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Phoebe Turton 13SS

Option 5: Development and Globalisation
Specification breakdown checklist:
1) Development:
a)
b)
c)
d)
e)
f)
a)
b)
c)
d)

Economic
Demographic
Social
Political
Cultural changes
The development continuum
...


3) Newly Industrialised Countries (NICs):
a) Their initial growth
b) “Asian Tiger” economies
...

d) Globalisation of services: India
...

b) Reasons for the social and economic groupings of nations, with particular
reference to the European Union
...

6) Aspects of globalisation:
a) Transnational corporations (TNCs): characteristics and spatial organisation
...

c) Case study of one TNC should be undertaken
...

b) “Economic sustainability versus environmental sustainability”
...


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Phoebe Turton 13SS
Describing Levels of Development
Development: A process of social and economic advancement, in terms of improving both
quality of life and standard of living
...
Some people hold the view that this western form of development can be
destructive to traditional cultures and ways of life
...

Two of the most useful are:
1
...
Human development index (HDI)
GDP: The value of all the goods and services produced in a country during a year
...

UK GDP= $2
...
41 billion, per capita= $3,500
HDI: A comparative measure of life expectancy, literature rates, education and standards
of living
...
It can be
used to measure the impact of economic policies on the quality of living of people in the
country
...
892
Ghanha HDI= 0
...
968
Norway=0
...
962
Canada=0
...
959
Mali=0
...
374
Guinea-Bissau=0
...
370
Sierra Leone=0
...

 2nd world included communist countries such as the former Soviet Union and
eastern European countries
...

In the 1980s, countries were placed into categories based on how economically
developed they were:
 MEDC= More Economically Developed Country
 LEDC= Less Economically Developed Country
 LDC= Least Developed Country
The Brandt Line (1980s)
Rich North

Poor South

Evaluating the Brandt line in classifying countries development:
Positives
Negatives
Easy to understand
Based on GDP- HDI would be a better
measure
Visual
Exceptions, e
...
Saudi Arabia is rich in oil
Majority is still correct
Over generalisation
Easy categorisation of countries
Outdated
The north south divide has more recently been named the development gap
...
Instead, countries can be regarded as being placed on a
spectrum of development
...


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Phoebe Turton 13SS
Changes with Development
Economic changes
The wealth of a country increases as it develops
...

Social changes
These affect people’s quality of life
...

These should both increase with development
...
They both decrease
with development
...

It increases with development as access to health care, clean water and food increases
...
For example, a
country is developing if it changes from a dictatorship to a democracy
...
For
example, in some countries women are not treated equally to men
...
This can be shown by an increase in female literacy rate and
a decrease in birth rate
...


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Phoebe Turton 13SS
Countries at very low Levels of Economic Development
The UN classifies a country as a least developed country (LDC) if it meets these
criteria:
1) Low income (3 year average income per capita of less than $750)
2) Human resource weakness (based on indicators of nutrition, health, education
and adult literacy)
3) Economic vulnerability (based on instability of agricultural production, instability
of exports, economic importance of non-traditional activities, handicap of mental
smallness and % population displaced by natural disasters)
The current list of LDCs includes 49
countries: 33 in Africa, 15 in Asia and the
Pacific and 1 in Latin America
...
558
 GNP per capita $400
 Literacy rate 79%
 Employment by sector: Agriculture= 45%
Industry= 30%
Services= 25%
 Population living on less than $1 per day: 36%

Phoebe Turton 13SS
Characteristics of countries at very low levels of development (BANGLADESH)
Low income: widespread poverty
Evidence the problem exists:
 An estimated 28 percent of the population in urban areas lives below the
poverty line
...
Many people live in remote areas that lack
services such as education, health clinics, and adequate roads, particularly road
links to markets
...
Of these, households engaged in
farming and fishing suffer a greater loss relative to income
...

 It has always been a difficult job for countries to move away from the Primary
Industry and Bangladesh are struggling, the World Bank says Bangladesh needs
up to 1
...

