GLOBAL

INDUSTRIAL
SHIFTS
You will learn to explain the trend of transference of manufacturing activities from
developed countries to less developed countries

Subject : GS201 Lecturer: TE HENGLY Submit by : GROUP 2

 Global Industry Shift 01

TABLE OF CONTENTS
01
HOW HAS THE GLOBAL MANUFACTURING INDUSTRY HAS CHANGED?

02
WHY DO INDUSTRIES MOVE THEIR MANUFACTURING ACTIVITIES?

03
IMPACTS OF TREND OF TRANSFERENCE
 Global Industry Shift 02

CHANGES IN GLOBAL
MANUFACTURING INDUSTRY
DEVELOPMENT OF LARGE-SCALE MANUFACTURING
Major changes in industries took place during the 18th and early
19th centuries. This period of change was known as the Industrial
Revolution It began in the United Kingdom (UK) and spread
throughout the world.

INDUSTRIALIZATION DUE TO LARGE-SCALE

MANUFACTURING
By the 20th century, some countries in North America and many
countries in Europe had become highly industrialised due to large-
scale manufacturing. This led to the improvement of their
economies, and consequently, their living conditions and
infrastructures. Such countries are called developed countries (DCs)
Source: okcredit
 Global Industry Shift 03

TREND OF TRANSFERENCE
From the 1960s to the mid-1990s, there was a global shift in location of a large-scale manufacturing activities and
a change in the types of industries. This is known as the trend of transference. This trend took place in different
stages over different periods of time, as shrend in the timeline in page 120. (Fig 4.3)
 Global Industry Shift 04

Source: Marshall Cavendish

Trend of Transference
 Global Industry Shift 05

WHY DO INDUSTIRES
MOVE THEIR
MANUFACTURING
ACTIVITIES?
In this section, we will learn why industries choose
to transfer their manufacturing activities from DCs
to LDCs.
 Global Industry Shift 06

COMPETITIVE ADVANTAGES
...
In order to maintain low costs in production and
maximise profits, companies may relocate their
manufacturing activities. In doing so, they achieve
competitive advantage, which is a gain obtained from
locating an industry in a new location. This gain may be
in the form of lower costs, attractive government
incentives or a large market. Source: marketing91
 Global Industry Shift 07

Source: mindomo • When costs are low, companies can keep their
prices competitive and maximise profits.
• Labour costs in DCs have been on the rise. As a
place develops over time, the standard and cost
of living also rise. As a result, people demand
higher wages
• In addition, many LDCs have large populations
which contribute to larger pools of available
workers. This, in turn, helps to keep labour costs
low.
• Apart from high labour costs, industries in DCs
may face difficulties in expanding factory space as
LOWER COSTS land is built-up and urbanised. Furthermore, the
cost of land is comparatively higher.
 Global Industrial Shifts

ATTRACTIVE GOVERNMENT
INCENTIVES
TAX EXEMPTION
A situation in which a person or organization does not
need to pay tax.

• Maylaysia, projects involving heavy investments and

use of high technology may be completely exempted
from income tax.
source:smartasset.com

07
 | Global
Global Industrial
Industrial Shifts
shifts | 09

FREE TRADE ZONE (FTZ )

are industrial areas where infrastructure is
built, government requirements are lowered
and incentives are provided to attract foreign
companies to set up their activities.

SPECIAL ECONOMIC ZONE (SEZ )

Source: https://pin.it/6kmslYj4w
•The Chinese Government designated Shenzhen and Zhuhai
in Guangdong Province as SEZs to attract manufacturers
with benefits such as tax incentives and relaxed labour laws.
are industrial areas similar to FTZs, but where
the economic laws are flexible than the
typical laws of the country.

| Attractive Government Incentives |

 Thynk
Global
Global Industrial
Industrial Shifts
Shifts 10
University

LARGE
MARKET
Closer proximity to large populations
of countries and growing middle-class
market (such as China and India).

