Topic 3 - EQ1 Flashcards

Question

What are intermodal containers?

Answer 1

Large capacity storing units which can be transported long distances using multiple types of transport, such as shipping and rail, without freight being taken out of the container.

Answer 2

Thanks to technology, distant places start to feel closer and take less time to reach.

Answer 3

Heightened connectivity changes our conception of time, distance and potential barriers to the migration of people, goods, money and information. This perceptual change is called time-space compression. As travel times fall due to new invention ps, different places approach each other in ‘space-time’: they begin to feel closer together than they did in the past. This is also known as the shrinking world effect.

Answer 4

The easyJet airline was founded in 1995 and it began as a small venture running flights solely within the UK. Most of Europes major cities are now interconnected via EasyJet’s cheap flight network. They initially had just two aircraft. Inaugural flights from London Luton to Edinburgh and Glasgow were supported by the advertising slogan ‘Making flying as affordable as a pair of jeans - £29 one way’. Flights to Barcelona then commenced as the airline expanded at breakneck speed. It now has around 300 different flight routes within the EU and even ones that extend beyond, e.g to Turkey. By 2014, the company owned 200 aeroplanes carrying 65million people each year, and bringing nearly £4 billion in revenues. Places that easyJet travelled to instantly become more switched on to globalisation.

Answer 5

-Telephones and the telegraph across the Atlantic replaced a 3 week boat voyage in 1860. -Broadband and fibre optics in the 1980s and 1990s, thus meant large amounts of data could be quickly moved through cyberspace. -GIS and GPS: Constantly deliver position and time data to users around the world. Deliveries can be tracked by companies that use vehicle-tracking systems, helping the growth of global production networks to be managed. -The internet, social networks and Skype: since the 1960s, connectivity between people and places has grown exponentially. By 2014, 5 billion Facebook ‘likes’ were being registered globally everyday.

Answer 6

ICT allows managers of distant offices and plants to keep in touch more easily. This has helped TNCs to expand into new territories, either to make or seek their products. Each time a barcode is scanned in an M&S in the UK, an automatic adjustment is made to the size of the next order placed with suppliers in distant countries like Kenya.

Answer 7

The maintaining of long-distance social relationships through ICT use is a factor that supports migration. Since 2003, Skype has provided a cheap and powerful way for migrants to maintain a strong link with family they have left behind.

Answer 8

Cultural traits, such as language or music, are adopted, imitated and hybridised faster than ever before. During 2012, South Korean singer Psy clocked up over 1.8 billion online views of ‘Gangnam style’.

Answer 9

Social networks are used to raise awareness about political issues and to fight for change on a global scale. Environmental charities like Greenspace spread their message online, while the militant group Isis has used social media to spread its message of terror globally, and to gain new recruits.

Answer 10

In countries where the lack of communication infrastructure has traditionally been a big obstacle to economic growth, mobile phones are now changing lives for the better by connecting people and places. In 2005, 6% of Africans owned a mobile phone, but now in 2015 this has risen to 70% due to falling prices and a growth of provider companies. There is also a rising uptake in India, meaning there are now more mobile phones on the planet than ever.

Answer 11

In 2007, Safaricom launched M-Pesa, a simple mobile phone service that allows credit to be directly transferred between phone users. This caused: -The equivalent of 1/3 of the countries GDP to be sent through the system annually. -People in towns and cities use mobiles to make payments for utility bills and school fees. -Rural fisherman and farmers could check market prices before selling. -Women in rural areas are able to secure micro loans from development banks by using their M-peas bills as proof that they have a good credit record. This new ability to borrow is playing a vital role in lifting rural families out of poverty.

Answer 12

Sometimes, global flows cannot take place due to political barriers that national governments have created. On the face of it, this may seem surprising, given that global flows can stimulate economic growth. But, global flows may also be viewed as threats: -Imports of raw materials and commodities can threaten a nations own industry. -Migrants can bring cultural change and religious diversity: not everyone welcomes this. -Information can provide citizens with knowledge that their governments find threatening. Because of this, some governments attempt to protect themselves from FDI of overseas TNCs.

