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									Development and globalisation questions



1. Study the information below.

Figure: The world’s top 10 companies (2007):

Rank    Company              Country           Market value        Sector
                                               (US $ billion)
1       Exxon Mobil          USA               479                 Oil and gas
2       General Electric     USA               396                 General industrials
3       Microsoft            USA               287                 Computer software
4       Toyota Motor         Japan             280                 Automobiles
5       Royal Dutch Shell    UK                269                 Oil and gas
6       Citigroup            USA               254                 Banking
7       AT&T                 USA               252                 Telecommunications
8       Gazprom              Russia            251                 Oil and gas
9       BP                   UK                232                 Oil and gas
10      Bank of America      USA               219                 Banking

(a) Comment on the information given above.                                    (7)

(b) Suggest reasons for the growth of transnational corporations (TNCs).       (8)

(c) With reference to examples, discuss the social, economic and environmental impacts
of TNCs on their host countries.                                                (10)
2. Study the figure below.




   (a) Comment on the degree to which the figure supports the view that development
       is a straightforward concept.                                  (7)

   (b) Outline the concept of the North/South divide, and explain its relationship to
       the development continuum.                                       (8)


   (c) Discuss the consequences of the groupings on nations for social and/or economic
       reasons.                                                   (10)
3.




4.
5 (a) Study Figure 5 which shows how foreign aid should be spent in three African
countries in order to achieve the United Nations Millennium Development goals by
2015.




Comment on the similarities and differences in the ways in which foreign aid should
be spent in the three countries shown. (7 marks)
(b) Outline and illustrate the concept of “the development continuum”. (8 marks)
(c) With reference to one or more specific examples, discuss the reasons for the
groupings of nations. (10 marks)
June 2010
Study Figure 5 which shows economic changes associated with development.
a. Comment on trends shown in Figure 5. (7 marks)




b. For either China or India, explain the recent growth of industries in that country.
(8 marks)
c. Discuss the impact of Newly Industrialised Countries (NICs) on the global
economy. (10 marks)
Jan 2011
Study Figure 5 which shows information regarding trends in both trade and aid
between developed countries and less developed countries.
a. Comment on the trends shown in Figure 5. (7 marks)




b. Outline and suggest reasons for the issues facing countries at very low levels of
economic development. (8 marks)

c. Discuss one of the following development issues:
either ‘Economic sustainability versus environmental sustainability’
or ‘Sustainable tourism – myth or reality?’
(10 marks)
June 11




Essays:
1. “Global social and economic groupings have significant beneficial effects for
their members.” Discuss the extent to which you agree with this statement. (40
marks)



2. Discuss the varying roles of (a) the promotion of trade and (b) the provision
of aid, as approaches in the efforts to raise living standards in the poorest
countries of the world. (40 marks)

3. Can   sustainable development ever be achieved? (40 marks)

 ‘Recent globalisation has resulted in a widening of the development gap.’
4.
How far do you agree with this statement? 40 marks
5. Discuss the roles and relative importance of transnational corporations (TNCs) and
newly industrialising countries (NICs) in the changing global economy.
(40 marks)

6. Assess the role of social and economic groupings of nations in the world today.
(Jan 2011)

7. “Countries at very low levels of economic development face such huge challenges
that they cannot hope to address them without assistance from the rest of the world.”
To what extent do you agree with this view? (June 2010)

8. (June 2011)




June 06 – essays now worth 40 marks
Questions with model answers – how many marks would you give
the answers?

Development and globalisation.

What can be the effects in the donor (home) country when transnational
companies move their investment to other countries?          (8 marks)


ANSWER A

When a transnational corporation moves operations to another country the main effect
in the home country is unemployment as factories can be closed down. This can also
affect factories that supplied components to the TNC’s plants. This can make the
regions where the factories are located a lot poorer. Service operations can also be
affected when TNCs move such things as call centres to developing countries. On the
plus side, many high salaried jobs stay in the home country. Money is also sent back
to the home country which improves its economy.

