Trans National Corporation s  The largest TNCs in the world have budgets which exceed those of many countries.¤  For e.g., the GDP of a developed country like Singapore ($110.6b in 2005) is still smaller than the 1996 sales figures of Shell, Ford Motor, Exxon, General Motors and Mitsubishi.¤  TNCs also employ many around the world.¤  Nike employs 80,000 worldwide.¤  Hong Kong & Shanghai Banking Corporation (HSBC) has 284,000 employees worldwide.¤  Wal-Mart employs 1.3 million people worldwide

Effects of TNCs :)Advantages

- Creates more jobs for the locals

- Injecting Capital into host economies

o Cumulative causation benefits for local industries and serviceso Enables development of natural resourceso Widens economic base of host countries

TNCs often help LDCs climb the ladder of economic developmento Improvement of infrastructure can be directly or indirectlyo TNC paying local taxes

Transfer of technology

o Large scale investments in R&Do Technology being transferred to the local populationo Training and skill acquisition

Eg. Tetra Pak (Swedish Packaging Film), used to send Swedes around the world to establish factories but in the recent years, more local executives are encouraged to take on important roles and build up talent and experience in the local community.

Establish global-local linkages

o Local industry acquires technology and planto New technology, expertise and managerial skills o Such as Quality management systems,”Just-in-time” production and

technical skills of workers may be upgradedo markets acquired, sales raisedo TNCs can focus on the tastes of local people, also known as ‘host market’

production, and introduce goods and services that caters to the taste of the locals, increasing sales

Eg. Toyota introduced Lexus, a separate brand to receive a higher share in the US domestic luxury car market in 1989 while slowly expanding and introducing it to Japan in 2005.

Stimulating local firms

o Include opportunities for local businesses when substantial local linkages are forged by foreign plants, particularly on the supply side

o TNCs reduce production cost, o Labour costs, cost of land and transport costs are lower in LDCs as

compared to DCso Dividend payment to shareholders (from?)o Consumers (from?) get cheaper goods available for sale

Disadvantages

Creating new jobs (Drawbacks)

o Limited employment offeredo Many manufacturing plants are capital incentives ( Large amount of

resources and money used to produce a good or service) thus in reality, few jobs are provided.

o Even when employing locals, they employ them for low grade cheap labour

o Highly skilled managerial positions are still being dominated by expatriateso Studies on TNC management have shown that the assignment of

expatriates would increase an TNC’s control over its overseas units by influencing the goals and values of subsidiary managers to reflect those desired by the parent company.

TNCs can ignore human rights and exploit cheap labourso Sweatshopso “working environment unacceptably dangerous (Hazardous materials and

situations) or difficult”o “long hours of work with very low pay, disobeying laws of mandating

overtime pay or a minimum wage”o “Child labour laws violated”

-Eg. Sri Lanka companies in the Free trade zones enjoy tax-free five years which they can leave and set up again a company with a different name. There is no security and health and safety standards are often lax, resulting in accidents, permanent damage or prolonged side-effects.

o Drawback to DCs Affects low tech labour intensive industries which can lead to the shutdown of

these companies, leading to deindustrialization. Technology transfer can lead to a loss of comparative advantage in high tech

industries.

Injecting Capitals (Drawbacks)

o TNCs may play the market for government incentiveso May increase debt if DC heavily involved in financing the project

Eg. Citigroup engages in questionable high interest late lending in low income communities across the United States and now globally

o TNCs rationalise and close overseas plants in time of economic difficulties or recession.

o Repatriation of profits - Profits mainly go back to the country of origin rather than being used to develop the local area.

o Decisions are made for the company’s benefits not for the national interest and main decisions makers are usually foreign.

o In regions of political/economic instability, TNCs may lose their investments

Eg. In Sub-Saharan Africa. Not all TNCs investments are successful in LDCs.

o There is a different business culture in many LDCs, therefore a detailed knowledge and understanding of the business climate and culture is required by the TNCs

Transferring technologies (Drawbacks)

o Branch plants tend to be only involved in assembly rather than design or marketing strategy.

o Dominant share of R&D activities remain in the TNC’s home country/ Region sales which comprises at least two-thirds of total company sales.

