Download - GEOG; EYA Notes - · PDF fileCreated by Myrth 405 ‘13 TREND: In recent years, manufacturing in NICs has increased, whereas manufacturing in

CreatedbyMyrth405‘13

OUTSOURCING & the

Global Industrial Shift Transition from developing to developed

& its impacts FOCUS:ImpactsofOutsourcingRelationshipbetweenGIS&OutsourcingESSENTIALQUESTIONS:‐Howwouldtheglobaleconomicmapinthe21stCenturybereshapedbytheglobalindustrialshift(GIS)inthisageofglobalization?‐Willglobal industrialshiftbringaboutamoreequitabledistributionof incomeornarrowthegapsinthelevelofdevelopmentintheworld?Globalshiftsineconomicactivityproduceevenhigherlevelsofdevelopmentthroughouttheworldtoalargeextent,withtheconditionthatwealthandprofitdistributionisensured,aswellasabalancebestruckbetweeneconomicidealsandtheneedsofpeoplefromamoralandsocialstandpoint.ENDURINGUNDERSTANDING:OutsourcingwillcreategrowthopportunitiesforLEDCsasMEDCs(traditionalkeyglobaleconomies)strivetomaintainacompetitiveadvantageinthisageofglobalizationLeadtoelevatedstatus/prestigeofemergingeconomies(eg.China,India)IPOInput:Resources,Agents–Government,MNCstoprovidecapital&expertiseProcess:Manufacturing,Processing–Outsourcing/OffshoringTakingonaglobalperspectiveOutput:Developmentgoals(IncreaseSOL/QOL)Intermediategoal:IncreaseprofitIndustrialRevolution(18th/19thCentury)Majorchangesinindustries,developmentoflarge‐scalemanufacturing(fromcottageindustries)NorthAmerica&Europehighly‐industrialisedDevelopmentofMEDCs(peopleenjoyhighstandardofliving)IR&GIS:ShiftinindustriesfromMEDCstoLEDCsresultedindeindustrializationofsomeregionsofMEDCsPhenomenon:GLOBALINDUSTRIALSHIFT‐TrendoftransferenceGlobalrelocationoflarge‐scalemanufacturingindustriesfromMEDCstoNICs/NIEsCausedachangeintypesofindustrieslocatedindifferentcountries“Restructuringofsocietyasawhole”

CreatedbyMyrth405‘13TREND:Inrecentyears,manufacturinginNICshasincreased,whereasmanufacturinginMEDCshasandisstilldecreasing.‐Inthelastfewdecades,manycountriesthathavetraditionallyreliedonagriculturehaveseenamassivegrowthintheirmanufacturingindustries(NICs)‐ThishasledtoarapidincreaseofdeindustrialisationinMEDCs(Eg.UK)wherethisisalonghistoryofmanufacturinggoods(Eg.CarsmanufacturedinUK,Germanyfordecades)Practice:OUTSOURCING(byMNCs)Practicewhereincompaniesreducecostsbycontractinganytask,operation,joborprocesstoathirdpartyinsteadofperformingitinternallyforasignificantperiodoftimeCanbewithinnationalboundariesFunctionbeingoutsourcedisconsiderednon‐coretobusiness(periphery)toincreasecomparativecost

