Chapter 1: Transnational Companies / Multinational

Corporations

 Firms with two or more branch plants across international

boundaries, usually organized in a spatial hierarchy of control and
production
 Core: EMDCs, Semi-periphery: NICs, Periphery: ELDCs
 Eg. Nike, Citibank, Coke, Sony
 Impacts of outsourcing
 Positive
 Reduces capital inputs of setting up new plants,
buying new machinery
 Able to shift operations quickly in order to find best
and most efficient subcontractor
 Negative
 Quality of products might be compromised unless
strict quality control is observed
 Unpredictability of employment of local labour
(strikes)
 Possible leakage of confidential trade information,
may lead to piracy problems
 Coping with competition
 Collaboration: corporate growth accentuated by increasing
global interconnectedness through acquisitions, mergers
and alliances to maintain good share of profits
 HP working with Japanese company Yokogawa – HP
provides technology (access market) while Yokogawa
provides workers (transfer of technology)
 HP gets ink from Canon to develop InkJet printer
 HP works with Chinese government to access
Chinese market
 Flexibility
 One worker able to do whole range of jobs
 If product changes, workers can adapt quickly
 Changing nature of TNCs
 Rationalisation: replacing workforce with machines
 Reorganisation: improvements in production,
administration and marketing
 Diversification: development of new products

1. Factors of investing overseas

 Economic
 Cheap and efficient labour: labour-intensive markets like
electronics, textiles
 Access to market
 Opportunities: may be end of product cycle in DCs but still
thriving in LDCs
 Geographical
 Strategic location
 Proximity
 Access to raw materials
 Political
 Government support: UK ‘open’ door policy, welcomes
Japanese investment – Japan moving to UK for production
of cars
 Lax environmental regulations
 Lack of strong unions
 Less protectionism
 Less social security: in Europe have paid maternity leave
for both fathers and mothers
 Stability
 Open to changes from supranational bodies: EU’s slow
economic reforms
 Socio-cultural
 Language
 Character of people: Asians perceived as more
hardworking than Westerners

2. Impact of TNCs
 Economic
 Positive
 Direct job creation: Nike employs 23 000 as direct
employees, 660 000 contract workers from
outsourcing
 Creates industrial linkages: primary industries like
rubber production can increase profits by supplying
rubber products to manufacturing plants for
production of Nike products
 Joint-venture schemes: transfer of technology,
shared profits, nurture local talent, development of
infrastructure: Ford launched road safety fund in
Philippines to reduce traffic fatalities
 Structural shift of economies: leapfrog stages:
Singapore – tertiarisation / industrialization
 More competitive pricing for consumers in DCs
 Multiplier effect – investor confidence
 Negative
 Exploitation of cheap labour: less than 4% of Nike
shoe goes to labour cost
 Profit repatriation: 60% for Coca-Cola
 Minimal transfer of skills: low-level repetitive skills
 Impermanence of jobs: 1996: Maxtor laid off 800
Singaporeans before relocating to China
 Stifle local competition and entrepreneurship: large
Chaebols in South Korea (Samsung) – immense
diversification and penetration
 Over-dependency: expatriates may all leave due to
disease / war
 Social
 Positive
 Trickle-down effect: better social provision
 TNC’s social strategies: Nike’s social programmes
include small loans for women in Thailand to set up
businesses
 Negative
 Violation of human rights: Indonesian Nike workers
fined half a day pay for talking
 Rise of consumerism culture: Nike promotes fashion
culture, not necessarily a healthy lifestyle
 Homogenisation of cultures: social invasion:
Starbucks in Forbidden City
 Environment
 Positive
 Implement environmentally-friendly schemes: Ford
Ikon for Indian market emits 40% less than legal
limits
 Negative
 Poorly-regulated controls in waste discharge: Nigeria
Shell Incident in 1990s: above-ground oil pipes leak
led to contamination of agricultural land
 Political
 Negligence of legislation: despite an international oil
embargo, BP continues to refine crude oil in South Africa

Chapter 2: Impact of New Technologies at Work

1. Fordism: just-in-case production

 Low-end jobs easily replaceable and offshored to LDCs, causing
deindustrialization in DCs
 Skilled workers become deskilled

2. Post-fordism: flexible production

 Just-in-time production eg. Dell
 Positive
 Saves costs because less storage space needed
 Value-added: latest products available +
customization
 Takes advantage of product cycles
 Negative
 Risk of unexpected demand surges
 System vulnerable if there is a breakdown in supply
chains
Chapter 3: New International Division of Labour

 New International Division of Labour: phenomenon of employing

labour crossing national boundaries and on a global scale, and is
often related to TNCs who practise this form of labour

