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1.2.2 Geography of the global economy & TNCs - Coggle Diagram
1.2.2 Geography of the global economy & TNCs
Interconnectedness within the global economy
Connections & interdependence through trade flows
can be seen in
Fluctuations in global trade patterns
Economic problems spreading quickly around the world
Growth of countries' economies as they trade with one another
Web of economic relationships due to countries relying on one another for goods & services
Complex supply chains spanning multiple countries
Connections & interdependence through capital flows
Foreign Direct Investment (FDI)
Creates direct business relationships between countries
Dependency on foreign-owned assets
Potential for profit repatriation
FDI growth outpacing that of trade, becoming the primary mechanism of the global economy
Cross-border mergers & acquisitions
Borrowing & lending activities between countries
Economic ties & financial support between nations in the form of remitances
Contributes to financial contagion
Connections & interdependence through labour flows
Labour migration flows
Skilled professionals to places where their expertise is in demand
Unskilled labour to sectors with labour shortages
Types of migrants
Elite migrants
Have easy global mobility
result of
Organised overseas assignments within TNCs
Direct recruitment from global talent pool
May exert considerable influence over govt policy e.g. UK
Skilled migrants
Illustrates how expertise & knowledge are shared & utilised across borders
Temporary foreign workers
Provides responsiveness to fluctuations in demand for certain skills/industries
Mutually beneficial (for host & source country)
Addresses gaps in host labour markets
Remittances - earnings generated in one country benefitting another
Undocumented migrants
Live & work without legal status
But often integral & essential as they make up a substantial proportion of labour in some sectors
TNCs' global production networks connect places within the global economy
Characteristics of TNCs
Power to coordinate & control operations in more than 1 country
Owns & controls overseas activities
Global presence
Take advantage of lower cost conditions abroad
Outsource parts of production chain to overseas subsidiaries which is more profitable
Cross border investment, outsourcing & offshoring, transnational inter & intra-firm trade
Worldwide operations
Dominance over world output, trade, investment & technology transfer
Oligopolistic nature - markets & output concentrated in the hands of a small no. of firms
Enormous amounts of productive assets
Strength & variety through merger & aquisition
Readily move between countries
Spatial organisation & hierarchical structure of TNCs
Headquarters - Coporate (global) & regional
Locational requirements
Access to advanced communication & transport infrastructure
Access to high quality producer services
Proximate to social & cultural amenities
Geography
Sited in home country
In first-tier/global cities (corporate), or urban centres/capital cities (regional)
R&D centres
3 types in general:
Internationally integrated lab
Locally integrated lab
Support lab
Locational requirements
Large supply of highly trained scientists, engineers & technicians
Close proximity to universities & research institutions
Locational trends
Concentration in DCs
Decentralisation, movement to Asian NIEs
Branch offices
Allow more effective response to local conditions
Help TNCs adapt to local business environments
Tailor marketing strategies to local preferences
Risk management - spread operations across different regions
Optimize supply chain efficiency
Branch plants
Locational requirements vary widely depending on specific organisational role
Locational trends
More geographically dispersed compared to HQs & R&D centres
Typically located in LDCs
but also can be found
Closer to home country
Located in different places to spread the risk of supply disruption
Places with low political & economic risk
Types of organisation
Globally concentrated production
Host market production
Product-specialisation for global/regional market
Transnational vertical integration
How Global Production Networks (GPNs) of TNCs connect places within the global economy
Intra-firm network - between operations of the same TNC in different countries
Inter-firm network - Successes & limitations
International subcontracting
Strategic Alliances
Joint ventures
Franchising
Cooperative agreements
Distribution of products to different places
facilitated by
Transportation terminals
Distribution centres
Electronic Data Interchange (EDI)
E-commerce
Consumption of products in different places
TNCs' global production networks impact on home & host economies