ANSWER B

When TNCs move their operations from their country of origin to other countries, a
lot of people may lose their jobs. This is not only true for the main company, but a lot
of employment may also be lost in companies which supply components to the TNC.
This is particularly the case in assembly industries such as motor vehicle manufacture.
It also affects those firms which offer services to the TNC’s factories, such as
maintenance companies and even those which supply food to the factory’s canteens.
This movement can also affect service industries as has been seen with call centre
operations of financial companies (banks, insurance companies) being moved to
India. All of this can have a major impact in regions where the TNC was located.
There is less money to spend, fewer goods and services are required and the region
can suffer increased unemployment. This is the reverse of the multiplier effect and is
often known as a downward spiral, or vicious circle. On the positive side, if the TNC
is successful in its move, profits will be returned to the home country and paid out in
the form of dividends or to the government as company taxation. As the headquarters
of the TNC will probably stay in the home country, a successful company may need
more high salary people at head office to run it.
Discuss the role of transnational companies in the development of the global
economy.                                                 (10 marks)


ANSWER A

Transnational corporations (TNCs) are companies which operate in more than one
country. Many of them have their headquarters in the country of origin along with
Research and Development (R&D), and their manufacturing plant overseas, usually in
cheaper labour areas. It is possible when they grow that they may establish regional
headquarters in some of their markets. TNCs control and coordinate economic
activities in different countries and develop trade between those countries as they
move materials and goods from factory to factory. They are also responsible for the
transfer of technology from the developed world to developing countries, which may
result in a more skilled workforce. The introduction of a TNC into a country can bring
some benefits, particularly in terms of employment, but there can also be some
disadvantages. The largest companies in the world are TNCs (e.g. BP, Toyota,
General Motors, Ford, HSBC, Coca Cola, Unilever, Sony) and they operate in a
variety of activities. In recent years, service companies, such as accountancy firms,
have become TNCs by taking on global operations.

ANSWER B

During the twentieth century a new global economy has emerged through a process
known as globalisation. This is defined as the increased interconnection between the
world’s economic, cultural and political systems. In the global economy, transnational
corporations (TNCs) and nation states are two of the major players. The growth of
TNCs has been particularly rapid in the second half of the century, because in the
1960s, less than 10,000 companies were TNCs, whereas today some economists have
estimated that there are over 60,000 in operation.
TNCs have been the major force in increasing economic interdependence between
various parts of the world. TNCs initially emerged from developed countries but
increasingly they are the product of economic growth in a number of countries which
are known as Newly Industrialising Countries (NICs), e.g. South Korea and
Singapore. TNCs have their headquarters in their country of origin, along with R&D,
but their manufacturing plant will be overseas, probably in a cheaper labour location.
TNCs have stimulated world trade as they move goods and materials between their
factories. This is particularly the case for those industries involved in assembly, such
as the motor vehicle industry. TNC involvement in poorer countries such as South
Korea, enabled such countries to become richer through the benefits of employment
and the transfer of technology and management skills. This is why several large firms
developed in South Korea which eventually became TNCs by locating factories
overseas, e.g. Samsung, Hyundai and LG. In the early 1950s , 95% of all
manufacturing was concentrated in the industrial economies. Since then, TNCs as a
result of direct foreign investment (FDI), have been involved in a movement of
manufacturing to developing countries, a process known as global shift. The creation
of TNCs is not confined to resource exploitation and manufacturing as many service
companies have now become global in their operations. The accountancy industry is a
very good example with the emergence of four very large corporations, e.g. KPMG.
One recent trend, which has affected the global economy, is the growth of services
such as call centres, where large banking and insurance companies move their call
centre operations from Europe and the USA to such countries as India. Some of these
movements have resulted in deindustrialsation in developed countries and decreased
employment opportunities in developed countries.
Examples of Unit 3 essays.
                         Mark scheme for the essay questions
In deciding the overall level a best fit of the above will be put into practice.
  Assessment            Level 1              Level 2               Level 3                 Level 4
     criteria        1-10 (mid 6)        11-20 (mid 16)        21-30 (mid 26)          31-40 (mid 36)
Knowledge of        Basic grasp of     The answer is         Sound and frequent     Strong evidence of
content, ideas      concepts and       relevant and          evidence of            thorough, detailed
and concepts        ideas; points      accurate.             thorough, detailed     and accurate
                    lack               Reasonable            and accurate           knowledge
                    development        knowledge.            knowledge
                    or depth.          Imbalanced
                                       theories
Critical            Incomplete,        Reasonable            Sound and frequent     Strong evidence of
understanding of    basic.             critical              evidence of critical   critical
the above                              understanding of      understanding of       understanding of
                                       concepts and          concepts and           concepts and
                                       principles with       principles, and of     principles and of
                                       some use of           specialist             specialist
                                       specialist            vocabulary.            vocabulary.
                                       vocabulary.
Use of examples/    Superficial        Examples show         Examples are           Examples are well
case studies to                        imbalances.           developed,             developed and
support                                                      balanced and           integrated.
argument                                                     support the
Maps/Diagrams       None               Ineffective           argument.              Fully integrated
                                                             Effective
Evidence of         No evidence        Limited.              Strong                 Full
synopticity:
Connections                            Some ability to       Some ability to        There is a high level
between                                identify, interpret   identify, interpret    of insight, and an
different aspects                      and synthesise        and synthesise a       ability to identify,
of the subject                         some of the           range of material.     interpret and
                                       material.                                    synthesise a wide
                                                                                    range of material
‘Thinking like a                       Limited ability to    Some ability to        with creativity.
geographer’                            understand the        understand the         Evidence of maturity
                                       roles of values,      roles of values,       in understanding the
                                       attitudes and         attitudes and          role of values,
                                       decision-making       decision-making        attitudes and
                                       processes.            processes.             decision-making
                                                                                    processes.
Quality of          Language is        Arguments are         Explanations,          Explanations,
argument – the      basic;             not fully             arguments and          arguments and
degree to which     arguments are      developed nor         assessments or         assessments or
an argument is      partial, over      expressed clearly,    evaluations are        evaluations are
constructed,        simplified and     and the               accurate, direct,      direct, focused,
developed and       lacking clarity.   organisation of       logical, purposeful,   logical, perceptive,
concluded           No sense of        ideas is simple       expressed with         mature, purposeful,
                    focus of task.     and shows             clarity and            and are expressed
                                       imbalances. Some      generally balanced.    coherently and
                                       sense of focus of     Clear sense of         confidently, and
                                       task.                 focus of task.         show both balance
                                                                                    and flair.
Development and globalisation essays.

