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Question 2

Attitudes to Foreign Direct Investment (FDI) - China’s 1978 Open Door Policy:

Answer 2

Shift from a closed to an open economy.
Policies introduced to attract foreign investment.
Promotion of Joint Ventures and collaboration.
Key factor in China’s rapid economic growth and globalisation.

Question 3

Indices and Indicators for measuring globalisation:

Answer 3

KOF Globalisation Index
AT Kearney
IMF

Question 4

Some parts of the world have benefited far more than others from FDI from TNCs because:

Answer 4

not all places are suitable sites of production for goods, for a range of physical and human reasons (including accessibility, natural resources, government policies and levels of education)
not all places have enough market potential to attract large retailers (due to low incomes, or culture).

Question 5

Other strategies come into play as TNCs attempt to build their global businesses.

Answer 5

Rather than investing directly in the offshoring of branch plants, or acquiring foreign firms, TNCs can instead forge business partnerships with existing companies in other countries.
Many of the world’s biggest brands do not, in fact, make their own products.
Instead, they use outsourcing as their strategy.

Large corporations ranging from Dell to Tesco have established tens of thousands of outsourcing partnerships while building their global businesses.
The resulting series of arrangements is called a global production network (GPN).
A TNC manages its GPN in the same way the captain of a team manages other players
As globalisation has accelerated, so too has the size and density of global production networks, spanning food, manufacturing, retailing, technology and financial services.
Food giant Kraft and electronics firm IBM both have 30,000 suppliers providing the ingredients they need.
An amazing 2500 different suppliers provide parts to assemble BMW’s Mini car, from the engine right down to the windscreen-wipers
Some parts are outsourced from suppliers within the EU (to avoid import tariffs). In contrast, the engine comes from an offshore factory in Brazil, owned by BMW.
GPN growth owes much to trade liberalisation and the changing attitudes of national governments
Developing countries have benefited from GPN growth because outsourcing arrangements are economically beneficial.
The local owners of factories in China’s SEZs have profited from the work that foreign TNCs have outsourced to them.

Question 6

However, some TNCs have discovered that outsourcing brings new risks. A poorly monitored GPN can damage corporate profits and image:

Answer 6

Natural hazards, such as the 2011 Japanese tsunami, can disrupt global supply chains.
UK supermarkets were stunned to find horsemeat had entered their supply chains in 2013.
The collapse of the Rana Plaza textile factory in Bangladesh in 2013 killed 1100 people making clothes for Benetton and Wal-Mart, among others, as part of an outsourcing arrangement.

As a result of events like this, some TNCs are now ‘re-shoring’ their manufacturing closer to home.

Question 7

Offshoring:

Answer 7

TNCs move parts of their own production process (factories or offices) to other countries to reduce labour or other costs.

Question 8

Outsourcing:

Answer 8

TNCs contract another company to produce the goods and services they need rather than do it themselves.
This can result in the growth of complex supply chains.

Question 9

Glocalisation

Answer 9

This refers to changing the design of products to meet local tastes or laws.
It is an increasingly common strategy used by TNCs in an attempt to conquer new markets.
Glocalisation makes business sense because of geographical variations in:
* people’s tastes
* religion and culture
* laws
* local interest
* Lack of availability of raw materials
Far from rolling out an undifferentiated product across the world, many TNCs actively view localising strategies as integral to globalisation.

Question 10

evaluating the importance of glocalisation for TNCs

Answer 10

not all companies need to glocalise products.
For some big-name TNCs, the ‘authentic’ uniformity of their global brand is what generates sales
For others, including oil companies, glocalisation has little or no relevance for their industrial sector.

Question 11

Glocalisation examples: Different approaches used by TNCs

Answer 11

The Walt Disney Company
In 2009, Disney released its first Russian film, Book of Masters, based on a Russian fairy tale and produced using local talent.
Disney acquired Marvel in 2009, gaining the rights to superhero characters that have sometimes been glocalised.
‘Spiderman India’ is an example.
In a story made for Indian children, Mumbai teenager Pavitr Prabhakar is given superpowers by a mystic being.
The story is different from the version UK and US children are familiar with.