Causes of the problem:
 Lack of electricity, political instability, corruption, lack of access to land and
complicated tax administration mean that Bangladesh will struggle to create
jobs in industry and services
...
8% for
women and 39
...




Women in the informal sector are often paid at lower grades than men for the
same work
...
Men on
the other hand, do not need such proof and can divorce their wives at any time
without proven reason
...


Phoebe Turton 13SS
The Process of Globalisation
Globalisation: The process of the world’s economies, political systems and cultures
becoming more strongly connected to each other
...
If there was complete globalisation, the whole world would act like a single
community
...

Globalisation is caused by the movement of people, capital, and business
...

Reasons for this include:
 Improvements and developments in technology
...
This permits
the exchanging of information and the transfer of capital
...

These have made it easier for people and goods to move quickly and cheaply
around the world
...


There are 3 main factors which promote globalisation:
1) Flows of capital









8

Capital is money that’s invested
...
g
...

Over time though, the amount of capital invested in foreign countries has
increased- this is Foreign Direct Investment (FDI)
...

Improvements in ICT have encouraged flows of capital round the world
...

World usage growth of internet usage 2000-2008= 305%
Increasing flows of capital are making the world more interconnected as most
countries economies are now dependent on flows of investment to and from
other countries
...

 Some people are moving because they have too, e
...
to escape conflict zones but
many people are choosing to move for work
...
g
...

Other workers are unskilled who move to more developed countries to look for
work because of unemployment or poor wages in their own countries
...

Products
 Historically, manufacturing industries were located in MEDCs
...

 In recent decades, manufacturing has decreased in more developed countries
...
g
...

 Lower labour costs overseas have caused many companies to relocate the
production side of their business abroad, then they import their products to
the countries where they’re sold
...
g
...

Services
 Services are economic activities that aren’t based around producing any material
goods
...
Things like banking and insurance depend on information and transfer
of information
...

 During the 1970’s and 1980’s there was dere
...
ulation (removal of rules to
increase competition) and opening up of financial markets to the rest of the
world
...

 Services can be split into low level (e
...
customer service) which tend to be
found in LEDCs where labour is cheaper and high level (e
...
financial services)
which tend to be found in MEDCs
...

Many products and services are sold all over the world, rather than just in the
country where they are produced- marketing has had to become global
...

Global marketing gives economic of scale- its cheaper to have one marketing
campaign for the whole world, rather than having a different campaign for
every country
...

The name was changed from Jif to Cif in order to fit its international
marketing strategy
...
There will be more sales overall
...

2
...

3
...

However, problems encountered by TNC’s aiming to achieve global marketing
include…
1
...

2
...

3
...

4
...
Eg, a
Mcdonalds meal is seen as a low-cost, unhealthy convenient meal in the UK
whereas in Cairo it’s only affordable by the wealthy
...
Sponsoring global world events so they are effectively simultaneously
advertising in many countries at once, eg Mcdonalds sponsoring 2012
olympics
...
Celebrity endorsement- choosing a celebrity that is globally well known
for maximum impact, eg Usain Bolt for Virgin Media
...
Changing the local name: Opal fruits changed to Starburst in 1998
...


Phoebe Turton 13SS
Trans National Corporations (TNCs)
Trans National Corporations (TNCs): A company that manages production or delivers
services in more than one country at once
...








They play an important role in the global economy- in 2010, TNCs accounted for
around ¼ of global GDP
...

They can be split into 3 different component parts:
o Headquarters are usually located in big cities in more developed
countries
...

o Research and Development (R&D) tend to be located in cities and towns
where there’s a supply of highly educated people, eg scientists
...

o Factories are often located in NICs where production costs (eg labour,
land, materials etc) are lower
...
If a product is made in the country
where it’s sold, the TNC can avoid paying import and export taxes and can
reduce transport costs
...
Also have regional HQs for Europe,
Middle East, Africa and The Netherlands
...
In 1974 Nike also opened a R&D plant in New
Hampshire as the area already had other shoe manufacturing companies nearby
so there was already a local supply of skilled workers
...