Discuss the roles and relative importance of transnational corporations (TNCs)
and newly industrialising countries (NICs) in the changing global economy.

It can be seen that TNCs have grown globally because of the competitive nature of
international economies and the ease at which products can be produced, traded and
transported worldwide. Often TNCs such as Nike, Dyson and Daewoo have the
mainframe of their corporations in MEDCs, for example Nike’s headquarters are
based in Oregon, USA. They are located in such areas for the skilled educated
workforce and commerce opportunities. However, the products they produce are often
out-sourced to NICs. This is because NICs offer what MEDCs can no longer afford to
do: cheap materials, tax incentives to locate there and most importantly a large cheap
workforce.
This creates huge profit margins for the company but can often cause both social and
economic problems. For example, when Dyson shifted production of its hoovers from
England to Malaysia, over 500 people lost their jobs causing mass unemployment. It
also affected local suppliers who lost trade because they had set up to supply the
company. Dyson could no longer afford the high rates of tax England charged, nor
could it continue paying high wages. In order to stay in competition it had to move
production abroad. However, the relocation of a TNC can also cause social problems
for the NICs. As a TNC relocates it needs a new large workforce that is often
unavailable at a local level and subsequently creates economic migration. For
example when HSBC moved its call centre from Derby to India, thousands of people
were required, and many left the rural agricultural townships to come and work in the
urbanised areas for them. This caused a shortage of people in the rural areas to work
on the farms. A similar scenario occurred when Nike set up a new factory in Vietnam,
people moved from the rural areas to work for the TNC only to find a severe shortage
of housing and services such as doctors and schools. Often the economies of areas in
MEDCs greatly suffer when TNCs shift operations to NICs. For example when the
Chinese Automotive Group closed Rover production in Longbridge, the area suffered
huge rates on unemployment and went into a mini-recession.
It can be seen that due to TNCs many NICs are becoming powerful components in the
global economy. For example the “Tiger” economies of Asia such as China and Korea
are growing incredibly fast and are able such to out-compete many established
MEDCs such as the USA because of the speed and cheapness of what they are able to
produce. For example, China’s sudden growth surge has required huge amounts of
metal, by buying in bulk they have cornered the market and many companies,
especially those in Europe have suffered shortages and have been unable to compete.
The success of these NICs has lead to an imminent rise in inflation rates which will
see established MEDCs such as in the UK suffer higher costs of borrowing, higher
taxes and lower house prices. As a result of the growing dominance of NICs such as
South Korea, MEDCs such as Japan are increasingly struggling to compete on the
global market. MEDC are subsequently losing many of its manufacturing industries to
cheaper NICs eg the British motor manufacturing industry is now non-existent except
on a bespoke scale because it is no longer financially viable to conduct such
businesses. Many NICs often have the raw resources such as coal that are needed for
industry that the MEDCs have long since either run out of or have outpriced the
limited resources they have.
In conclusion it can be seen that TNCs and their reliance on NICs has had a major
impact on the global economy. With the ever increasing growth that NICs such as
Taiwan and the Philippines and China are undertaking, there is an increased
likelihood they will soon develop into viable superpowers on a scale on a par with the
USA. The commercial viability of NICs is destined to translate into a decline in the
manufacturing capabilities of MEDCs such as the UK and Germany. MEDCs will
have to resort to other industries and services in order to maintain economic stability
and a place in global economic marketplaces. The increase in freer trade has also
helped NICs to attract TNCs and subsequently boost economic activity. MEDCs can
no longer rely on its traditional industries in order to survive with the growth of NICs,
MEDCs need to become more innovative in order to prevent a global recession. TNCs
should also be more considerate in their host countries before shifting operations
abroad, for example Heinz has had to reconsider keeping its HP Sauce Aston factory
open after it caused civil outrage when announcing it was transferring production to
Holland, prompting the local city council to intervene. It is therefore fair to comment
that TNCs and NICS now have a major influence on local, national and international
economies.