Answer 13

For decades, 3 international organisations have acted as ‘brokers’ of globalisation through the promotion of free trade policies and FDI. These are the International Monetary Fund (IMF), the World Bank and the World Ttrade Organisation (WTO). The ‘Bretton Woods institutions’ were established after WW2. The guiding principle was to restabilise the world economy and avoid a return to conditions in the 1930s Great Depression, which was caused partially by protectionism causing a fall in world trade, with nations blocking foreign imports with tariffs.

Answer 14

It is impossible to know, but there are several issues to explore: -The global financial crisis in 2008/9, which originated in the US and EU money markets, and had negative implications on the entire world economy. As a result, governments in developing countries have become more sceptical of financial advice from the IMF and World Bank. -Geopolitical changes means that the new alternatives are emerging to the Bretton Woods institutions. Developing countries in search of assistance can instead approach China Development Bank. China loaned more than US$110 Billion to developing countries in 2010, which exceeded World Banks value. In 2014, the BRICS group of nations announced its establishment.

Answer 15

A financial injection made by a TNC into a nation’s economy, either to build new facilities (factories or shops) or to acquire, or merge with, an existing firm already based there.

Answer 16

The four large, fast-growing economies of Brazil, Russia, India, China and recently also South Africa.

Answer 17

The IMF channels loans from rich nations to countries that appeal for help. In return, the recipients must agree to run free market economies that are open to outside investment. As a result, TNCs can easily enter the countries. The USA exerts significant influence over IMF policy despite the fact that it has always had a European president.

Answer 18

The World Bank lends money on a global scale and is also headquartered in Washington. In 2014, a $470million loan was granted to the Philippines for a poverty-reduction programme, for instance. The World Bank also gives direct grants to developing countries. For example, in 2014, help was given to the Democratic Republic of the Congo to kick-start a stalled mega-dam project.

Answer 19

The WTO took over from the General Agreement on Trade and Tariffs in 1995. Based in Switzerland, the WTO advocates trade liberalisation, especially for manufactured goods, and asks countries to abandon protectionist attitudes in favour of untaxed trade. For example, China was persuaded to lift export restrictions on ‘rare earth minerals in 2014.

Answer 20

IMF rules and regulations can be controversial, especially the strict financial conditions imposed on borrowing governments, who may be required to cut back on healthcare, education, sanitation and housing programmes.

Answer 21

In total, the World Bank distributed $65billion in loans and grants in 2014. However, like the IMF, the World Bank imposed strict conditions on its loans and grants. Controversially, all World Bank presidents have been American Citizens.

Answer 22

The WTO has failed to stop the world’s richest countries, such as the USA and UK, from subsidising their own food producers. This protectionism is harmful to farmers in developing countries who want to trade on a level playing field.

Answer 23

The Bretton Woods institutions have created a global legal and economic framework that is suited to free trade and FDI. TNCs have thrived in this environment, helped by changed in the rules that dictate how they can operate. In the 1980s, financial deregulation for many European countries and the USA led to banks and finance companies globalising rapidly. All involve the injection of capital into the economy of s foreign state in the absence of any political barriers.

Answer 24

Some TNCs build their own new production facilities in ‘offshore’ low-wage economies. For instance, US guitar maker Fender opened its Mexican plant at Ensenada in 1987.

Answer 25

Two firms in different countries join forces to create a single entity. Royal Dutch Shell has headquarters in both the UK and the Netherlands.

Answer 26

When a TNC launches a takeover of a company in another country. In 2010, the UK’s Cadbury was subjected to a hostile takeover by US food giant Kraft. The UK has few restrictions on foreign takeovers. In contrast, the Committee on Foreign Investment in the USA closely scrutinises inbound foreign takeovers.

Answer 27

Some TNCs, such as Starbucks and Amazon, have sometimes channelled profits through a subsidiary company in a low-tax country such as Ireland. The organisation for Economic Cooperation and Development is now attempting to limit this practice.

