(6.2.1 B) Global industries + MNCs

What is industrialisation?

Where a mainly agricultural country develops and begins to depend on the manufacturing industry

What is deindustrialisation?

a decline in the relative importance of manufacturing industry and growth in the tertiary + quaternary sector

What is the tertiary sector?

the service industry

What is the quaternary sector?

industries providing information

What does the ‘global shift’ refer to?

the movement of the manufacturing industry from Western Europe to the Far East

What are NICs?

Countries that have developed a large manufacturing industry very quickly

What is globalisation?

the free flow of goods, ideas, people and money around the world, causing increasing inter-connection

What factors have aided globalisation?

Transport → easier travel, easier trade

Technology → increase e-commerce, access to foreign markets

Expanding markets → greater disposable income globally, rise in middle class population

What is an MNC?

Multi National Company - companies with branches/factories in many other countries

What has happened to many manufacturing sites in the UK, and other developed countries?

They have shifted to NICs.

What are push factors for MNC factories from developed countries like the UK?

• higher minimum wage in the UK → higher running costs

• high energy prices → high running costs

• environmental impacts of factories on the country

• undercutting by competitors

What are pull factors for MNC manufacturing plants to NICs?

• Special Economic Zones

• larger labour force

• cheaper labour force

• cheaper energy

What are Special Economic Zones?

an area in a country that is subject to different economic regulations (low/no tax)

aimed to attract Foreign Direct Investment.

How many SEZs are there in India?

272

What are benefits for an NIC (India) when an MNC moves there?

• companies provide expensive machinery

• improvements in roads, airports + transportation

• companies introduce modern technology

• reduced dependence on primary goods

• widens economic base of the country

• increased GDP → increased demand for consumer goods → multiplier effect

• new employment opportunities

• improvements in education level + skill of locals

• local workforce receives a guaranteed income

• improvements in standards for production, health + environmental control

What are downsides for an NIC (India) when an MNC moves there?

• money could be better spent on improving the NIC than attracting MNCs

• big schemes can end up increasing national debt

• GDP grows slower in NIC than the HIC which has the HQ→ exacerbate inequality

• economic leakage as most profits go overseas

• HQs remain outside of the country- decisions don’t put the NICs first

• insufficient attention to health and safety → unsafe conditions

• local workforce often employed in less skilled jobs → lower pay, long hours

• leaves the workforce vulnerable due to their dependency on a foreign company

• poor environmental regulation → environmental damage

What are the benefits of deindustrialisation for a HIC (UK)?

• reduced pollution + environmental impact of factories

• cheaper goods for consumers

• lower running costs for companies based in the UK

What are the cons of deindustrialisation for a HIC (UK)?

Decline of the inner city

• high unemployment in areas that relied on industry (London Docks + in city areas)

  → decline of shops and services

  → decline of housing and environment

  → rise in crime + decrease in living standards (negative feedback loop)

  • huge investment has been given to try and revive these areas