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geography > (4) emergence of TNCs and NIDL > Flashcards

(4) emergence of TNCs and NIDL Flashcards

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1
Q

what are the benefits of strategic alliances?

A
  • access to new/unfamiliar markets
  • sharing increasing costs, uncertainties and risks of RandD
  • achieving economies of synergy
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2
Q

what are the challenges of strategic alliances?

A
  • loss of key technologies and expertise by one or other of the partners
  • difficult to manage and coordinate than single ventures -> potential of misunderstanding and disagreement is great
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3
Q

what is intra-firm trade?

A

it is trade that occurs within the same firm, occurs between parent company and its branches/subsidaries/affiliates

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4
Q

what is inter-firm trade?

A

it is trade that occurs between different forms -> involves international subcontracting or sourcing of intermediate inputs or component parts from other firms overseas

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5
Q

what is subcontracting?

A

relocate different stages of production to firms overseas, involves firms buying inputs that have been made, under contract, to meet TNCs own specific requirements

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6
Q

what are the benefits of subcontracting?

A
  • greater flexibility in their production and management of goods
  • promote competition between suppliers, and benefit from geographical differences in production costs
  • cut down risks borne by large companies as they rely on their suppliers to employ staff, meet production deadlines, and manage logistics of getting the products to the market on time
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7
Q

what is a strategic alliance?

A

a specific type of inter-firm collaboration

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8
Q

what are joint ventures?

A

two or more firms decide to establish a separate corporate entity for a specific purpose

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9
Q

what are the benefits of joint ventures?

A
  • access to new markets and distribution networks
  • increased capacity
  • sharing of risks and costs with a partner
  • access to greater resources

hence, help business grow faster, increase productivity and generate greater profits

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10
Q

what are the risks of joint ventures?

A
  • different objectives
  • different levels of expertise, investment or assets
  • poor integration and cooperation due to different cultures and management styles
  • partners don’t provide sufficient leadership and support in early stages
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11
Q

what is franchising?

A

franchising refers to an organisation from in which the TNC owner of a registered trademark or intellectual property rights agrees to let a franchisee (often outside of home country) use that trademark or rights provided that the franchisee follows the guidelines and requirements laid down by the TNC

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12
Q

what are the benefits of franchising?

A
  • can reduce costs/obtain sufficient capital to expand markets
  • not exposed to risks arising from unfamiliarity with local cultures, social relations and the practices of local customers
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13
Q

what are the challenges of franchising?

A
  • insufficient capital -> cost of creating franchisee system and cost of supporting new franchisees usually exceed royalty revenues and franchisee fees in the beginning
  • unstable infrastructure -> systems, procedures, support are not always at the top of the priority list for new franchisors
  • bringing right franchisees on board -> long term success of franchise is dependent on quality of franchisees
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14
Q

what are the challenges of subcontracting/outsourcing?

A
  • suppliers fail to deliver standards

- lack of control over quality

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15
Q

what is a producer-driven network?

A

production system is controlled by large industrial corporations -> exerts control over ‘backward’ linkages to raw material and component suppliers, and ‘forward’ linkages with distributors and retailers

high level of profits are earned through the scale and volume of production in combination with the ability to drive technological developments within the production system

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16
Q

what is a buyer-driven network?

A

production is undertaken using tiered networks of subcontractors that supply finished goods subject to the specifications of retailers and brand-name merchandisers -> these buyers in turn extract substantial profits from bringing together their design, sales, marketing and financial expertise with strong brand names and access to large consumer markets in developed countries

17
Q

what are the three challenges to the producer and buyer driven networks?

A
  1. there may be other types of governance such as relational forms of governance that develop in a more even footing. it can take the form of trading firms, or intermediaries that drive the network
  2. governance relations are extremely complicated and varied significantly within the same industry
  3. governance regimes are dynamic. nature of production network may change over time, firms and/or particular regions may seek to improve their position within global production nature through upgrading strategies
18
Q

what is a global production network?

A

it is defined as a network system that is coordinated and controlled by a globally significant TNC and involves a vast network of overseas affiliates, strategic partners, key customers and non-firm institutions

19
Q

what is the new international division of labour (NDIL)?

A

it refers to the changes to the way labour is arranged spatially across international borders due to the increased speed and scope of globalisation –> linked with labour cost and comparative advantages

20
Q

how did the (1)rise of TNCs lead to the emergence of NIDL?

A
  • footlose and fragmented production (major agents of NDIL)
  • HQ, administrative and RandD sections of TNCs located in core economies while manufacturing plants (production units or assembly lines) located in LDCs and NIEs –> such a structure drives international division of labour

-TNCs seek locations that can offer them low cost of labour and high level of skill of labour force –> low cost production, TNCs vertically disintegrate/frahment their production chain and outsource respective parts to various overseas locations that can provide appropriate skills for the lowest labour cost

21
Q

how did (2)increased (job and economic) specialisation based on comparative advantage of each location/country lead to the emergence of NIDL?

