Globalisation Flashcards
Name 3 characteristics of TNCs
- Companies which operate in more than one country
- Usually have headquarters in MEDCs
- Factories and suppliers in LEDCs
What is a global production network?
A chain of connected suppliers of parts and materials that contribute to the manufacturing or assembly of the consumer goods. The network serves the needs of a TNC, such as Apple or Tesco.
What is outsourcing?
TNCs contract another company to produce the goods and services they need rather than doing it themselves. This can result in the growth of complex supply chains.
Name 6 reasons why TNCs source from a range of places
- It lowers cost and increases profit
- Cheap labour
- Cheaper land costs
- They can take advantage of locations e.g with low tariffs
- Climate barriers in home country
- Lower transport costs
Name 9 impacts of TNCs on host countries
- Creates jobs
- Investment of local economy
- Skilled jobs often go to people from HQ countries
- Environmental damage
- Poor pay and working conditions
- Attracts other TNCs- supply chain and indirect employment
- Money returns to HQ country
- Improvements in infrastructure e.g roads, airports
- Loss of culture
Name 2 reasons why global flows can be seen as a threat
- Imports of raw materials and commodities can threaten home industries
- Migrants can bring negative cultural damage
What is privatisation?
Transferring ownership of a business, agency, service or property from the public (government controlled) sector to the private sector
What is liberalisation?
Reducing and removing rules restricting economic activity and companies
What is a Special Economic Zone (SEZ)?
An industrial area, often near a coastline, where favourable conditions are created to attract foreign investment/TNCs. These conditions include low tax rates and exemption from tariffs and export duties
What did India do to encourage economic development?
India’s TNCs have grown in size and influence and India’s mobile network operators have become major global players. However, 90% of India’s shops are still family owned.
What did Indonesia do to encourage economic development?
Indonesia’s president turned his back on communism and opened up Indonesia’s markets, making Indonesia a popular offshore location for TNCs like Gap and Levi’s. World Bank funded the speedy modernisation of its roads, power supplies and ports.
What is globalisation?
The way in which people, companies, ideas, money and lifestyles are spreading more and more easily around the world, meaning actions and decisions made in one part of the world have a knock on effect in other places.
According to the IMF, what is globalisation?
The growing economy interdependence of countries worldwide through increased volume and variety of cross border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology
What is a global village?
National economies becoming more inter grated into a single global economy
Name the 4 types of globalisation
Economic, political, cultural and social
What is economic globalisation?
A global economic link between countries. It includes the growth of the TNC and the global spread of Foreign Direct Investment (FDI) and the growth in world trade
What is Foreign Direct Investment?
FDI- a financial injection made by a TNC or external government.
What is political globalisation?
- International Organisations (e.g The World Bank, International Monetary Fund) encouraging countries to work together
- Governments responding to global concerns such as free trade and responding to natural disasters.
- Growth in trade blocs (e.g EU), reducing trade restrictions and tariffs
What is cultural globalisation?
The spread of food, music, fashion, sports and dance around the world. It has a positive and negative effect on cultures.
What is social globalisation?
- International immigration- extensive family networks that cross international borders
- Rising world life expectancy and literacy due to improvements in education and health.
What is a MEDC?
More Economically Developed Country
What is a LEDC?
Less Economically Developed Country
Name 5 factors which accelerate globalisation and 1 factor which restricts it
- Technology
- Transport
- International organisations (trade blocs)
- TNCs
- ICT and communications
- National governments (can RESTRICT globalisation)
How has transport encouraged the growth in globalisation?
- Transporting of goods (cargo ships)
* Movement of people (rail links and planes)
How has ICT and communications encouraged growth in globalisation?
- Enabled the flow of money
* Enabled the flow of information
What is the shrinking world effect (time-space compression)?
Heightened connectivity which changes our conception of time, distance, and potential barrier to the migration of people, goods, money and information
Name 4 processes of globalisation
Financial, political, population and communications and information
What are the impacts of finance on globalisation?
- Global capitalism is spread by large TNCs
* Trillions of dollars are exchanged globally
What are the impacts of population on globalisation?
• Those with skills in management, finance and IT move around the world to where they are in most demand
What are the political impacts on globalisation?
- Some TNCs seek to influence how people think
- TNCs and international political organisations can influence national governments
- Many trade barriers have been reduced or removed to liberalise world trade
What are the impacts of communications and information on globalisation?
- Lower transport costs
- Cheaper global phone networks
- An emerging “global village”, which is interested in universal sport, music and films, with no political or social boundaries
What is capital?
Money flows between countries on a global scale through the stock markets and businesses
What are commodities?
Raw material are traded between countries; manufactured goods have also been traded
What is information?
Real time communications due to the internet, allowing goods and services to be brought at a click of a button
What are tourists?
Air passengers have brought countries together, helped by budget airlines
What are migrants?
The movement of people between countries; movement is restricted due to border controls and immigration laws.
What are remittances?
Money that migrants send home to their families via formal or informal channels
What is interdependency?
If two places become over- reliant on financial and/or political connections with one another, then they have become interdependent
Name 3 advantages of trade bloc membership
- Bigger markets (but no extra taxes)
- National forms can merge to form transnational companies
- Protection from foreign competitors and political stability
Name 3 disadvantages of trade bloc membership
- Loss of sovereignty
- Interdependence
- Compromise and concession- countries entering into a trade bloc must allow foreign firms to gain domestic market share
What is foreign direct investment?
A controlling ownership in a business enterprise in one country by a company or organisation based in another country
What are the 4 types of FDI?
- Offshoring
- Foreign mergers
- Foreign acquisitions
- Transfer pricing
What is offshoring?
Some TNCs building their own production facilities in “off-shore” low wage economies
What are Foreign mergers?
Two firms in different countries joining forces to create a single entity
What is a foreign acquisition?
When a TNC launches a takeover of a company in a different country
What is transfer pricing?
Some TNCs channelling profits through a subsidiary company in a low wage country
Give an example of offshoring
US guitar maker Fender opened its Mexican plant in 1987
Give an example of Foreign mergers
Royal Dutch Shell has HQ in both UK and the Netherlands
Give an example of Foreign acquisitions
UK’s Cadbury’s was subjected to a hostile takeover by US food giant Kraft
Give an example of transfer pricing
Starbucks and Amazon channeled it’s profits into Ireland
What is a trade bloc?
When a group of countries join together to form an intergovernmental agreement where barriers of trade are reduced or eliminated to improve their trade
What is protectionism?
The policy of imposing duties or quotas on imports in order to protect home industries from overseas competition
Name 2 least economically developed countries
Ethiopia and Bangladesh
Name 2 less economically developed countries
Peru and Egypt
Name 3 recently industrialised countries
Brazil, South Africa and China
Name 2 countries which have organisations which export petroleum
Saudi Arabia and Kuwait
Name 2 newly industrialised countries
Singapore and South Korea
Name 2 more economically developed countries
UK and USA
Name 3 international organisations
- International Monetary Fund
- The World Bank
- The World Trade Organisation