Write an account of the growth and impacts of transnational corporations
(TNCs) and their relationship with global products and global marketing.

Answer 1.
TNCs grow as companies try and make the most money as possible. Nike for example
started making shoes in the 1960s in the US and realised that costs could be cut if
manufacture was shifted to a newly industrialising country. In the 1960s these were
places such as Taiwan and Hong Kong (Tiger economies). The advantage to Nike of
becoming a TNC was that labour and land was cheaper in the NICs than in MEDCs
and regulations about pollution and working hours were scarce. Furthermore
governments attracted TNCs like Nike by offering tax breaks and subsidies. Other
reasons for the growth of TNCs is to get the product closer to the market. Nissan for
example set up its first European car plant in Washington near Sunderland. The
advantage of this to Nissan is that it reduces transport costs of shipping cars from
Japan to Europe and more importantly as the cars are made in Europe the EU does not
charge Nissan for importing the product again cutting costs and increasing profits for
the TNC. TNCs grow with time so may set up manufacture in one country, have
research and development in another and have regional headquarters in other
countries. Washington near Sunderland for example is the European headquarters of
Nissan.
Often TNCs set up in a country to be near the appropriate market. Their product must
suit the market. For example, the Nissan Washington plant builds 250000 Primeras
and Micras a year to be sold on the European market. This is because there is demand
for that kind of product in Europe. Whereas in Mexico Nissan set up a factory
building pick up trucks which are more suitable for the Mexican market as it is less
economically developed so has poorer roads so pick up trucks are more in demand. It
is also in close proximity to the USA and Canada where pick up trucks are popular. In
this way Nissan are reducing transport costs in getting their product to the desired
global market so make more money.

The impact of TNCs can have on the countries they operate in can be massive. Last
year for example the biggest TNC was Exxon-Mobil which turned over the most of
any TNC much more money than a lot of African nations. Clearly then they will have
tremendous power as market forces are in operation. The impact of TNCs can be
positive and negative. Jobs are often created in NICs in the manufacturing industry
building sector and service sector, for example in hotels and food providers for
workers. Whilst this seems positive often jobs are lost in MEDCs as a result. For
example when Dyson closed its Wiltshire factory to move it to Malaysia over 800
jobs were lost in England. Further problems are that skilled jobs are often not given to
the people of the host country, in Washington Nissan brought in over 70% of the
managers from Japan. The impact of this is that the host country will not have its
population trained in skilled work.

A positive impact of TNCs operating in other countries is that the building of a site
often brings with it improved infrastructure and sometimes health care. For example a
Dutch TNC set up a diamond mine in Namibia and gave free HIV tests and treatment
for all its workers. On the other hand the negative side of the setting up of the mine
was that much land was lost that had previously been home to native tribe. The tribe
was relocated in urban areas and elders say much of their culture and tradition has
been lost as a result. A similar problem is that when setting up in new countries TNCs
often build on Greenfield sites. Conservationists complain TNCs are destroying
natural habitats worldwide especially in LEDCs where rules about pollution and
where sites can locate are less strict.

A further problem is that often the host country will not profit that much from having
the TNC there, taxes on profits will be paid to the country of origin of the TNC. Also
a lot of TNCs are footloose so can move whenever they want. The impact of this
especially for LEDCs is that countries can become dependent on a particular company
who may suddenly pull out thus ruining the economy of the host nation.

