Chapter 1: Transnational Companies / Multinational Corporations
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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
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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
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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
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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
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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
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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
 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