McDonald’s
By 2012, McDonald’s had established 35,000 restaurants in 119 countries.
In India, the challenge for McDonald’s has been to cater for Hindus and Sikhs, who are traditionally vegetarian, and also Muslims who do not eat pork.
Chicken burgers are served alongside the McVeggie and McSpicy Paneer (an Indian cheese patty).
In 2012, McDonald’s opened a vegetarian restaurant for Sikh pilgrims visiting Amritsar, home to the Golden Temple.

Question 12

environmental reasons for global isolation in North Korea:

Answer 12

Limited Arable Land
North Korea has mountainous terrain, 80% of its land consists of rugged mountains and hills.
The limited availability of flat and fertile land impacts agricultural productivity
As a result, North Korea has faced chronic food shortages and struggles to meet the nutritional needs of its population.

Limited Access to Water Resources:
Despite having several rivers, North Korea faces challenges in accessing and effectively utilising its water resources.
Unequal distribution of water resources and inadequate infrastructure for irrigation limit agricultural output and make the country reliant on rainfall for crop cultivation.
The scarcity of water resources also affects other sectors such as hydropower generation and industrial activities.

Air and Water Pollution
Old and inefficient industrial facilities emit pollutants into the atmosphere, contributing to poor air quality and potential health risks.
Inadequate wastewater treatment systems and industrial waste disposal practices contaminate water sources, negatively impacting both human health and ecosystem integrity.

Question 13

political reasons for global isolation in North Korea

Answer 13

corruption
potential investors are concerned about the lack of transparency and accountability.
According to Transparency International’s Corruption Perceptions Index, North Korea consistently ranks among the most corrupt countries in the world.
limits its access to international trade and investment.

Exclusion from Trade Blocs
the country has been excluded from major regional trade blocs such as the Association of Southeast Asian Nations (ASEAN)
The absence of membership in trade blocs restricts North Korea’s access to preferential trade agreements.
This isolation impedes the country’s economic growth and integration into global markets.

Civil Conflict
North Korea has experienced internal conflicts, most notably the Korean War (1950-1953), which divided the Korean Peninsula into North and South.
The ongoing political tensions and unresolved conflict have contributed to the country’s isolation from the global community.

Question 14

economic reasons for global isolation in North Korea

Answer 14

weak education and poor workforce
North Korea’s education system suffers from limited resources and a focus on ideological indoctrination rather than practical skills.
This results in a poorly trained workforce with inadequate knowledge and skills for modern industries.

Poor Transport and Telecommunications Infrastructure
limited and outdated transportation infrastructure, including poorly maintained roads, railways, and ports.
This hampers efficient movement of goods and services both domestically and internationally.

has limited access to modern telecommunications networks, with restricted internet access and limited connectivity.
This lack of connectivity inhibits participation in global markets and hinders communication with the outside world.

Dependence on Specific Industries:
heavily relies on specific industries such as mining, agriculture, and manufacturing, which limits its ability to diversify its economy.
These industries often suffer from outdated technology, lack of investment, and poor infrastructure.
nobody knew the song “yesterday” by the beatles when a journalist visited

Question 15

Global Shift of Manufacturing to China:

Answer 15

world’s largest manufacturer.
due to low labour costs, a vast workforce, favourable government policies, and access to global markets.
Many multinational corporations have relocated their manufacturing operations to China to take advantage of these factors.

Question 16

Outsourcing of Services to India:

Answer 16

emerged as a global leader in the outsourcing of services, particularly in the fields of information technology (IT) and business process outsourcing (BPO).
due to a large pool of skilled English-speaking professionals, cost advantages, and a supportive government framework.
Many Western companies have outsourced their customer service, IT support, data processing, and other services to Indian firms.

Question 17

Costs and benefits for emerging
Asia:

Answer 17

Average incomes have soared for successive waves of new Asian ‘tiger’ economies. Japan’s success came first in the 1950s.
South Korea followed soon after.
Foreign investors began working with local firms called Chaebols.
As national revenues soared, so too did South Korea’s spending on education and health.
Today, the country is an OECD member with the world’s eleventh largest economy.
Between 2000 and 2010, most large Asian economies sustained exceptionally strong annual growth rates, in part due to global shift (Table 13.1).
More recently, growth has slowed but, in most cases, remains higher than in developed countries (Figure 13.1).
* Across Asia, urban environments have been transformed by rapid industrialisation and the establishment of SEZs (see Chapter 12).