Bulk of production comes from volume producers such as Thailand and
China
...


Why do TNCs continually grow by moving production to new countries?
1
...
60
...
55
...
This is usually
in countries which are newest to capitalism/ development as have no regulations
regarding workers wages
...
In addition, other TNCs move in with jobs and
workers will work for the company paying the highest rate
...
Improved transport and communication
Most trainers are exported so good transport is needed
...

3
...
As a country
gets discovered as being good for production, eg South Korea, other TNCs want
to move there causing the price of land to rise
...
Favourable tax routines
Companies want to locate factories in countries with minimal import taxes for
importing new materials
...
Trade barriers
In an attempt to protect local industries some countries discourage imports into
the area by having large trade barriers
...
5% import duty on leather foot ware
from China
...

6
...
As these populations become richer, customers are located in
the production country so Nike won’t have to pay any import tariffs
...
Less restrictive legislation
Some countries have less restrictive legislation, which enables Nike to produce
footwear for cheaper
...


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Phoebe Turton 13SS
TNC case study: Nike: Impacts on host countries
Social
 Nike was one of the first TNCs to set up a code of conduct for suppliers in
1992
...
Footwear factories were inspected daily and apparel and equipment
factories weekly
...
Workers should
work for no more than 60 hours a week and have one day in 7 off
...
There are
many claims as to poor working conditions in factories rented by Nike
...

 Americanisation of culture
Economic
 Nike would argue that they are giving agricultural workers experience of factory
work – teaching them skills such as sewing and time keeping – and this will work
help provide an industrial workforce for the future
...
An OECD report says
TNCs pay – 40% higher wages than local firms on average, this does vary though
...

 Nike has put pressure on Vietnam to improve its infrastructure – describing it as
‘roads without bridges’ and ‘bridges without roads’
...
This improves the chance of improved
trade between Vietnam and the USA
...
6billion to upgrade
...

 Income tax paid by workers; Nike pays tax on its earnings as well as profit
repatriation
...

 In 2004, total exports of Nike products (both footwear and apparel) accounted
for nearly US$ 782 million, or 3% of Vietnam’s exports
...

More stores opened across the USA and more recently across the globe via the
acquisition of other companies, eg ASDA in the UK
...

Wal-Mart divides its labour across different countries- its HQ is in Arkansas but most
of its manufacturing takes place where costs are lower
...
Eg in California in 2004, its estimated
the state paid $86 million to support its employees
 Wal-mart has been accused of having poor working conditions
...

Economic
 Each new store creates jobs, eg Vineland (USA) opened in 2009 creating 700 jobs
 Decline in manufacturing industry in the USA as Walmart buys mainly from
suppliers outside of the USA- eg electronic goods are made in China or Malaysia
 Loss of local business as a result of not being able to match Wal-marts low prices,
leannding to loss of local jobs
...

Environmental
 Wal-mart produces large amounts of greenhouse gases but has opened ‘greenstores’ that run on renewable energy
...


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Phoebe Turton 13SS
Impacts on host countries
Social
 Wal-mart offers skilled jobs in LEDCs, eg all stores in China are managed by local
people
 In very poor host countries working for Wal-mart can offer a more reliable wage
than other jobs, eg subsidence farming
 Working conditions may be poor
...

 Wal-mart donates millions of dollars to improve things like health in countries
where it operates
...

Economic
 Wal-mart creates any jobs in construction, manufacturing and retail services
...

 Local companies and farmers supply goods to Wal-mart
...

 Local suppliers to Wal-mart may be able to expand their business by starting to
export their goods to Wal-mart stores in other countries
...

 Local companies suffer in competing with Wal-mart, causing smaller shops to shutthey can’t compete with the price and range of products on sale
...

Environmental
 Wal-mart invests in environmentally friendly technologies and sustainable
development
...