Answer 2.
Transnational corporations are among the most powerful business organisations in the
world with considerable influence in global consumer prices, living standards and
politics. The huge American chain Walmart has an annual income of $244 billion
which is more than the combined gross domestic product of the world’s 30 poorest
countries. On a slightly smaller scale, Nike, the major American sportswear brand has
an annual output of $11 billion, which is greater than the GDP of Jamaica ($10
billion).

Over the past 30 years the world has seen considerable growth in the number, size and
wealth of TNCs. This is due to a number of different factors. Most importantly is
communication. Fast air travel, internet broadband, undersea cable and mobile phones
means that it has become much easier for domestic companies to function abroad. The
relaxation of trade barriers for example within the EU where there are no significant
trade barriers between member states means that it is economically possible for
companies to import and export raw materials, products and employees, thanks to
more lax labour laws). The growth towards privatisation in many countries since for
example the collapse of the Soviet Union in Europe and the end of the British Empire
means that foreign direct investment has become much easier. Governments however
can still play a key role in encouraging foreign companies to set up branch plants in
their countries for example in Britain where the UK government offered grants to the
Japanese car company Nissan when they created their Sunderland plant. Many TNCs
chose to relocate routine assembly lines to LEDCs and Newly Industrialising
Countries (NICs) to capitalise on cheaper labour, cheaper land and less stringent
health and safety and environmental planning laws.

At the moment the majority of TNCs are American, European and Japanese and their
head offices in MEDCs but there is significant growth of TNCs in China and India
and the Tiger nations of South East Asia. Singapore for example since gaining its
independence in 1985 has developed into one of the largest electronics producing
countries in the global market playing host to TNCs such as SGS Thompson electrics.
The investment by foreign corporations has led to such growth that SGS Thompson
outsourced its routine assembly plants to Muan in Malaysia making Singapore itself
the site of more sophisticated assembly as well as some R&D. Singapore is now
investing in other countries through foreign direct investment and outsourcing its own
branchplants.

The logos and products of the major TNCs are recognisable everywhere, for example
McDonalds, Coca Cola, Cadbury Schweppes and global products can be found in all
countries even some of the poorest LEDCs such as Lesotho in Southern Africa. These
are very much globally functioning companies. Nestle which manufactures a large
number of food products employ 276.050 people worldwide in 100 different
countries. The popularity of global products has led to the creation of ‘fake trade’
which functions particularly healthily in the Far East. In Hong Kong the market in
fake brand electronics is currently booming and though it can be seen as an unfair
trade capitalising on the TNCs business, it is at least providing employment for those
not directly employed by the global TNC.
TNCs impact heavily on the countries in which they operate. They can have
considerable benefits economically. In Taiwan for example the growth of TNCs has
increased the average GDO per capita from $140 to $4800 between 1980 and 1997.
However this does not translate directly into a higher standard of living: only 600000
of Taiwan’s 27 million inhabitants are served by a proper sewage system. Equally, the
environmental impact of the TNCs is considerable: toxic fumes are pumped into the
air and chemical affluent pours out from factories though when compared to the
pollution TNCs have brought to Chinese cities such as Beijing, Taiwan’s pollution
problem is viewed less harshly. The wages from global companies can be superior to
domestic ones and TNCs regularly employ more women. When Singapore was still an
LEDC receiving foreign imports, female employment rates began to rival male
employment, producing some jealousy in male counterparts.

Another outcome of the creation of TNC branch plants is rural to urban migration.
TNCs tend to establish themselves in the urban areas and attract employment leading
to overcrowding and eventually even unemployment when these jobs start to run out.
In the rural communities there may be fewer people to work in food production
leading to malnutrition in rural areas and the urban areas which they supply. Age
structure imbalance can often occur as the young active population leave to find work,
leaving the older generation and children. In South Africa this has led to the spread of
AIDS. Men leaving their families in peripheral areas to work for foreign owned
mining companies work on long term contracts and may frequent brothels in cities
like Johannesburg and Cape Town, infecting themselves with AIDS which they can
then transmit to their own communities on their return.

Some TNCs are also unscrupulous employers. Nestle have been chastised in the past
for this use of child slavery on West African cocoa plantations. One problem of TNCs
is that often the product supply chain is so long that the head office can lose track of
the ethical practices and wage structure further down its supply chain. In conclusion,
TNCs are a major part of the growing trend of globalisation, the increasing
importance of global perspectives and communication in the lives of both people and
companies.

								
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