The changing nature of global industry
Globalisation is where human activities take place on a worldwide scale so that we increasingly live in a 'global village'. Interdependence is when countries are linked together economically, socially, culturally and politically so that they are dependent on each other.
The drivers of globalisation
Globalisation, a term first used in the 1950s, is due to:
- improvements in technology - internet access has expanded - mobile phones are widely available and affordable
- improvements in telecommunications - the cost of data transmission has become cheaper due to a global fibre-optic cable network
- improvements in transport - people now holiday in faraway destinations and businesses ship products globally
- the growth of multinationals such as HSBC, McDonalds and Nike
- greater political cooperation and development of trading blocA group of countries who have agreed to share trading agreements, and minimise barriers of trade between them.
Multinational corporations
A multinational corporation (MNC)Sometimes called transnational corporations (TNC). These are large and powerful businesses that sell products or services in different countries. (MNC) is a company that operates in more than one country. It can also be referred to as a 'transnational corporation' (TNC).
MNCs often have factories in low income country (LIC)Based on the World Bank's income classifications, a LIC has a gross national income (GNI per capita) of $1,045 or lower. to middle income country (MIC)A country (as classified by the World Bank) having a gross national income per capita of US$1,026 to $12,475, eg Botswana. because of:
- cheaper labour
- access to cheap raw materials
- access to markets where the goods are sold
- friendly government policies
- more relaxed environmental laws
Offices and headquarters tend to be located in high income country (HIC)A country with a gross national income per capita above US $12,735 (according to the World Bank) such as the Netherlands and the UK..
Advantages of MNCs locating in a country
- Creation of jobs.
- Improved education and skills.
- Investment in infrastructure, eg new roads.
- Help in exploiting natural resources (as the LIC may lack the means to do it independently).
- The multiplier effectThis occurs when a positive change happens, which then has a knock-on effect on other businesses. For example a new office may open, which leads to an increase in lunchtime sandwich sales at the local caf茅 and more bus passengers. helps in developing local industry.
Disadvantages of MNCs locating in a country
- Poor working conditions.
- Damage to the environment.
- Profits go back to the country where the headquarters are located, not benefitting the host country.
- Factories are footlooseIndustries that can set up anywhere because they are not tied to a specific location. and jobs insecure.
- Natural resources may be over-exploited.