Question 18

Major economic, social and environmental changes are associated with globalisation:

Answer 18

Poverty reduction and waged work:
Education and training
Environment and resource pressure
Infrastructure, the built environment and unplanned settlements

Question 19

Poverty reduction and waged work

Answer 19

Worldwide, 1 billion people have escaped US$1.25-a-day poverty since 1990.
The majority are Asian: over 500 million have escaped poverty in China alone.
The term ‘new global middle class’ is used to describe the growing mass of urban, working people who have escaped rural poverty.
Some work in the manufacturing sector in Bangladesh and China.
Others belong to service industries in India and the Philippines. Many earn between US$10 and US$100 per day (far more than their parents did). By 2030, it is predicted that Asia will be home to 3 billion middle-class people.

Question 20

Education and training:

Answer 20

High school achievement in Singapore and Hong Kong is envied by governments around the world, including the UK.
Throughout Asia, education has improved in recent decades, albeit unevenly (illiteracy remains a problem in rural India and Bangladesh, for instance).
Around 2500 universities in China, India and South Korea award millions of graduate degrees each year.
China alone awarded 30,000 PhDs in 2012, and Asian countries now play a leading role in quaternary sector research in biotechnology and medical science.

Question 21

Environment and resource pressure

Answer 21

The flip-side of global economic growth is the acceleration of environmental decline. Forested land has been sacrificed to urbanisation, logging and cash cropping.
Since 1990, Togo has lost 60 per cent of its forested area; Nigeria’s forest has halved in size.
Elsewhere, productive crop land has been ruined by over-exploitation, soil erosion or mining.
From 1990 to 2008, globalisation helped drive a ‘commodities supercycle’.
Demand for raw materials - from soy beans to iron ore - rose steeply each year.
However, global resource pressure has recently slackened, due to reduced demand in China (where economic growth has halved since 2008).

Question 22

Infrastructure, the built environment and unplanned settlements

Answer 22

Alongside economic take-off, infrastructure development has taken place, bringing modern motorways, high-speed railways and airports to major cities including Jakarta.
There is a growing trend for extreme high-rise development in city centre ‘hotspots’ in many Asian cities, including Hong Kong, Singapore and Shanghai.
Often these developments are accompanied by the loss of recreational spaces and older, unplanned neighbourhoods. Beijing’s traditional hutongs (narrow lanes) are now all but lost.
Mumbai’s Dharavi slum is a cramped and chaotic place that is home to families who live on little more than £200 a month.
It is also the location of a thriving recycling industry worth as much as £700 million a year and employing 250,000 people.
However, city authorities are determined to replace the Dharavi slum with modern flats.

Question 23

Global outsourcing of services to India:

Answer 23

By 2040, India is expected to be the second-largest economy in the world.
Some of its recent economic success is attributable to the call centre services that Indian workers provide (Table 13.2).
Why have US and UK businesses outsourced so much work to India, and to the city of Bangalore in particular?

• Many Indian citizens are fluent English speakers.
  This is a legacy of British rule, which ended in 1947.
  It gives India a comparative advantage when marketing call centre services to the English-speaking world.
• Broadband capacity is unusually high in Bangalore.
  This city is a long-established technology hub, thanks to early investment in the 1980s by domestic companies such as Infosys and foreign TNCs such as Texas Instruments.
  Today, large independent Indian operators conduct contract work for all kinds of firms, from travel companies to credit card providers.
  Dell, Intel and Yahoo have also built their own call centres here.

Question 24

Evaluating India’s call centre success story
Costs

Answer 24

Some call centre workers complain they are exploited.
Their work can be highly repetitive.
Business is often conducted at night - due to time zone differences between India and customer locations in the USA or UK - sometimes in ten-hour shifts, six days a week.
Despite overall growth, the gap between rich and poor has widened sharply.
India has more billionaires than the UK, yet it also has more people living in absolute poverty than all of Africa.
In 2015, half a billion Indians lived in homes that lacked a toilet.

Question 25

Evaluating India’s call centre success story
Benefits:

Answer 25

India’s call centre workers earn good middle-class wages by Indian standards.
Nightclubs and 24 shopping malls in Bangalore testify to the relatively high purchasing power of a new Indian ‘techno-elite’ typically earning 3500 rupees (£40) a week (Figure 13.2)
Indian outsourcing companies have become extremely profitable.
Founded in 1981, Infosys had revenues of US$9 billion in 2015. It is one of the top twenty global companies for innovation, according to the US business analyst Steve Forbes.