Answer 28

-Offshoring -Foreign Mergers -Foreign Acquisitions -Transfer pricing

Answer 29

-Free-market liberalisation -Privatisation -Encouraging business start ups

Answer 30

This governance model is associated with the policies of US president Ronald Reagan and Margaret Thatcher in the UK in the 1980s. They followed two simple beliefs. Firstly, they felt government intervention impeded economic development. Secondly, as overall wealth increases, trickle-down will take place from the richest in society to the poorest. In practice, this means that restrictions being lifted on the way companies and banks operated. The deregulation of the City of London in 1986 removed large amounts of ‘red tape’ and label the way for London to become the world’s leading global hub for financial services.

Answer 31

Successive UK governments have led the way in allowing for foreign investors to gain a stake in privatised national services and infrastructure. Until the 1980s, important assets, such as the railways and energy supplies, were owned by the state. However, running these services often proved costly: they were sold to private investors in order to reduce government spending and to raise money. Over time, the ownership of many assets has passed overseas. For instance, the French Company Keolis own a large stake in southern England’s railway network and the EDF energy company is owned by Elecrticite de France. Since the global financial crisis, the UK government has approached Chinese and Middle Eastern sovereign wealth funds to help fund new infrastructure projects.

Answer 32

Methods range from low business taxes to changed in the law allowing for north local and foreign-owned businesses to make more profit. When Sunday trading was introduced in 1994, the UK became a more attractive market for foreign retailers, from Burger King to Disney Store. Italy has eased restrictions on Chinese investors wanting to start up textile companies in the EU; as a result, the city of Prato now has the largest Chinese population in Europe.

Answer 33

National governments have also promoted the growth of trade blocs. TO trade freely with neighbours or more distant allies, agreements have been drawn up allowing state boundaries to be crossed freely by flows of goods and money. Within a trade bloc, free trade is encouraged by the removal of internal tariffs.

Answer 34

-By removing barriers to intra-community trade, markets for firms grow. For instance, when ten new nations joined the EU in 2004, UK firm Tesco gained access to 75 million extra customers. -Firms that have a comparative advantage in the production of a particular product or service should prosper. This French wine-makers, thanks to their advantageous climate and soil, produce a superior product that is widely consumed throughout a tariff-free Europe. -An enlarged market increases demand, easing the volume of production and thereby lowering manufacturing costs per unit. Also improved economy of scale results, meaning that products can be sold more cheaply and sales rise even further for the most successful firms. -Smaller national firms within a trade bloc can merge to form TNCs, making their operations more cost effective. Airtel Africa is a mobile telecommunications company headquartered in Kenya whose expansion into seventeen African states has been helped by the existence of the EAC and COMESA trade blocs.

Answer 35

The positive impacts on peripheral regions caused by the creation of wealth in core regions.

Answer 36

Government-owned investment funds and banks, typically associated with China and countries that have large revenues from oil, such as Qatar.

Answer 37

These are voluntary international organisations that exist for trading purposes, bringing greater economic strength and security to the nations that join.

Answer 38

These are the taxes that are paid when importing or exporting goods and services between counties.

Answer 39

They may agree a common external tariff and quotas for foreign imports. In 2006, the EU blocked imports of underwear from Chinese manufacturers on the bases that the annual quota had been exceeded, jeopardising sales of EU clothing makers.

Answer 40

Both Mexico and the USA are in the NAFTA trade bloc. Mexico is an emerging country with a cheap labour force, while the USA has management and research expertise. This allows American TNCs, such as Nike, to exploit the Human Resources of both nations, cheaply manufacturing gods in branch plants in Mexico that and designed and marketed by white-collar staff in the USA.

Answer 41

One very important reason for the acceleration of globalisation in recent decades has been chan government attitudes in regions outside of Europe and North America. Asia’s 3 most populated countries - China, India and Indonesia - have all embraced global markets as a means of meeting economic development goals. In all three cases, the establishment of subsidies and changing attitudes to FDI have played important roles.

Answer 42

Indonesia provides a striking example. In the late 1960s, President Suharto turned his back on communism and opened up Indonesias markets. American and European TNCs met with Suharto’s advisors and collectively built an attractive new legal and economic framework for foreign investors. Indonesia instantly became a popular offshoring location for TNCs like Gap and Levis. World Bank lending funded the speedy modernisation of its roads, power supplies and ports. However, human rights campaigners expressed concerns that the capital city Jakarta’s export zone had become a low tax heaven for sweat shop manufacturers.