 Wal-mart stores use large areas of land for factories and stores- eg a Wal-mart
in Hawaii covers 29,000m2

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Phoebe Turton 13SS
Newly Industrialised Countries (NICs)
Newly Industrialised Countries (NICs): a country whose economy hasn’t yet reached
developed status but has outpaced other developing countries in terms of its economic
growth
...
Africa- South Africa
2
...
South America- Brazil
4
...
India
b
...
China
d
...
Thailand
5
...

Examples of special characteristics of NICs:
 Mexico is situated next to the US so has many trading advantages
...
Many Mexicans have also
migrated and send home remittances which make a major contribution to the
Mexican economy
...

 South Africa has huge resources of minerals- gold, diamonds, coal etc- these
draw in investment, provide jobs and boost spending power
...
The large Chinese community has provided an entrepreneurial class
...
The
Multimedia Super Corridor (MSC) runs from the twin towers sky scraper in the
capital Koala Lumpur, out to the International Airport
...

The 4 Asian Tigers pursued an export-driven
model of industrialisation and development, with
the production of export goods aimed at the
highly industrialised nations of Europe and North
America
...


How to become an NIC?
1
...
Branch out to become countries of origin as
Home grown industries take off

South Korea- Pre 1960s in brief

Primarily agricultural

Limited natural resources

Limited supplies of land

Very poor

1950-53 Korean war

Similar to Japan, 20 years earlier

How did the 4 Asian Tigers become successful host countries?
 Culture- Strong degree of Chinese influence- very entrepreneurial community
...
This emphasises
the virtues of hard work, loyalty to superiors, social harmony and consensus of
views
 Wages- Relatively poor in 1960s- abundance of cheap labour, wages suppressed
deliberately to attract TNCs
 Geographic position- South Korea is close to Japan so attractive for Japanese
TNCs eg Toyota to set up factories
...

o All 4 tigers are coastal, ideal for importing raw materials and exporting
finished goods
...
This vision included:

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Phoebe Turton 13SS
o
o
o

o
o

Focussed development on exports to richer countries, building up trade
surpluses with industrialised countries
A focus on exports rather than imports, allowing the 4 tigers to develop a
healthy balance of payments as well as creating lots of jobs
Domestic consumption and purchase of consumer goods were discouraged
at first, often placing a high tariff on imports, encouraging savings and
allowing investment in selected areas of industry
Trade unions were discouraged to keep wages down in the early years
Ensured all children attended at least primary school and secondary
school
...
As a result, workforce became more skilled and able
to do sophisticated jobs for TNCs locating there as well as setting up
their own companies- helping them become countries of origin
...

 As a result, many local companies became large and successful
 These firms became TNCs
...
Land was also cheaper here
...

Competition from 3rd and 2nd generation NICs where labour is cheaper
...
20 per hour whereas in Vietnam its $44 a month
...


Phoebe Turton 13SS

Further growth of NICs: China
China’s history
From 1946 to 1950 China was experiencing its second civil war in 20
years
...
Zendong’s communists
eventually won in 1950, china then became a single party state and
stayed communist until 1976
...


GNI per capita
1978=$180
2010=$2940
Growth rate of
10% per year!

In 1978 a period of economic reform begun in China
...
Then, in
the
1990’s, industry was liberalised and private companies and TNCs were encouraged to
develop in some sectors of industry
...

China’s indigenous industries
1) The textile industry

China exports more clothes that any other
territory in the world
...
Textile manufacturing accounts for
about 10% gross industrial output in China
...


2) The steel industry
China is the world’s leading manufacturer of chemical fertilisers, cement and steel
...
Despite its good social objectives, this policy did
not produce an efficient and competitive industry
...
Anshan has since become one of the largest producers of iron and steel in Asia
if not the world
...
China accounted for over 50% of world steel production in 2013
...
36 billion citizens means large internal market
 Encouraged exports and imports by reducing tariffs and taxes- exports rose by
19% per year between 1981 and 1994
 Special economic zones with reduced taxes for foreign companies
 Investment in education to create a workforce attractive to TNCs
 Investment in infrastructure to make it easier for manufacturers to operate
 In 2001 China
 New middle class market forming, allowing families to have disposable income to
spend on goods and services and creating a market for higher end goods- eg
Jaguar opened a factory
 Saturated growth in Western countries during recession means businesses are
looking for new markets
 Becoming less communist and more of a free market which encourages FDI
 In 2001 joined World Trade Organisation- further opening China’s markets to
foreign investors and allowed Chinese businesses to export more easily
 Cheap labour!!!!!!
Case study of China as a host country- Luis Vuitton (LV)
 Currently, China is the world’s second largest market for luxury products- in
2011 China accounted for 28% luxury purchases worldwide
...

