UNIT 2

Globalisation > the process by which people, their cultures, money, goods an information can be transferred between countries with few or no barriers

What has made this happen?

• The world shrinking effectively
• Information, goods and services can now be transferred much more quickly
• The cost of communication has fallen

Lower transport costs:

• Shipping > Ships transport over 90% of our goods and have become much larger.
• Containerisation > Each container is bar coded so machines rather than people now identify its contents
• Aircraft>transport by aircraft is more expensive by ship so only 0.2% of our goods are transported by air

What is transnational company?

• A transnational company is a huge company that does business in several countries
• Many TNCs are much richer that entire countries in less develop world
• A TNC is a large company which operates in countries all around the world
• In the past 20 years, TNCs have grown in number and importance
• They cover many different industries
• The headquarters of a TNC are usually found in 'global cities' such as London or New York
• A TNC may have wanted to go global for various reasons:
  • to spread business risk
  • to reduce costs of buildings/land
  • to reduce labour costs
  • to be close to markets 

Examples of TNCs:

• McDonalds
• HSBC
• NIke

• Nike was founded in Oregon, USA in January 1964 as Blue Ribbon Sports and was later renamed Nike in 1978. Its HQ is still in Beaverton, Oregon, USA
• They produce and sell a vast range of sports clothing and equipment
• They have offices in 45 countries and 700 stores worldwide
• The majority of their products are outsourced and manufactured in Asia, but they also own some factories where their goods are manufactured.
• The components for their goods are sourced from various different countries around the world.
• Their annual turnover continues to rise
• Nike maintains its market and reputation by sponsoring and promoting sports events and sports stars                                                                                                                .                                                  

Outsourcing > Where part or all the project such as manufacturing or a service is handed over to a third party company (This is done to save time and money)

Why do TNCs outsource their work?

• Cheap Raw materials
• Cheap labour workers supply
• Good transport
• Access to good markets where the goods are sold
• Friendly government policies

Positive impacts of TNCs outsourcing in developing countries:

• They bring jobs
• Give people a varitey of goods to choose from
• Bring new technology
• Connect different countries together

Primary Sector

• This sector involves people working with natural resources. The largest and most important activity in this sector is agriculture, but it also includes fishing, forestry, mining and quarrying.

Secondary Sector

• This sector involves making new things. This could either be by manufacturing a good, such as a car, or constructing something, like a house or a road.

Tertiary Sector

• This sector provides services for the population. The services include commercial services (banks), professional services (dentists), social services (schools and hospitals), entertainment services (cinemas) and personal services (hairdressers ).

Quaternary Sector

• This sector is mainly found in developed countries only and involves research, information and communication.

> Two economics, Clark and Fisher produced a theory to help explain changes in employement structure overtime.

Pre-industrial stage

• In this stage, the majority of people are employed in primary industries, agricultural working, fishing and mining.

Industrial stage

• Lots of jobs are created in factories and industries, e.g. steel, textiles, steel and engineering goods. Chemical and vehicle industries being to develop.
• Secondary industries, such as manufacturing and construction, increase in importance in terms of the economy and employment and peaks in the industrial stage.
• The tertiary sector also begins to grow while the primary sector beings to decrease

Post-industrial stage

• The tertiary sector, providing services to the population, becomes the most important sector and continues to grow.
• The quaternary sector begins to make an appearance while the primary and secondary sectors continue to decline.

What are the problems with this model?

• It generalises everything, it is a guide only, and not the exact answer to how ALL countries will develop
• It doesn’t take into account countries that might go straight from primary to tertiary sectors
• It doesn’t reflect how quickly developing countries now move into the industry period

Low income countries are dominated in the primary sector.

Middle income countries are dominated by the secondary sector. As economies develop ad income rise, the demand for agriculture and manufactured goods increase.

High income countries are dominated by the tertiary and quaternary services. As income continues to rise the sector develops as people start to use their services.

International Monetary Fund > organisations of 188 countries who work to promote financial cooperation between countries to reduce poverty. This is normally in though the promotion of trade and high employment

United Nations > it promotes the development of poorer nations through the work of |IMF and World Bank

World Trade Organisations > Deals in the rules of trade between countries ensuring trade flows freely

World Banks> It is an important source of financial and technical assistance to developing countries, its main aim is to reduce poverty

TNC > A global company which operates in more than one country. Headquarters are often in MEDCs with factories in LEDCs where workers are cheaper