Question 26

Global outsourcing of manufacturing to China:

Answer 26

The global shift of manufacturing has played an important role in extreme poverty in China falling from 60 per cent in 1990 to sixteen per cent by 2005 (Table 13.3).
China first gained its reputation as the ‘workshop of the world in the 1990s.
Cities like Shenzhen and Dongguan offered foreign investors a massive pool of low-cost migrant labour.
At this time it was common to hear stories of Chinese workers suffering in factory conditions similar to those of Victorian England.

Between 2000 and 2010, conditions improved markedly for many workers.
The disposable income of urban citizens rose threefold following a series of protests. In 2010, workers walked off production lines for Honda, Toyota, Carlsberg and other global brands.
Actions such as these led to wage increases of between 30 and 65 per cent (Honda employees now earn US$300 a month).

Since 2010, strategic planning by China’s government has helped some companies move further up the manufacturing value chain.
The country’s economy is maturing rapidly. ‘Hi-tech’ manufacturing is booming, bringing improved pay for skilled workers.
Increasingly, high-value products such as iPhones are made in China, not just ‘throwaway’ cheap goods.
Many less-desirable ‘sweatshop’ jobs have migrated to Bangladesh where labour costs remain much lower.

Question 27

Evaluating China’s ‘workshop of the world’ status
Costs

Answer 27

In the early years, many workers were exploited in sweatshops.
Around 2500 metal-workers in Yongkang lost a limb or finger each year due to dangerous factory conditions.
It gained a reputation as China’s so-called ‘dismemberment capital’. Since then, conditions have improved for many Chinese workers.
The environment continues to suffer greatly.
Dubbed ‘airpocalypse’ by the Western media, air pollution in cities reduces Chinese life expectancy by five years.
The WHO is concerned with very high average levels of small particulate matter known as PM2.5.
These deadly particles settle deep in the lungs, causing cancer and strokes.

Question 28

Evaluating China’s ‘workshop of the world’ status
Benefits:

Answer 28

As conditions improve, people are enjoying large income gains. More people can now afford smartphones and fridges.
Car ownership has grown from one-in-a-hundred families to one-in-five since 2000. Increasingly, China’s economic growth is driven by this domestic consumption, and not just by the value of its exports.
A transfer of technology has taken place since the early days of manufacturing-led industrialisation.
Local companies have adopted technologies and management techniques brought to China by TNCs.
Increasingly, Chinese companies are developing their own products.
A leading example is smartphone maker Xiaomi.
Chinese banks are now some of the world’s largest TNCs.

Question 29

Environmental challenges for communities in developing countries:

Answer 29

It is not only China that has experienced an “airpocalypse.
Communities within many developing economies have experienced major environmental problems as a result of global shift.
Adverse impacts on the health and well-being of people have resulted from pollution, over-exploitation of resources and the dumping of industrial waste.
Global shift has, in part, been driven by TNCs seeking low-cost locations for their manufacturing and refining operations.
Weak environmental governance has sometimes been an attractive location factor. In high-income nations, bodies such as the UK Environment Agency have a well-funded remit to monitor industrial operations and fine polluters.

Question 30

Elsewhere, there is less red tape:

Answer 30

China: In Dongguan, workers for Wintek - the firm that makes touchscreens for iPhones - were poisoned by chemicals used to treat the glass. In Hunan province, many people were poisoning by a lead-emitting manganese smelter (manganese is used to strengthen steel, one of China’s major exports).

Ivory Coast: Tens of thousands of Ivorians suffered ill health after toxic waste alleged to produce hydrogen sulphide was dumped by a ship in the employ of Trafigura, a European TNC. A £28 million cash settlement followed.

Indonesia: Land degradation and biodiversity loss are widespread in Indonesia, where an area of rainforest as big as 100,000 football pitches is lost each year. Room is being created for oil-palm plantations and mining operations. The scale of forest burning has created transboundary smoke pollution affecting neighbouring states.
More mammal species are threatened in Indonesia than in any other country. The government has been very slow to act and corruption remains widespread