Case study of China as a country of origin- Sinopec Petroleum
 Founded in Beijing, China (HQ)
 Host countries: Africa, South Africa, Middle East, Asia, Russia, North America
 Products: fuels, lubricants, petrochemicals
 China is unable to meet its demand requirements for raw materials so companies
(including Sinopec) are expanding to Africa where resources are plentiful
 In 2012, Sinopec were doing business with 15 countries in Africa

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Phoebe Turton 13SS



After having operated in Africa for the past 20 years, Sinopec’s assets there
are totalled at $22 billion and plan to invest further
Sinopec drill for oil in Sudan, Gabon and Ethiopia

Role of China in the World’s global economy





In 2002 became world’s largest recipient of FDI, attracting nearly $53 billion
In 2013 total imports and exports exceeding $4
...

 Environmental problems because in industrial areas eg air pollution and acid rain
because of increased emissions
 Working conditions are poor in some areas
...
Manufacturing is only beginning to take off in India as it adopted an
‘import substitution’ strategy in 1949 which had limited success
...

Why choose India as a software services/ BPO host country?
 Indian education is good and provides workers with good IT skills
 The government has created SEZs and in 1999 they established a Government
Ministry of IT
 India now has a middle class of 250-350 million – a growing market to sell
software to
 Inward investment into India is about $60bn per year and most comes from IT
related services
...
6m people, many of them English
speaking graduates
 About 50m Indians speak English
 Cheap workers! An Indian call centre earns about 1/3 of a similar US worker
 In places like Bangalore, infrastructure is excellent particularly broadband
enabling instantaneous communication with the rest of the world
What services does India specialise in?
1) Business process outsourcing (BPO)
Outsourcing means hiring an external organisation to perform some business
functions in a country other than where the products or services of the country
are located
...
After this it became widespread practice
and today India is often called the ‘back office of the world’
...
High
standard of university education provides an abundance of high skilled workers
...

The Great Barrier Reef
 Largest coral reef system in the world
...

 In the 1980’s and 90’s improved access led to a rapid rise in
tourism- visitor numbers rose by about 30% every year in the 1980’s
...
It is a major source of income
for the local and national economy, generating over AU$5 billion a year
...

Set on 18 hectares of lush tropical rainforest overlooking the Coral Sea
...

The Longhouse Bar and Restaurant is constructed of natural timbers and utilising the talents of local craftsmen to create exquisite natural furniture,
the roomy stylish area offers an in house restaurant specialising in locally grown fresh foods and excellent coffee to satisfy your base desires
...

More than 90% is dedicated to cassowary habitat and rainforest conservation
...


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SUSTAINABLE????

Management of tourism on the reef aims to make it more environmentally sustainable…
 The Great Barrier Reef Marine Park Authority (GBRMPA) manages a large area of
the reef
...

 In 2003 GBRMPA established a zoning system that describes where certain tourist
activities can take place
...

 Some activities, such as fishing, are strictly regulated
...
The number of permits is capped and there are
restrictions on group numbers and boat sizes in sensitive areas
...
50 per visitor per day to the GBRMPA
...


UNSUSTAINABLE!!

Tourist activities can have negative impacts on the Great Barrier Reef:
 Coral reefs are easily damaged by pollution, which also affects the species
dependent on them
...

 Coral can be damaged by anchors and poor diving practices
...

 The reef is culturally and economically important to local indigenous islanders
...

 Developments of tourism along the coast damage coastal ecosystems (eg mangrove
forests and estuaries) which are important for maintaining the reef

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