Eg. Major American TNCs such as IBM, General Motors, Du Pont and General Electric have more than 50%  of their assets and employment in US.

o May not adhere to DC standards relating to labour laws (child labour, safety) pay conditions ( pensions, maternity benefits) and environmental safety

Eg. Anti-Wal-Mart rallies lambast the company for failing to provide adequate health care or recognise unions.

Establishing Global-local linkages (Drawbacks)

o There are some cases where valuable resources are exported out of the country with little value added

Eg. Export of primary products like timber, iron core or agricultural products

o TNCs may hold extraordinary political and economic power Eg. Nigeria has an oil-based economy and they give the large oil

TNCs including Royal Dutch Shell considerable power and influence in such an unstable country.

Squeezing local firms (Drawbacks)

o Dominance of very large firms increased and new domestic firms may be suppressed.

Effects of Mass Tourism on Destination Country

Economic (Positive)

o Economic boost for host country (Economic multiplier effect)o New businesses, open jobs, increased commercial and residential

development. Employment: Tourism industry mostly operates 24/7, resulting in

many more jobs. (Open job scope, presence of skilled employment as well as employments for people who lack formal qualifications.

Eg. Luggage carrier...etc)

o Varied economic base. Creation of new businesses and commercial activities to meet

the expectation and needs of visitors results in reduction of reliance on just a few traditional industries.

Eg. Kenya, before development in tourism, heavy reliance on agriculture, 90% of GDP.

Economic (Negative)

o Enclave tourism. Profits do not stay within the country where the attractions are

located. (Least profitable to the host country, cheapest facilitation for tourism organizations)

Smaller trickle-down effect, internal and external leakages Eg. "Sun n' Sand" resort in the Caribbean. Eg. Cruise ship industry, where tourists are encouraged

to spend their time and money on boardo Leakage

When the profits earned from tourist expenditure goes back to international companies and not the local companies

In most tour packages, about 80% of the profits go back to international companies

Eg. estimated 70% of Thailand’s profits lost as leakage Import leakage - when tourists demand standards of equipment,

food etc. that the host country cannot supply Eg. Due to the high quantity and quality needs of the 64-

room hotel "Kaiser im Tirol" in Austria, an award- winning leader in sustainable practices, the hotel cannot find sufficiently reliable, and good, organic food suppliers in the local farming networks.

Export leakage - often associated with TNCs, when they invest in tourism infrastructure and reap the profits back home

Eg. St. Lucia had a foreign exchange leakage rate of 56% from its gross tourism receipts, Aruba 41%, Antigua and Barbuda 25% and Jamaica 40%.

o Infrastructure cost Costly activities for the government

o Increase in prices - Inflation due to competition and influence from foreigners who have larger disposable incomes

Eg. Prices of goods in Johor Bahru significantly cheaper than in Singapore, like petrol

o Economic dependence on tourism (too many eggs in one basket) Major stress to perform well

Eg. 70% of Seychelles citizens earn their income from tourism

The danger of over-reliance Eg: Easter island , economy is basically totally dependent

on tourism , no natural resources and little land to do anything .

o Seasonal character of jobs Some jobs are only available during specific seasons.

Eg. During holidays, when tourists have a break to travel

   

Environmental(Positive)

o Raises awareness of environmental values and functions as a tool to finance protection of natural area.

o Destination countries with neutral attractions such as waterfalls, hills and coral reefs, they will make an effort to promote the conservation of natural environment so as to maintain their natural attractions.

o Eg. Australian Great Barrier reef, where the management of the reef is controlled by the Great Barrier Reef Marine Park.

Environmental(Negative)

o Environmental Degradation: the large volume of tourists causes extreme stress to the natural environment, thereby causing environmental destruction.

o Increased numbers of tourists may introduce stress on the organisms living in a particular region, altering their natural behaviour

Eg. In the Philippines and the Maldives, dynamiting and mining of coral for resort building materials has damaged fragile coral

reefs and depleted the fisheries that sustain local people and attract tourists.

Social-Cultural (positive)

o Exchange of values: the presence of tourists in a particular area can help to increase interaction between locals and tourists, which in turn can help promote better cultural understanding between each other.

o Increased tourism can help to maintain and preserve existing culture and heritage, either hardware (architecture)or software( culture, food, arts), by promoting it to the large numbers of tourists associated with mass tourism. Continuation of heritage and culture is promoted by tourist interest and revenue obtained.