Answer 43

Globalisation began in 1991 for India, when sweeping financial reforms took place. Since then, Indian TNCs have grown in their size and influence. Tata and Bharti Airtel, India’s mobile network operate, have both become major players globally. Until 2013, foreign retailers could only gain a presence on India’s own high streets by agreeing to form a partnership with a local Indian business. Thus, McDonalds restaurants in North India and East India are a joint venture between Vikram Bakshi and the McDonald’s corporation. India’s high street rules have deterred many other foreign retailers, such as IKEA, however. As a result, 90% of India’s shops are still family owned.

Answer 44

An industrial area, often near a coastline, where favourable conditions are created to attract foreign TNCs. These conditions include low tax rates and exemption from tariffs due to export duties.

Answer 45

It has changed from a simple trade bloc into a multi-governmental organisation with its own currency and some shared political legislation. Member states are eligible for EU structural funds to help develop their economies, while agricultural producers in the region all benefit from farm subsided which are issued under the Common Agricultural Policy. The EU also helps cities to gain a global reputation by awarding prestigious titles such as ‘Capital of Culture’ or ‘European Capital of innovation’.

Answer 46

The EU is the only group of nations that grants all citizens of member states freedom of movement. Elsewhere in the world, free flows of people do not take place as a result of trade bloc formation. Most national borders were removed within Europe in 1985 when the Schengen Agreement was implemented (the UK and Ireland had remained outside the Schengen Area so were provided with opt-outs).

Answer 47

The Association of South East Asian Nations. It has 10 member states and a combined population of 600 million. Established in 1967, ASEAN’s founding members include high-income Singapore and the emerging economies of Indonesia, Malaysia and the Philippines. Over time, they have worked to eliminate tariffs in favour of free trade. The enlarged ASEAN market has helped Indonesia’s manufacturing industries to thrive, while the Philippines has gained a global reputation for its call centre services. ASEAN is now expected to develop further into a single market called the ASEAN economic community. This will operate along similar lines to the EU and may allow free movement of labour and capital. The ASEAN agreement also promotes peace and stability: its members have pledged to not have nuclear weapons.

Answer 48

Prior to 1978, China was a poor and politically isolated country, ‘switched-off’ from the global economy. Under the communist leadership of Chairman Mao Zedong, millions had died from famine. Most people lived in poverty in rural areas. This changed in 1978 when Deng Xiaoping began the radical ‘Open Door’ reforms which allowed China to embrace globalisation while remaining under one-party authoritarian rule.

Answer 49

Rural areas. Agricultural communes we’re dismantled and farmers were allowed to make a small profit for the first time. Strict controls on the number of children were also introduced, to curb population growth.

Answer 50

Over the next 30 years, the largest migration in human his took place. 300 million people left rural areas in search of a better life in cities. Only a strict registration system called hukou prevented rural villages from emptying all together. Soon there will be 200 Chinese cities with 1 million inhabitants or more. Many are new, rapidly built ‘instant cities’. An urban mega region of 120 million people has growth around the Pearl River Delta. It included the conjoined cities of Shenzhen Dongguan and Guangzhou.

Answer 51

Urbanisation which was initially fuelled by the low-wage factories. The worlds largest TNCs were quick to establish branch plants, or trade relationships with Chinese owned factories, in newly-established coastal special economic zones. By the 1990s, 50% of Chinas GDP was being generated in SEZs. Since then, the Chinese economy has matured quickly. By 2015, many workers were earning $40 a day or more making quality goods such as IPhones.

Answer 52

China is now the worlds largest economy. With 400 million people said to have escaped poverty since the reforms began in 1978. Chinas story lends support to the ‘hyper-global’ veiw that global-scale free trade can sometimes cure poverty. However, China is still not entirely open to global flows.

Answer 53

For nearly 70 years, North Korea has been ruled as an autocracy by a single family. They have deliberately chosen to remain politically isolated from the rest of the world. -Ordinary citizens don’t have access to the internet or social media. -There are no undersea data cables connecting North Korea with anywhere else. -A visiting journalist observed it was the only country he had ever travelled to where nobody knew the song “yesterday’ by the Beatles.

