Globalisation revision

An overview of the Globalisation topic.

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Reasons for globalisation.

Lower wages: wages in China and the Far East are lower then in countries such as the USA and Japan.

Improvements in communications: the internet, telephone and fax enable the HQ of a comany, for example in the USA to keep a close watch on production and design, and research and development in a factory it owns on the other side of the world.

Improvements in transport: enormous container ships moving goods across the seas have reduced transport costs.

Free trade: over the past 25 years trade barriers and tarriffs beteen countries have fallen considerably.

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Example

The Apple Ipod

  • Sold more than 240 million ipods by January 2010.
  • The company has taken advantage of globalisation by building factories or using suppliers in countries with low labour costs , good transport links, access to raw materials and a growing market.
  • Different companies manufacture and supply the small parts to be made into the Ipod at the HQ.
  • For example: the video processing chip is produced at Samsung, South Korea and the flash memory is produced at Toshiba, Japan. Also the shipping is from Hong Kong.
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Local Industrialised Regions

Silicon Valley, Califonia, USA.

It is home to the HQ of a host of ICT and other high-tech companies such as Apple Inc, eBay, Google, Yahoo and Intel, because:

  • Similar companies are located nearby and knowledge can be shared.
  • Education establishments are nearby to offer training to future employees.
  • There is a good climate, landscape and quality of life to attract the best workers.
  • These companies have global connections, e.g. Apple Ipod.
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Call centres

Companies locatecall centres in two ways:

1. Outsourcing - a larger company contracts some work to smaller specialist companies.

2. Offshoring - a large company develops part of its operation in another country.

Case Study: Bangalore, India:

  • Labour costs are much lower than Europe or the UK.
  • India has a large, English-speaking workforce, many of whom are uni grads.
  • The rental cost of office and factory space is very low.
  • Bangalore has a pleasant climate, 900m above sea level.
  • As ICT develops, more workers are trained and knowledge can be exchanged.
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Advantages/Disadvantages

Benefits:

  • The creation of well-paid jobs in India.
  • Bangalore has developed as a city with new buildings.
  • The development of call centres has contributed to the Indian economy and some are helping the government to train people.

Issues:

  • People in Europe and America lose jobs.
  • Many people from the countryside have been attracted to Bangalore causing the city difficulties in servicing and housing due to the increase in population.
  • The benefits are largely restricted to the English-speaking middle classes in certain cities, maily the south.
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Transnational companies

TNCs:

  • are very large: some with an income higher than that of small countries.
  • trade across the world with their HQ in one rich country and brahces in many others.
  • can benefit from owning factories in other countries - paying lower wages etc.

Advantages:

  • Provide jobs and good wages.
  • Provide training to improve skills.
  • Increase foreign trade and bring in foreign currency.

Disadvantages:

  • Makes goods for export, not for the host country.
  • Take profits out of the host country.
  • In difficult times, close overseas factories first.
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The new economic giant

China

Government legislation:

  • foreign investment was encouraged.
  • In 6 areas, special economic zones were set up with tax incentives for foreign investors.
  • 'open' cities were declared, e.g. Shanghai.
  • the one-child policy checked population growth. People had more money to buy consumer goods like cars and televisions.

Size of the home market:

China potentially has a massive home market and the average income has more than tripled in the last 20 years.

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Continued.

Labour:

China has an almost limitless source of labour, educational standards are good, and wages are low.

Competitiveness:

No other country can compete on cost with China, especially making clothes and toys.

Globalisation:

The opening up of world trade, the lowering of trade barriers; the ICT revolution; and the reduction of transport costs all enable China to trade with the world.

TNC's were quick to establish factories in China. China is expanding its own industries, selling to the world and its people. Economy is growing.

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Increasing demand for energy

World population growth:

The world's population is rising at a very rapid rate due tp increased food supplies and improved healthcare.

Increased wealth:

People's incomes are rising. With increasing wealth comes a greater use of technology to generate more wealth to provide a better standard of living. This leads to a greater use of energy.

Technological advances:

The range of maufacturing goods like radio, TV has increased. A people buy more consumer good the demand for energy grows.

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Continued.

Impact of increased global energy use:

Social:

Increasing use of energy has enabled people to have an improved quality of life.

  • They have more leisure time as technology in the home reduces workload.
  • Leisure activities change, travel is easy, shows/cinema easy to get to.
  • Able to chose the environment in which they live and travel to work some distance each day.

Environmental:

Burning fossil fuels has damaged the environment.

  • release of carbon dioxide contributes to global warming.
  • mining causes land-scarring and damage.
  • pollution from oil spills.
  • air pollution causes health problems.
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