4 Globalisation Economic Powerpoint

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4 Globalisation Economic Powerpoint

  1. 2. Globalisation (in the broad sense) <ul><li>Spread of; manufacturing, services, markets, culture, lifestyle, capital, technology and ideas across national boundaries and around the world. </li></ul><ul><li>Also the integration of these geographically dispersed economic and social activities. </li></ul><ul><li>Huge impacts on people and nations. The whole world is affected by globalisation. </li></ul>
  2. 3. We now live in a “shrinking” world where space and distance are irrelevant and places have become homogeneous? <ul><li>Geography is irrelevant? </li></ul>
  3. 4. Nonsense!! <ul><li>Think how different your life would be if you were born in a village in Niger. </li></ul><ul><li>We all still spend most of our lives in local space . </li></ul>
  4. 5. Nonsense!! <ul><li>As it becomes easier to transcend space, an understanding of the differences between places becomes even more important. </li></ul><ul><li>It is now possible for even small companies to seek a competitive advantage by producing and selling their products in another place. The decision is, which place? </li></ul>
  5. 6. Nonsense!! <ul><li>The process of globalisation is not uniform. Change does not occur everywhere in the same way and at the same time. </li></ul><ul><li>The particular character of individual countries, regions and even localities interacts with the larger scale general processes of change to produce quite specific outcomes. (P Dicken – Global Shift) </li></ul>
  6. 7. Globalisation and cultural integration It is true that globalisation has had an affect on culture. We will look at this in more detail later.
  7. 8. Globalisation ( Economic) <ul><li>Growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, free international capital flows, and more rapid and widespread diffusion of technology. </li></ul>
  8. 9. Measuring Globalisation <ul><li>Statistics related to trade. </li></ul><ul><li>Total exports, total trade (imports + exports), Trade as a % of GDP </li></ul><ul><li>Statistics related to FDI. </li></ul><ul><li>Foreign Direct Investment. Money invested in a country by a foreign company. FDI inflows and outlflows. </li></ul>
  9. 10. TNC – Stages of Globalisation <ul><li>TNC – “a firm which has the power to coordinate and control operations in more than one country, even if it does not own them” (Peter Dicken – Global Shift) </li></ul><ul><li>TNC - Transnational Corporation </li></ul><ul><li>Also called Multinational Enterprise (MNE) </li></ul>
  10. 11. Globalisation (globalising a firm’s activitiy) <ul><li>Nagle page 309 </li></ul><ul><li>Worldwide intra-firm division of labour. </li></ul><ul><li>In this strategy, activities are established in many sites spread over the world based on a country’s comparative advantages. </li></ul><ul><li>Secure supply of inputs by locating production of these inputs in the most favourable location (Weber weight-losing industries) (sourcing copper from Chile) </li></ul><ul><li>Labour-intensive production in low wage areas (China) </li></ul><ul><li>Hi-Tech, high value parts located near skilled/well educated workforce (Biotech Cambridge UK) </li></ul>
  11. 12. Globalisation is closely linked to the concept of the… The New International Division of Labour. The spatial decentralisation of many economic activities. Until recently the NIDL was seen as the spatial decentralisation of manufacturing away from the Core to Semi Peripheral areas. Now we can observe a NIDL in services and an increasing decentralisation of coordination and control operations.
  12. 13. Factors which help the spread of globalisation <ul><li>Low transport costs, containerisation </li></ul><ul><li>Telecommunications </li></ul><ul><li>Internet </li></ul><ul><li>Low trade barriers </li></ul><ul><li>Political stability </li></ul><ul><li>Increasing role of TNCs </li></ul>
  13. 14. Geographical theories of industrial location which affect globalisation <ul><li>Weber least cost location </li></ul><ul><li>This is basically about locating where costs are lowest. If the finished product has gained weight during production the production is located near the market eg brewing beer. If the raw materials are heavy production is located near raw materials eg steel near iron and coal. </li></ul><ul><li>This leads to agglomeration (groups of similar industries) </li></ul><ul><li>Nagle (311) Changing location of Steel Industry) </li></ul><ul><li>Puts a big emphasis on transport costs. </li></ul><ul><li>Assumes that decision makers behave rationally. </li></ul><ul><li>Behavioural theory suggests that decision makers do not locate in the most profitable place or area. A satisfactory location is decided on taking into account personal factors which might reduce profit but increase quality of life. </li></ul>
  14. 15. Geographical theories of industrial location which affect globalisation New International Division of Labour – As transport and communication technologies have improved it is possible to decentralise primary industries, manufacturing and to an increasing extent service activities and yet still maintain a central control. For example TNCs locating production in least cost locations far from decision making HQ. Increasingly HQ activities are being decentralised into an integrated network of regional HQ. “ Just in Time” production – Started by Toyota to reduce costs of storing large volume of parts. Suppliers supply parts just in time to the assembly plant. Requires coordinated vertical integration. Product life cycle – As product goes through its life cycle from introduction into mass market consumption and decline its production changes from R+D to mass production to cost reduction.
  15. 16. Newly Industrialising Countries <ul><li>NICs are becoming more important as they have had large amounts of FDI from TNCs they are now becoming more than just locations for cheap manufacturing and are starting to develop domestic markets and their own global companies. </li></ul><ul><li>Tata Steel from India </li></ul><ul><li>ACER from Taiwan </li></ul><ul><li>Lenovo China </li></ul>
  16. 17. Impacts on host countries <ul><li>Geofile – January 2006 Transnational Corporations. </li></ul><ul><li>Benefits and drawbacks </li></ul>
  17. 18. TNC response to change <ul><li>TNCs operate in a competitive environment. </li></ul><ul><li>Nagle 304 </li></ul><ul><li>Rationalisation and restructuring </li></ul><ul><li>Diversifying </li></ul>
  18. 19. Now we need to view globalisation in a wider sense and investigate the impact of globalisation on culture and the concept of cultural integration.

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