Nike Case Study
Nike is an example of a vertical organisational structure across international boundaries, characterised by a high level of subcontracting activity.
Nike does not make any of the products itself, but contracts out production to South Korean and Taiwanese companies - employs 650,000 workers in 700 factories worldwide.
- There are 124plants in China, 73 in Thailand, 35 in South Korea and 34 in Vietnam
- 75% of the workforce is based in Asia
- The majority of workers are women under the age of 25
- The low wage Asian economies provide cheap pools of labour - examply of new international division of labour
- Illustrates both Fordist and flexible characteristics.
In response to sweat shop allegations, Nike created a 108 page report which included details of abuses:
- forced overtime, wages below minimum, verbal harassment, restricting access to toilets and water.
Advantages and Disadvantages of TNCs for headquart
- Positive employment impact and development of high-level skills in design, marketing and development
- Direct and indirect contribution to local and national tax base
- Another US firm that does not manufacture in home country - indirect loss of jobs and negative impact on balance of payments
- Trade unions complain of an uneven playing field due to the contrast in working conditions in LEDCs and MEDCs.
Advantages and Disadvantages of TNCs in outsourcin
- Creates substantial employment in Vietnam
- Pays higher wages than local companies and improves skill base
- Success of one TNC may attract other FDI = cumulative causation
- Sets new standards for indigenous companies
- Contribution to local tax base and improvements to infrastructure
- Concerns over cheap labour and poor working conditions
- Allegations of use of child labour
- Company image and advertising may undermine national culture
- The dubious political influence of TNCs
- Knowledge that investment could be transferred wuickly to lower cost locations
Samsung Case Study
Samsung employs 200,000 people and is currently ranked among the 15 largest corporations in the world.
Smasung produces products such as microwaves, televisions, phones etc. It claims to have 20,000 subcontractors. In 1992, the group accounted for 13% of South Korea's total exports.
In October 1995, the group opened a new facility in Britain's northeast - £450million investment for the UK.
- Every employee recieves 20 days training a year at one of 14 Samsung schools
- 400 junior managers a chosen annually to go abroad for a year in order to absorb the culture of the country they are visiting
- Senior executives are banned from travelling by air; they have to go by car, train etc. in order to absorb culture.
- The group now has 38 branches and 22 manufacturing facilities worldwide.
- British Gov awarded Samsung the largest packets of aid ever given to a foreign investor - enable them to set up in Teeside - 5000 new jobs.
Dyson Case Study
James Dyson set up the Dyson company in his home town of Malmesbury, in Wiltshire.
After investing £32 million in his factory in Wiltshire, in 2001 Dysondecided tomove part of the production line to Malysia - loss of roughly 800 jobs in Wiltshire
Dyson had been forced to shift productino to Malaysia because of soaring manufacturing costs in Britain - labour costs had doubled in 10 years - Swindon needed higher wages at time of virtually zero unemployment in area
Profit would be used to increase spending on research and development (R&D) - vital to the survival of the company
Washing-machine production was moved to the same part of southeast Asia, with the loss of a furhter 65 jobs - R&D budget inc. by 50% over the £12million spent in 2002
Toyota Case Study
The Toyota Motor Corporation is the fastest growing auto manufacturer in the world - 16% increase in revenues between 1998 and 1999 - 2002 = ninth largest corporation in the world with revenuesof $122.8bn.
- The Japanese began to study US production methods - began to incorporate Fordism into its production - evolving a just-in-time system that recognised the central role of stock control
- Fordism strongly dehumanises the workforce, giving it simple and very repetetive tasks
- Suppliers must guarantee quality (100% defect free) and generally develop close relationships with the mother company
- Toyota began to exportto the Middle East and South Africa in the 1960s - political factors intruded due to Japan's opposition to Apartheid - FDI limited
- 1980s Toyota restarted production in USA through joint venture with General Motors - opened an $800million plant in Kentucky
- By 1990, Toyota had sold over 1 million vehicles
Case Study Asian Tigers: South Korea
Companies such as Hyundai, Daewoo, Samsung and Lucky Goldstar have become household names - Korea is the most poignant 'economic miracles'.
- Korea was occupied by the Japanese btwn 1905 & 1945 - Koreans were kept out of education and prohibited from most significant positions in industry and government.
- The USA delivered massive amounts of aid (up to 18.5% of South Korea's GNP) in aftermath ofthe 1950-53 war.
- The main agency behind the Korean economic policy is CHAEBOL = large, family-run companies with extensive network of subsidiaries and political connections.
- Between 1950-2000, cooperation between government and industry was pursued which created a 20+ fold inc. in GNP.
- A policy of import substitution was pursued behind a tariff wall that would not be possible in the current atmosphere of 'free trade'.
France Case Study
Renault announced that Clio Campus cars made at Novo Mesto plant in Slovenia would be produced at the Flins plant, West of Paris, creating 400 jobs.
President Nicolas Sarkozy granted £5.6billion in soft loans to Renault and Peugeot Citroen in exchange for a pledge not to shut French plants or cut French jobs - France dropped the condition after EU objections.
If there is a link between the car sector aid plans and the localisation of car production, is would be deemed as illegal aid.
Renault's net profits fell by 78% the previous year.
Shell and Ogoniland Case Study
In 1979 Nigeria was at the peak of an oil boom. Oil brought in $25billion that year. External debt was less that $10billion. The country's development plans forecasted that oil prices would stay at $40 per barrel.
Within few years, Nigeria went from boomto bust and has yet to recover.
- Shell is responsible for nearly half of the country's output of two million barrels a day
- It accounts for 80% of export earnings and 90% of government revenue
- The Niger Delta is a region of river systems, swamps, ainforest and farmland - 6 million live there, but they are losing land to oil companies
- Nigeria's police force has apparently killed 80 people who protested against Shell
- Shell leaves rusting pipelines, contaminated air & water, damaged crops and angry locals
- Ken Saro-Wiwa executed (supposedly because of Shell protests)
- Shell states it has spent $100million in one year on enviro projects + $20million on raods, health clinics, schools and scholarships
- Shell claims over 60% of oil spillswere caused by sabotage
China and UK Case Study
Boris Johnson & George Osbourne faced controversy after 'ignoring political issues let alone human rights' and concentrating on the money to be gained from investments with China.
- Britain pledged to relax visa regulations for business visitors and tourists and a warm welcome for yet more Chinese dtudents in London.
- In return, a flood of investment in England was promised.
- The state-owned Commercial Bank due to put £650 million into a 150-acre business district at Manchester airport - should generate 16,000+ over 15 years
- The Ping An Insurance Group bought the Lloyd's building in London for £260million
- Advanced Business Park recently signed a £1billion to develop the Royal Albert Dock.
- Beijing's state sovereign wealth fund, CIC, has used part of its £300billion in assets to snap up 8.7% of Thames Water
- Over 500 Chinese companies have invested in Britain.