Eg. Revival and preservation of Balinese art in Indonesia due to increased attention by tourists.

Social-Cultural (Negative)

o Loss of identity and values: Over exposure to external influences brought about by mass tourism may result in the dilution of traditional cultures and heritage associated with a particular community.

The local community may also be compelled to discard traditional ideals and practices in favour for more attractive, efficient modern ideas introduced by the tourists.

to cater to the needs of the tourists,  the local community inadvertently engages in commodification of goods and practices staged authenticity to continuously attract  visitors to earn tourist receipts

Eg: Maasai tribe in Kenya and Tanzania, where performances are scheduled and staged to cater to the increasing amount of tourists. (staged authenticity)

Eg: long-necked women in Padong (zooification)

o Clash of values Tourists tend to bring with them their own behavioural norms

and culture to the destination countries. Some behaviour may be perceived as inappropriate by the local

people, i.e. scantily clad tourists in a conservative country.

o Crime generation Growth of tourism may also encourage vices and inappropriate

activities in some countries,

i.e. drug trafficking or theft.

o Economic inequality Conflict may arise when higher-paying work in the tourism

industry goes to foreigners instead of locals. Friction may arise from the frequent contact of local people and

such tourists when there is a large gap in wealth status between them.

Eg resort destination countries eg Indonesia or Brazil tourism employees with annual salaries of US$ 1, 5000 serves guests with yearly income of > US$ 80 000

o Conflict of resource use Competition for resources may result in local communities

having to pay higher taxes for resources such as water and electricity.

Industrial System:Industry: The production of economic goods or services within an economy.Can be classified into:1) Primary Sector: This involves the extraction of resources directly from the Earth, this includes farming, mining and logging. They do not process the products at all. They send it off to factories to make a profit.

2) Secondary Sector: This group is involved in the processing products from primary industries. This includes all factories—those that refine metals, produce furniture, or pack farm products such as meat.

3) Tertiary sector: This is the service industry which might utilize the products processed from the secondary industries. This sector provides services to the general population and to businesses. Activities associated with this sector include retail and wholesale sales, transportation and distribution.

4) Quaternary Sector: This group is involved in higher services in which companies involved in the tertiary industry invest in to further expand their businesses. It includes intellectual activities such as research and development branches, finances and investments.

5) Quinary Sector: This includes the highest levels of decision making in a society or economy. This sector would include the top executives or officials in such fields as government, science, universities, nonprofit, healthcare, culture, and the media.

Before we continue, lets zoom in into the different types of Industries

Heavy Industries Light Industries

Large amount of inputs/heavy, bulky raw materials/outputs

Small amount of inputs/light, raw materials/outputs

Large Scale (physical size) Small Scale (physical size)

Capita Intensive Labour Intensive

Large equipments Small equipments

More likely to cause pollution Less like to cause pollution

Distribution of such industries are based on locational factors such as:1) Raw Materials (cheap transportation, accessible etc)2) Labour (cheap, skilled etc)3) Market (good market, accessible etc)4) Government Policy (incentives present etc)

All to maximise profits

Clark Fisher Model

Reasons For Industrialisation:1. Simply because the profits gained from secondary sector (manufacturing) is

much more than the profits gained from primary sector (agriculture etc)

Effects of Industrialisation:1. Urbanisation. i.e. More paid jobs, less brute labour needed, concentration of

workers into an area of a factory = cummulative causation = large towns= $$$$$$$$

2. Division of Labour i.e. outsourcing, more specialised jobs3. One person able to produce more products i.e. Higher GDP = $$$$$$$$

Trivia: First country to undergo Industrialisation was UK, during the Industrial Revolution.

Reasons for De-Industrialisation:1. Machine replacing people2. Competition from overseas producing products at cheaper prices3. More people are skilled → preference in jobs in tertiary and above sectors4. As people get more $$$$$$$$$, things get more expensive = factories need

to pay more money to hire people to push a button = they get pissed ‘cos they earn less = they find other people willing to receive less money to push the button = factories moving away i.e. De-Industrialisation.