1. Impact of Industrialisation
 Economic
 Raises standard of living
 Change in labour force: shift to manufacturing industries,
decline in agricultural employment and productivity,
increase in service industries
 Growth in urban infrastructure
 Benefits government instead of people
 Increased competition for land, raising land prices
 Social (rural)
 Social imbalance between affluent people and rest of
population
 Population change: age-selective migration to urban areas
 Decline of traditional values and lifestyles
 Increased dependence on income from urban workers
 Poor welfare systems
 Social (urban)
 Rapid development of slums: concentration of unemployed
and poor
 High crime rates, illiteracy, disease
 Low levels of social provision
 Unsatisfactory working conditions
 Political and social unrest
 Environmental
 Resource exploitation – damage natural environment
 Rivers polluted by industrial waste
 Air pollution
 Unsafe working practices – environmental disasters
 Urban disease eg. contaminated land
 Limited environmental legislation / difficult to enforce

2. Deindustrialisation
 Long-term absolute decline in the manufacturing sector with
respect to jobs and production
 Reasons
 Maturity: inevitable change from agriculture through
manufacturing to service industry
  Management slow to innovate: boom period of 1960s
meant that even inefficient plants could make a profit –
maangers unwilling to modernize
 Overseas competition
 Rationalisation
 Negative deindustrialisation: plant closure due to inefficiency vs.
positive industrialization: reduce plant and workforce to improve
competitiveness

3. Reindustrialisation
 Development of new industries which has followed
deindustrialisation in many regions of the developed world
 Causes
 Inward investment: movement of foreign-owned firms /
capital into another country
 Growth of small firms due to
 Market demand for specialized goods
 Large firms fragmenting during recession and
offloading production and R&D to smaller firms
 Rapid technological change and innovation favouring
small research companies
 Government policies which have encouraged the
enterprise culture
 Large firms vs. small firms: consider marketing, management,
internal communications, qualified technical manpower
Chapter 4: Role of State and the Supranational Bodies

1. Roles of State
 Employer: provide public employment eg. civil service
 Regulator: sets and regulates strategic socio-economic policies in
trade
 Ensure adherence to fair wage rates eg. NWC
 Create spatially efficient land uses / niches / economic
zones
 Niche on local strengths of economy
 Promote investments in specific areas
 Provide grants to targeted industries
 Usually already have well-built infrastructure
 Eg. Biopolis
 Mitigate environmental impact with urban planning
 Provide local protection: minimum local content
 Malaysia: locals must own at least 51% of firm
 Create pull factors for industries
 Singapore: firms not taxed for first 5 years + grants
 Reduce dependency via joint ventures
 Link local firms with TNCs: Local Industry Upgrading
Programme in Singapore has seen TNCs like Apple
assisting local firms by providing access to their
technologies
 GLCs do business with foreign TNCs
 Collaborator: bilateral trading arrangements
 Competitor
 Effectiveness depend on factors like
 Size and diversity of people: Singapore much easier to
control
 Cultural factor: Singaporeans generally more hardworking
 Geographic location
 Policies in place

2. Role of Supranational Bodies

 Regulator: sets and regulates socio-economic policies in trade
Chapter 5: Service and SMEs

 Rise of quaternary and quinary sectors: R&D, biomedical, education

sector, government planning departs (military intelligence)
 R&D industries tend to be in suburban locations, attract
international laobur and talents
 Decentralisation of service industry
 Causes
 Suburbanisation of services from city center to city
edge
 Transport and communication improvement
 Arguments for
 SOHO (Small office, home office)
 NO need for highest accessibility because of Internet
 Arguments against
 Central economic and government systems – most
vital functions carried out
 Highest accessibility, centrality and address-prestige
 Globalisation of services
 Fueled by development of IT
 Growing quality of labour in LDCs
 Growing standardization of service products: university
education conducted mainly in English, demands for 5-star
tourist class resorts even in LDCs
 Service-diversification of manufacturing firms: Wing Tai
Apparels – Wing Tai Properties / purchase hotel properties
overseas
 Rapid growth of international trade of goods: high need for
support services – logistics and transport, finance,
administration, telecommunications
 New industries due to global economic change
 Rise of SMEs
 Fueled by stable and supportive government
 Platforms to foster innovation and enterprise due to
its small and flexible size
 Diversify economy (prevents monopoly)
 Hope that a few SMEs may become TNCs eg. Old
Chang Kee
 Singapore’s SMEs contribute up to 25% of GDP
 Creation of hubs: cluster of industries generate more EOS
 Deregulation and privatization of public services: introduce
more competition to achieve greater efficiency,
productivity and add more value to consumers