Companies in DCs can expect a

consumer goods market of half a billion
people from these two countries alone.
 Global Industrial Shifts

SPACE SHRINKING
TECHNOLOGY

TRANSPORT COMMUNICATIONS
TECHNOLOGY CONTAINERISATION TECHNOLOGY

11
 12

TRANSPORT
TECHNOLOGY
Reduce distance or time taken to travel.
Aeroplane (London-Bangkok: 8days)
Jet engine (London-Bangkok: 10h)
Source: CNN

Global Industrial Shifts

 Global Industial Shifts 13

Increase the speed and efficiency of

moving goods.
Transport technology& containerisation
have helped industries from being
located near their sources of raw
materials or market. Source: BBC

CONTAINERISATION
Global Industrial Shifts 14

COMMUNICATION
TECHNOLOGY
Made communication between people more
convenient.
Headquarters of industries are better able to
monitor and coordinate with their branches.
 Global Industrial Shifts 15

IMPACTS OF THE TREND

OF TRANSFERENCE
• Shift in manufacturing jobs from DCs to LDCs due to • Decrease in manufacturing workforce in DCs since
cost-saving measures. 1960s.

• Increase in manufacturing employment in LDCs (as • Transition from low-skilled, labor-intensive jobs in
seen in China from 1978 to 2002.) LDCs to high-technology jobs since the 1990s.
 Global Industrial Shifts 16

INCREASE IN FOREIGN
INVESTMENTS IN LDCS
• Foreign investment in LDCs
has increased since the 1980s
due to the trend of
transference.
• Foreign manufacturers
investing in a country spend
money to acquire resources
like land and labour, resulting
in more money flowing into
the economy.
• Thailand's foreign
investment flow increased 14
times from US$250 million
between 1980 and 1985 to
US$3,500 million between
1996 and 2000.

• Foreign investment also introduces new • Malaysia established its own motor vehicle
technology, as seen with Mitsubishi Motor manufacturing company, Perusahaan Otomobil
Corporation's motor vehicle manufacturing Nasional (Proton), in 1983, employing 10,000 people
technology in Malaysia. and generating about RM8.8 billion in 2006.
Impacts of Shifting manufacturing activities from DCs to LCDs
 Global Industrial Shifts 17

INCREASE IN EXPORT OF
MANUFACTURED PRODUCTS IN LCDS

Exports of manufactured products in LDCs have also increased significantly as a

result of the trend of transference.

Impacts of Shifting manufacturing activities from DCs to LCDs

 Global Industrial Shifts 18

EXAMPLE
According to a report released by the General Department of
Customs and Excise, the country exported goods worth $20.5
billion in 2023, compared to $20.24 billion during the same period
in 2022.

The report also highlighted the significant rise in Cambodia’s exports

to China, with a growth rate of over 18 percent. In January-
November, Cambodia exported goods worth 1.3 billion dollars to
China, up from $1.1 billion in the previous year. China remains the
third-largest export destination for Cambodia, following the United
States and Vietnam.

| Impacts of Shifting manufacturing activities from DCs to LCDs |

Source: Khmer Times

 Global Industrial Shifts 19

GROWTH OF NEWLY INDUSTRIALISING

ECONOMIES

A lot of LDCs have been benefited by the trend of transference but this trend does
not take place every LDCs.
 Global Industrial Shifts 20

NIES
LDCs that have been able to enjoy rapid growth in their manufacturing industries,
resulting in industrialization. These countries are known as Newly Industrializing
Economies.
 Global Industrial Shifts 21

SUMMARY
How the Global Manufacturing Industry has changed:
Development of large-scale manufacturing
Industrialisation due to large-scale manufacturing

The reasons why industries move their manufacturing activities:

Competitive advantages:
o Lower costs
o Attractive government incentives
o Large markets
 Global Industrial Shifts 22

Space shrinking technology:

o Transport technology
o Containerisation
o Communication technology

Impacts of Trend of Transference:

Shift in manufacturing-related jobs from DCs to LDCs
Increase in foreign investment in LDCs
Increase in export of manufactured products in LDCs
Summary
 Global Industrial Shifts 23

THANK YOU
Q&A

Subject : GS201 Lecturer: TE HENGLY Submit by : GROUP 2