Reasons for Re-Industrialisation1. High tech firms that produce advanced products

2. Presence of a highly skilled labour force, able to explore new prospectful industries.

Global shift: When economic activities shift from DCs to NIEs to LDCs- DCs: deindustrialisation- NIEs and LDCs: industrialisation

NIEs vs LDCs: NIEs more successful in industrialisation process. Eg. Sg, Taiwan, Hong Kong, South Korea

Global Shift example: standard charted , outsource call centres to india -----> cheaper cost ----> benefit? disadvantage?

Benefit : jobs created , cumlative causation , ^ SOL Drawback : Low income jobs mainly , long working hours , exploited? due to little unionfication?

Cost india Uk

Pay/month (pounds) 3000 14000

Hours worked per week 40 36

Monthly Rent( pounds) 2000 4000

Rostow Model

1) Traditional Society    - High level of agriculture → Labour intensive    - Existence of barter economy    - Subsistence economy

2) Transitional Stage / Pre - take off stage    - Development of more advanced primary sector like mining etc    - Money invested into agriculture etc    - External funding    - Growth in savings and Investments

3) Take Off Stage    - Increasing industrialization    - Growth in savings of investments    - Regional Growth    - Agriculture employment decreases (primary sector decreases)

4) Drive to Maturity    - Growth becomes self-sustaining    - Investment in value industry and devt.    - Industry more diversified

    - Tech increase

5) High Mass Consumption    - High output levels    - Mass consumption of consumers    - Tertiary/quarternary sector increases

Limitations Too Simplistic Investment will not always be successful He assumes that development always take a direct linear path Need for other requirements like  infrastructure

Tourism

Definitions: Tourism refers to the temporary, short term movement of people to

destinations outside the places where they normally live and work, and their activities during their stay at these destinations.

A tourist destination area (the recipient) refers to a place that tourists travel to while a tourist generating area (the source) refers to a place that tourists come from.

Tourism Industry is defined as individuals , businesses and organizations that work to provide products and services to tourist

Mass Tourism: Defined as the process of which continuously large groups of people visit a certain places of interest simultaneously or a certain location that has been over-exposed to tourism.

Enclave tourism: Tourism in destinations where tourist activities are planned and congregated in one small geographic area.

Eco-tourism: Tourism that only involves small groups of visitors at a time, revolving around more eco-friendly and sustainable activities like homestays, trekking and local cultural immersion.

Scales of tourism:  national/global scale Domestic/regional tourism: When residents travel within their own country or

region International tourism: Travel which involves the movement of tourists from

their own country to other countries around the world.

Trends -Largest global industry

e.g. 9.9% of world GDP and 8.4% of world’s work force.

- Grown rapidly over these 60 years    

Growth Overall 1950 - 25m international arrivals 2008 - 903m international arrivals

    Distribution: LDCs increasingly receiving more of the share MEDC -70% share of arrivals However share has decreased from 82% in 1980

-Reasons for these trends: Economic Growth >Affluence>  Disposable income Technology leisure time Accessibility Government Policies Life Expectancy Lifestyle changes Marketing and Awareness New destinations

-Slight Decrease of Growth from time to time due to natural disasters, wars . Eg. Gulf wars and many civil wars such as the Arab spring have caused

tourism in the Middle East to decline.

Examples:

Global Tourism Arrival Rankings: 1) France, 2) US, 3) China, 4) Spain, 5) Italy UK Tourism

o 5th largest industry, third largest export earner, 8.7% GDP per yearo UK citizens spend 48 million pounds (day), 22 million pounds

(overnight)o Attracted to UK culture and heritage

o Facing competition and falling behind to other nations(in terms of growth in spending )

Eg. China As stated in the Annual Report of China Outbound Tourism Development 2009-2012, there have been 70.25 million Chinese tourists traveling abroad just in 2011, with an increase of 22%

Kenya - safari and beach holidays o shows fragility of the tourist trade   

affected by factors such as terrorism, natural disasters, political instability

Indonesia/Malaysia - ecotourism in Sarawako allows the country to earn income with the availability of National Parks

within the country - tourists purchase visitor passes for accesso Engages tourists in outdoor activities which are environmentally

friendly and requires lower costs, such as caving, rock climbing, jungle trekking etc.

Awareness Affluence Leisure Time Marketing Disposable income Government policies Lifestyle changes Technologies New destinations Economic growth Accessibility