3.3 - Varying Levels Of Globalisation Flashcards
1
Q
What is the KOF index
A
- Measures the social, economic and political aspects of globalisation
- Uses a wide range of data, such as participation in UN Peace-keeping missions to TV ownership
- Countries are scored out of 100 and the higher the number, the more globalised the country is
- Economic globalisation Is measured by indicators like cross-border trade, FDI, tariff rates and money flows.
- Social globalisation is measured by international telephone calls, tourist flows, resident foreign population and access to foreign internet, households with a TV set, and ‘global affinity’ (presence of international TNC retail outlets), international mail, import and exports of books.
- Political globalisation is measured by foreign embassies in a country, membership of international organisations, number of UN Peacekeeping missions participated in, trade and other agreements with foreign countries.
2
Q
What are some problems with the KOF index
A
- This information is only available for 122 countries (2023)
- Some of the indicators used are now outdated due to improvements in technology
- There is cultural bias in some of the indicators for example, the number of McDonalds
- It does not take into account environmental factors
3
Q
What is the AT Kearney index
A
- First published in 2008
- It aims to look at how countries cope with population growth and a shrinking world
- Ranks cities according to their ‘business activity’, ‘cultural experience’ and ‘political engagement’
- Data for this includes the number of TNC headquarters, museums and foreign embassies
- Measures economic integration through trade and FDI flows
- Measures technological connectivity through the number of internet users, internet hosts and secure servers
- Measures political engagement through memberships of international organisations and treaties, contribution to UN peacekeeping, level of governmental transfers (e.g. aid)
- Measures personal contact through international travel and tourism, international telephone traffic, personal cross border financial transfers (e.g. remittances)
4
Q
What are some problems with the AT Kearney index
A
- Smaller countries have higher FDI indicators due to small domestic markets
- Heavy weighting given to ICT connectivity enables the USA to gain a high index score despite low political engagement in terms of treaties signed.
5
Q
What are TNCs and their purpose
A
- Transnational corporations (TNCs) are firms with operations in more than one country
- When a firm changed from a national company to a TNC by opening operation in another country (FDI), it creates international connections, spreading globalisation.
- The growth of TNCs can be encouraged by the creation of trade blocs, removing barriers, and changing government policies, including removing capital controls and legal restrictions, and creating SEZs.
- Firms aim to maximise profit, becoming a TNC helps to do this by reducing costs, or generating higher revenues from new markets.
- New foreign operation may be part of production process in a lower cost location, or a retail outlet to access new markets and increase revenue.
6
Q
What is offshoring
A
moving parts of their production process, such as factories or offices, to other countries to reduce costs (e.g. labour). Furthermore, it reduces costs as wage rates are lower, tax rates are lower, proximity to raw materials reduces transport costs, less environmental regulation.
7
Q
What is outsourcing
A
contracting a different company to produce goods and services they need, Outsourcing is more flexible than offshoring as the TNC can quickly shift supplier if a cheaper source becomes available. However, less direct control over the production process can lead to problems, e.g. in 2013 Tesco discovered that its Romanian supplier was is Romanian supplier was mixing horse meat into their budget beef burgers.
8
Q
What is globalisation
A
the process of adapting brands and products to suit the local market conditions, such as taste, laws or culture.
9
Q
What are the impacts of TNCs
A
- Raised living standards
- Political stability
- Tax avoidance
- Higher environmental standards
- Growing inequalities
- Transfer of new technologies
- Environmental degradation
- Unemployment
10
Q
Glocalisation case study - McDonald’s
A
- 38,000 restaurants in more than 100 countries
- McDonald’s adapts its menu to reflect local tastes while maintaining its core brand identity
- it offers the McAloo Tikki in India
- Sells the Teriyaki burgers in Japan
- McBeer and the McSausage burger are on the menu in Germany
11
Q
Politically switched off - North Korea
A
- North Korea is a hereditary autocracy ruled by Kim Jong-Un
- It’s run as a one-party system with a command economy organised on the communist system
- Since 1955 it has followed the policy of ‘self-sufficiency’, minimising trade with other countries
- Emigration and foreign tourism by ordinary North Koreans is prohibited
- Ordinary North Koreans have no access to internet or social media
- it does trade with China, and set up the Kaesong Special Economic Zone, employing 52,000 people on the border with South Korea
12
Q
Physically switched off - Sahel region
A
- All four Sahel region countries are landlocked, rely on poor quality roads, and freedom of passage through neighbouring countries to access coastal ports this resulting in high transport costs which may make exports unattractive in foreign markets and deter FDI
- poor infrastructure and low literacy levels of the working age population make it unattractive for offshoring FDI
- low income levels mean it lacks market size to attract retail outlet FDI. Few households other than elite can afford to purchase imported goods or engage in foreign tourism.
13
Q
Political factors for being switched off
A
- Political instability due to war: so TNCs choose not to locate there as trade would be disrupted negatively affecting profits
- Choice of government (e.g., North Korea): controls the media and restricts trade so there is limited knowledge of the area
- Corrupt government e.g., misuse of aid/tax: would discourage TNCs from investing as business would be difficult
14
Q
Social reasons for being switched off
A
- Lack of technology and infrastructure: which would make trading/transporting goods difficult which is not attractive for TNCs
- Poverty/unemployment: reduces the ability of a country to trade with other countries
- Low literacy rate (education): possibly low-skilled population would mean that TNC investment is unlikely
