The changing nature of global industry

Globalisation is where human activities take place on a worldwide scale so that we increasingly live in a 'global village'. Interdependence is when countries are linked together economically, socially, culturally and politically so that they are dependent on each other.

The drivers of globalisation

Globalisation, a term first used in the 1950s, is due to:

  • improvements in technology - internet access has expanded - mobile phones are widely available and affordable
  • improvements in telecommunications - the cost of data transmission has become cheaper due to a global fibre-optic cable network
  • improvements in transport - people now holiday in faraway destinations and businesses ship products globally
  • the growth of multinationals such as HSBC, McDonalds and Nike
  • greater political cooperation and development of trading blocs

Multinational corporations

A multinational corporation (MNC) is a company that operates in more than one country. It can also be referred to as a 'transnational corporation' (TNC).

MNCs often have factories in low to middle income countries because of:

  • cheaper labour
  • access to cheap raw materials
  • access to markets where the goods are sold
  • friendly government policies
  • more relaxed environmental laws

Offices and headquarters tend to be located in high-income countries.

Advantages of MNCs locating in a country

  • Creation of jobs.
  • Improved education and skills.
  • Investment in infrastructure, eg new roads.
  • Help in exploiting natural resources (as the LIC may lack the means to do it independently).
  • The multiplier effect helps in developing local industry.

Disadvantages of MNCs locating in a country

  • Poor working conditions.
  • Damage to the environment.
  • Profits go back to the country where the headquarters are located, not benefitting the host country.
  • Factories are footloose and jobs insecure.
  • Natural resources may be over-exploited.