Answer 54

In 1948. South Korea has since become a developed country which is home to Samsung and other global brands. A comparison of the two countries, and the policies of their governments, illustrates clearly how political decisions making affects globalisation.

Answer 55

Poverty affects the overwhelming majority of people in some of Africa’s Sahel nations, such as Chad, Mali and Burkina Faso. These are some of the worlds least developed countries (LDCs) and there are many reasons for the development challenges that they face. The mismanagement of natural resources has plagued a role, rating back to colonial times. LDCs lacking a coastline, such as Chad, may struggle to affect FDI. Arid conditions and desertification gibe rise to further development challenges. In particular, extreme environmental conditions increase the cost of providing infrastructure such as railways or ICT networks, in regions where poverty has meant there is limited market potential to begin with.

Answer 56

It tends to be in shallow forms of integration. Subsistence farmers may become dependent on flows of food aid from charities in OECD nations. Some farmers grow cash crops for TNCs, for instance cotton producers in Malo. Wages are so low, however, that workers have negligible spending power. Thus, global brands do not yet view these places as viable markets, leaving them relatively switched off from consumer networks.

Answer 57

Rapid economic growth is happening in neighbouring countries like Nigeria. Already, a minority of Sahelian people do interact with the rest of the world in interesting ways: -Mali’s folk musicians have a large global following on YouTube. -Conflicts in the region involved groups linked with al-Qaeda’s global terror network.

Answer 58

The worlds very poorest low-income nations, whose populations have little experience of globalisation. A number of these nations are described as ‘failed states’ by politicians, for example Somalia and South Sudan.

Answer 59

Many countries in Africa, the Middle East and South America have introduced legal and economic reforms in recent years in order to attract FDI and increase their level of global participation. Saudi Arabia is one interesting case, having recently abandoned Thursday and Friday as its official weekend in favour of Friday and Saturday. This brings it more in line with other countries for the purpose of doing business.

Answer 60

Globalisation has affected so,e places more than others. Spatial variations in poverty, physical factors and the policies of national governments have inevitably introduced geographical bias into world markets. Studies have shown that the effects of globalisation are highly uneven.

Answer 61

Uneven levels of globalisation can be measured using indicators and indices. -The Swiss institute for Business Cycle Research, also known as KOF, produces an annual Index of Globalisation. In 2013, Ireland and Belgium were the world’s most globalised countries according to the KOF index. A complex methodology informs each report, using diverse data such as participation in UN peace-keeping missions and TV ownership. While there is merit in KOF’s multi-strand approach to measuring globalisation, the validity of these criteria may be debated.

Answer 62

This ranks New York, London, Paris, Tokyo and Hong Kong as the top five ‘alpha’ world cities for commerce. The ranking is established by analysing each city’s ‘business activity’, ‘cultural experience’ and ‘political engagement’. The data supporting this include a count of the number of TNC headquarters, museums and foreign embassies, respectively.

Answer 63

They combine many data sources that can be critiqued on the grounds of either reliability of validity. Some data suffers from crude averaging and statistical gaps. Other indicators are arguably poor proxies for globalisation (hours spent watching TV for example). However, they can provide an interesting starting point for the statistical analysis of globalisation.

Answer 64

1) Collect data relating to: -Economic globalisation (trade and FDI figured or tariffs) -Political globalisation (e,g number of foreign embassies in a country) -Social and cultural globalisation (international ICT traffic, tourist flows and international mail; households with a TV set; imports and exports of books) 2) Analyse all new data by: -Converting all 24 variables into an index with a scale of 1-100 -Substituting missing data with the most recent data available -Averaging the individual scores to give a final score out of 100. 3) Compare new scores with previous scores dating back to 1970.2

Answer 65

TNCs are important agents of global change. Along with trade blocs, they can be described as ‘architects’ of globalisation, helping to build bridged between nations. Making connections, TNCs bolt together different economies and societies through their supply chains and marketing strategies. However, some parts of the world have benefited far more from FDI than TNCs.

Answer 66

-Not all places are suitable sites of production for goods, for a range of physical and human reasons (including accessibility, natural resources, government policies and levels of education). -Not all places have enough market potential to attract large retailers (due to low incomes, or culture).

