language, food and clothing

• Increased trade and availability of goods from other countries

• Economies being affected by economic changes in other countries

• Worldwide environmental effects such as air pollution and global warming

• Increased global population migration

• The growth of transnational corporations

• Advances in transportation allowing the movement of people

• Advances in communication  infrastructure such as the internet and cell phones allowing movement of knowledge

• The growth of international political alliances such as the European Union

• POLITICS – international organisations such as the EU, UN and CIS involve cooperation between countries in military and economic action. The power of individual power decreases

• ENVIRONMENT – the threat of global warming and atmospheric pollution show how the actions of one country affect others. The UN Sustainable Development Summits attempt to set international goals (e.g. Rio 2012)

• ECONOMICS – world trade has expanded. Economies have become inter-dependant. TNCs have become a major force.

• CITIES – the concept of the global city has emerged

• DEMOGRAPHY – international migration has been greatly increased and societies have become more multicultural.

This is when a company or an individual from another country buys a company in a country or expand an existing business in that country.

NB; it does not include investment in the securities of other countries such as stocks and bonds.

FDI may include: - mergers and acquisitions of existing companies in the host country, - building new facilities, - reinvesting profits earned from overseas operations, - intra-company loans

• Influx of capital

• Increased tax revenues

• Development of skills

• Access to more advanced technology

• Access to research and development

• New infrastructure

• Encouraging productivity gains and greater efficiency in other industries due to  competition

• Providing an example of better corporate governance standards

• Few skilled workers may be employed

• Profits may go abroad

• Local labourers are exploited at low wages

• The cost of the manufacturing goods is too high for local people to buy

• Local resources are exploited

• Mechanisation reduces the demand for labour

• The ease at which TNCs can shut down production in a country

• This is change in location of manufacturing industries from capitalist HICs such as UK, USA and Japan to LICs and MICs.
• Until around 1970, LICs were mainly suppliers of minerals and agricultural commodities.
• It is sometimes described as the filter-down process where manufacturing moves from economic core regions in HICs to lower-cost peripheral regions, often in LICs and MICs
• Some benficiaries have been NICs like, China, Vietnam and India
• FEATURES; - low cost labour for labor-intensive industries such as call centres, - nearness to growing consumer markets, - tax incentives, - favourable labour laws, - the development of containerisation: cheaper shipping in bulk carriers and container ships have made industry mobile

• Firstly, a multi-national corportation (MNC) owns manufacturing or service industries in one or more countries other than the home country.
• A transnational corporation (TNC) is atype of multinational but it does not identify itself with one national home
• Examples; - Walmart, Retail, Bentonville,USA
•                  - BP, Oil and gas, London,UK
•                  - Apple, Electronics, Cupertino,USA
•                  - Samsung, Conglomerate, Samsung Town,South Korea

• POLITICAL CHANGES; In the 1980s, the governments in the USA ( under President Ronald Reagan) and UK adopted free market policies. These policies spread to ther countries. Trade rules were liberated by the WTO and world financial markets were deregulated.
• THE EMERGENCE OF THE NICs; The economic developments in countries such as India, Brazil, Taiwan, Malaysia and Thailand provided further opportunities for the expnasion of TNCs.
• DEVELOPMENTS IN TRANSPORT AND FRAGMENTATION; Improvements in marine transport such as conytainer ships and bulk carriers have led to international trade becoming easier,cheaper and more complex. Because of this TNCs have been able to develop specialst plants in different countries.

• There are anumber of ways that a TNC may locate it's activities across the globe and this will depend on the size of the company, the number of subsidiaries and various other factors. The organisational features of a company may include;
• headquaters, which are usually in a global city in the country wherre the company was originally founded. resaerch and development and marketing are similar and they may be regionalised. branch plants including component production and assembly plants and distribution centres

• HORIZONTAL INTEGRATION is common in the motor vehicle industry. Each production branch produces one model for a region. Individual plants are large to take advantages of economices of scale
• In VERTICAL INTEGRATION each branch carries out seperate tasks of production process and the products are transferred to a final assembly plant in another country.

In a typical NIC primary employment has decreased and secondary employment has increased. Tertiary employment has increased but yet not to the same extent as in HICs

• In countries like China industrialisation was state-led
• Investment by TNCs has been important, as in the example of the motor vehicle industry or the development of high technology industries in places such as Bangalore, India.

THE ASIAN TIGERS; South Korea, Taiwan, Singapore and Hong Kong

• ·         Financial credits were available at low interest rates. In particular it allowed the South Korean chaebol to expand
• ·         The geographical location of these countries made international trade with HICs such as Japan and USA easier

This term is used to describe the decline of manufacturing employment in HICs.

Deindustrialisation has hit coalfields in Western Europe hardest, this is where manufacturing was heavily concentrated.

In the UK areas such as south Wales, north-east England and west Cumbria have become synonymous with industrial decline, unemployment and the social problems that accompany it.

POSITIVE DEINDUSTRIALISATION occurs when it is possible for workers to be absorbed by the growing service sector, in a growing economy. However, NEGATIVE DEINDUSTRIALISATION occurs when slow economic growth (such as that of coalfields in Europe) does not allow the absorption to occur.

It is debateable whether leaving these countries heavily reliant on service industries can be a sustainable economic future

OUTSOURCING means the contracting out of a business process to another party. For example, a private school may have its catering outsourced to a separate company and its cleaning outsourced to another. It has become an increasingly common business practice since about 1980. Outsourcing might involve transferring employees to another company.

OFFSHORING means relocating a business function to another country. Many companies such as banks do this for their call centres.

REASONS:

• Cheaper labour (the digital workforce in countries like India and China are only paid a fraction of what would be minimum wage in many HICs.
•  Lower taxes and cheaper energy costs
•  Less government regulations
•  Less need to hire and train specialised staff
• Shortage of skill or expertise at home

• Governments invested in basic infrastructure
• Governments welcomed foreign direct investments
• The lack of flat land made agriculture difficult and thus countries had to expand the industries to provide jobs for the growing populations
• The culture of the country valued education and strong work ethic
• The countries have strong governance and laws and a lack of corruption

MINT- Malaysia, Indonesia, Nigeria, Turkey (countries that are expected to develop their economies significantly)

EFFECTS; 

• the greater distance management and the outsourced activity may require a change in management practices
• Call centre customers may feel that an outsorced service is of lower quality
• fraud ia a security issue
• employment at home is reduced