A
  • countries used to export products in their area of specialisation, and import products that that have the least comparative advantages in order to attain maximum economic efficiency
  • but, they can no longer locate their entire production process in one country because of the increasingly specialised labour force that spans the globe
  • firms therefore have to vertically disintegrate production chain and outsource it to various locations in order to engage the required labour force with the appropriate skills for each part of the production chain –> results in an international division of labour
22
Q

what are the four trends that resulted in a newer international division of labour?

A
  1. international subcontracting
  2. rise of services
  3. outward investments by NIEs
  4. cross investment by core economies
23
Q

how does (1)international subcontracting lead to the newer international division of labour?

A
  • firms from DCs concentrate on higher value-added elements of design, marketing and RandD
  • as for the actual physical production, they engage subcontractors internationally, usually from LDCs that have comparative advantages in lower value-added physical production
  • these subcontracting relationships allows TNCs to be flexible (can pull out operations from one country and move to another that can offer lower costs anytime) and more lean (reduce expenditures on overheard, physical capital, wages and benefits)

-international subcontracting has widened and deepened the international division of labour, creating a ‘newer’ international division of labour

24
Q

how does (2)rise of services lead to the newer international division of labour?

A
  • higher-order services, which traditionally operated in DCs, are now being outsourced and subcontracted to LDCs and NIEs because of the availability of a large pool of inexpensive labour and the flexibility that these countries offer (i.e. TNCs can pull out operations to move to another lower-cost location anytime)
  • firms have been moving back office functions, such as data entry, call centers, software development and computer programming to LDCs such as India, the Philippines, etc.

-thus, operations in the service sector are becoming increasingly fragmented and the labour in the service sector is also being internationally divided

25
Q

how does (3)outward investments by NIEs lead to the newer international division of labour?

A
  • undertaking of FDIs and production chain is decentralising away from core advanced nations (Europe, North America, Japan), towards the semi-peripheral NIEs (Singapore, South Korea)
  • NIEs see their economies developing and labour force up-skilling. They also have become increasingly expensive places to do business in as labour costs rise among many others (e.g. an experienced worker in South Korea would typically cost US$3.60 per hour compared to the US$2.90 that is paid to a similarly skilled worker in Thailand)
  • NIEs emulate the advanced nations by undertaking FDIs in LDCs (Indonesia, Bangladesh, etc) as they search for low labour and production costs there, and thereby subsequently shifting their production chains to LDCs too
  • expensive business environments of NIEs have also caused firms in advanced economies to avoid them in order to remain competitive
26
Q

how does (4)cross investments by core economies lead to the newer international division of labour?

A

-DCs are investing in DCs as well, and not just LDCs or NIEs

division of labour is taking place not only in the semi-periphery (NIEs) and the periphery (LDCs), but also within DCs

27
Q

why do core economies cross invest?

A
  • as jobs from US firms get outsourced to overseas locations that could offer cheaper labour costs, it resulted in high domestic unemployment and stagnating/failing incomes for US worker –> de-industrialisation
  • certain areas in non-urban America with lower levels of unionization, wages and social benefits, become favourable locations for technologically advanced production by European and Japanese firms
  • with a large pool of unemployed but skilled workers, and a well-equipped and stable investment environment, these previously de-industrialised areas became attractive to investors in other core economies, and undergo re-industrialisation as investors return to invest in their economies
28
Q

What is comparative advantage?

A

It is an age-old principle whereby countries are better off when they export things they are best at producing, and import the rest

29
Q

what is the impact of de-industrialisation on DCs?

impacts of global division of labour on DCs

A
  • NIDL led to jobs of those in the manufacturing sectors in the DCs being outsourced or offshored to LDCs. As a result, DCs share of world manufacturing output saw a decline, while that of the LDCs more than quadrupled
  • this has lead to the loss of jobs in the manufacturing sector

-job losses may be part of the process of rationalisation, whereby the industry reduced employment in order to be more cost efficient and productive

30
Q

what is the impact of tertiarisation on DCs?

impacts of global division of labour on DCs

A

-increased GDP and employment

  • the shift towards services resulted due to the unemployment created by de-industrialisation
  • as employment in the manufacturing industry fell, workers began to look for jobs in the tertiary sector (e.g. banking, tourism, etc.)
31
Q

what is the impact of increased flow of FDI from DCs and NIEs on LDCs?
(impacts of global division of labour on LDCs)

A
  • due to attractive low labour costs in LDCs

- increased job opportunities and economic growth

32
Q

what is the impact of rapid industrialisation and tertiarisation on LDCs?
(impacts of global division of labour on LDCs)

A
  • due to employment in and GDP contributed by the manufacturing sector taking up a bigger share in LDC’s economies
  • increased job opportunities and economic growth as a result of more suppliers in LDCs subcontracting with bigger firms

geography (3 decks)

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