Answer 67

Rather than investing directly into offshoring of branch plants, or acquiring foreign firms, TNCs can instead forge business partnerships with existing companies in other countries. Many of the world’s biggest brands do not, in fact, make their own products. Instead, they use outsourcing as their strategy.

Answer 68

The resulting series of arrangements is called a global production network (GPN). 2500 different suppliers provide the parts to assemble BMWs Mini car, from the engine right down to the windscreen-wipers. Some parts are outsourced from suppliers within the EU. In Contrast, the engine comes from an offshore factory in Brazil, owned by BMW.

Answer 69

Trade liberalisation and the changing attitudes of national governments, as outlined earlier in the chapter. Developing countries have benefited from GPN growth because outsourcing arrangements are economically beneficial. The local owners of factories in China’s SEZ have profited from the work that foreign TNCs have outsourced to them.

Answer 70

-A poorly monitored GPN can damage corporate profits and image. -Natural hazards, such as the 2011 Japanese tsunami, can disrupt global supply chains. -UK supermarkets were stunned to find horse meat had entered their supply chains in 2013. -The collapse of the Rana Plaza textile factory in Bangladesh in 2013 killed 1100 people making clothes for Benetton and Walmart, as well as others. As a result, many TNCs are ‘re-sourcing’ their manufacturing closer to home.

Answer 71

The strengthening of Latin American, Asian and Middle Eastern economies has prompted an explosion of TNC interest in these emerging markets, where over 2 billion people have moved from dollar-a-day poverty into higher income brackets since 1990. Building a global production network helps TNCs to gain access to these new markets. In order to maximise profit, many TNCs adapted their products to suit local tastes. This is called glocalisation.

Answer 72

This refers to changing the design of products to meet local tastes or laws. It is an increasingly common strategy used by TNCs in an attempt to conquer new markets. Glocalisation makes business sense because of geographical variations in: -Peoples tastes -Religion and culture -Laws -Local interest -Lack of availability of raw materials

Answer 73

When evaluating the importance of glocalisation for TNCs, remember not all TNCs need to glocalise products. For some big-name TNCs, the ‘authentic’ uniformity of their global brand is what generates sales. For others, including oil companies, glocalisation has little or no relevance for their industrial sector.

Answer 74

In 2009, Disney released its first Russian film, Book of Masters, based on a Russian fairy tale and produced using local talent. Disney acquired Marvel in 2009, gaining the right to superhero characters that have sometimes been glocalised. ‘Spider-Man India’ is an example. In a story made for Indian Children, Mumbai teenager Pavitr Prabhakar is given superpowers by a mystic being. The story is different from the version UK and US children are familiar with.

Answer 75

By 2012, McDonalds had established 35,000 restaurants in 119 countries. In India, the challenge for McDonalds has been to cater for Hindus and Sikhs, who are traditionally vegetarian, and also Muslims who don’t eat pork. Chicken burgers are served alongside the McVeggie and McSpicy Paneer. In 2012, McDonalds opened a vegetarian restaurant for Sikh pilgrims visiting Amritsar, home to the Golden Temple.

Answer 76

Unlike Disney and McDonalds, Lego hasn’t glocalised its products. Since 1949, the Danish brick-maker has been producing gradually more complex designs in 4 locations: Denmark, Hungary, Czech Republic and Mexico. However, Lego exports identical products to all global markets, including China. Like Apple and Samsung, Lego makes products with a genuine global appeal. The company does not take local tastes into accounts.

Answer 77

A few of the very poorest nations of the world remain relatively switched off from global networks (aside from small elite groups of citizens). For physical, political, economic or environmental reasons, these countries still lack any strong flows of trade and investment with other places and economies.

Answer 78

TNCs move parts of their own production process to other countries to reduce labour (or other) costs.

Answer 79

TNCs contract another company to produce the goods and services they need rather than do it themselves. This can result in the growth of complex supply chains.

Answer 80

These are a chain of connected suppliers of parts and materials that contribute to the manufacturing or assembly of the consumer goods. The network serves the needs of a TNC, such as Apple or Tesco.

Topic 3 - EQ1 Flashcards

(104 cards)