Global trade is the result of uneven distribution of materials and resources across the world. No single country has everything it needs and so countries need to trade with each other. Countries that rely on each other to trade goods and services are interdependent.
The global pattern of trade is uneven because:
TNCs or multinational corporations (MNCs) are companies that operate in more than one country. They often have factories in countries that are not as economically developed because labour is cheaper. Offices and headquarters tend to be located in the more developed world. Unilever, McDonalds and Apple are all examples of TNCs.
When a TNC locates within a country, there are advantages and disadvantages.
Advantages of TNCs locating in a country include:
Disadvantages of TNCs locating in a country include:
A product has a series of stages, linked from design to purchase. Each link in the chain may happen all in one location, or be spread globally. Large companies often have very complex chains. A company may also outsource some of the production, paying another company to make part of the product.
For example, HP laptops are assembled for sale in Kunshan, China. Manufacture of each laptop's printed circuit board (PCB) is outsourced to a company in Penang, Malaysia - this is called the first tier of outsourcing. The PCB requires parts, such as memory chips or a cooling fan. These can be sourced from other Malaysian factories and firms - this is called the second tier of outsourcing.
Because even the wire, screws and plastics used in the manufacture of each component part will need to be sourced separately, there are additional tiers of outsourcing.
The interactive graphic outlines a simple global chain.