‐ Divisionofpartsinsupplychain‐ Eg.LEDCs–Manufacturing&assembly,MEDCs–R&D

MaximizecomparativeadvantagethroughspecializationCost‐cuttingmeasurewhereproductsaremadeinpoorercountriesforrichernationswhohavegreaterspendingpoweranddisposableincomeOUTSOURCING GIS:OutsourcingtriggeredGIS,GISisareflectionofmassoutsourcingbyMNCsovertimeOffshoring:ForeignOutsourcingRelocationbyacompanyofabusinessfromonecountrytoanotherUsuallyanoperationalprocessDEFINITIONSNewlyIndustrialisedCountries(NICs/NIEs):DevelopingcountrieswheremanufacturingindustrieshavegrownrapidlyLeapsineconomicdevelopment(Eg.India,China&Brazil)Industrialisation:ThedevelopmentofindustryonanextensivescaleDeindustrialisation:OccursinPost‐Industrialsocieties‐amountofindustrialisationinacountrydecreases.Transitionfromamanufacturingbasedeconomytoaservice‐basedeconomyEastAsianTigers:‐4earlytigers–HK,Taiwan,SouthKorea&S’pore‐Emergents‐China,India,Thailand,Vietnam,Malaysia,IndonesiaRELATEDTRENDSININDUSTRY‐Increaseinglobalaffluencedriveshigherconsumptionandconsequentlyproductionacrosstheworld‐Massivelevelsofoverseasproductionsatiatinghighdemandglobally‐Siteofmanufacturinghubsnearertoemergingmarketstoextendglobalreach‐Needtomaintaincompetitiveadvantageintheageofglobalizationfreermarkets&stretchprofitmargin‐IncreaseddrivefordevelopmentinLEDCsInviteMNCsin(outsourcing)toboosteconomicdevelopmentSubsequentlyuseprofitstoincreaseSOL&QOL


Rise of Multinational Corporations (MNCs) Roleinmanufacturingtoday:Keydriverofoutsourcing/offshoringKeyglobalplayers,dominateinternationalmarketsPrimemotivationalforcesbehindglobalizationaregianteconomiesoftheworld(MEDCs&MNCs)

‐ Increasinglypowerfulpartofourglobalsociety‐ Mergeandacquireeachotherformlargerentities,dominateinternational

marketplace‐ Exertshapinginfluenceoneconaswellassoc&culwellbeingbothpositive&

negativeonmanystakeholders–homecountryandoutsourcingdestinationBusinessesthatmanageproduction/deliverservicesinmorethanonecountryOwnedbyrich,monopolizingcompaniesCharacteristics:‐Abletocoordinate&controlprocesses&transactionswithinproductionnetworks‐Flexibilityinswitchingresources&operationsbetweenlocations‐Hasitsheadquartersinonecountry(placeoforigin)buthasoperationsinarangeofdifferentcountries

Why do MNCs outsource? ReasonsforrelocationoffactoriesfromMEDCstoNICs1LowerCost,HigherProfit‐CostpressuresdriveMNCstolow‐costdestinationsAttractivenessofLEDCs/NICsasareasoflowercostofproduction‐MinimumwageislowerthaninNICsMNCswillgainmoreprofit1.1LaxerHealth&SafetyRegulations‐CostSaving:Companydoesnotneedtopayouttobetterworkingconditions1.2ConsistentWorkAttendance‐Prohibitionofstrikes‐NICsforbidworkersfromstrikingoverpoorwagesandworkingconditionsConsistentworkers’attendance2.IncreasedProductionRate‐InNICs,rulesregardingworkinghoursarevirtuallynon‐existentMoreproductionhoursandahigherrateofproducinggoodsCompanyruns24/hduetodifferenttimezones3.TaxIncentivesand“Tax‐freeZones”‐ReducestheamountoftaxespaidbytheTNCIncreasethecompaniesprofit.4.LargeConsumerMarketinNICs‐DuetolargepopulationExpansionofmarketsize&accessExpansionofindustry

CreatedbyMyrth405‘134.1InternationalPublicity&Branding‐Extendinfluence5.AllowRecruitingonIrregularBasis‐Whenusageofserviceisunpredictable‐In‐housestaffisnoteconomicallyviable‐Jobsthatarenotroutinebound;onlynecessaryforparticularneedsinparticularseason6.EnhanceStrategicFocus‐Specialisationtomaintaincompetitiveedgeinglobaleconomy‐EVIDENCE:Companiesthatoutsourcereduceadministrativetasksbymorethanhalf,increasestrategicfocusby40%‐Pursueexcellenceincorecompetencies(Eg.Innovation),outsourcesecondaryfunctions(Eg.Administration)7.ReduceRiskFactors‐Diversifymanufacturingprocesses(Eg.Naturalhazards,workers’strike,wars)Decreaseinstability‐EVIDENCE:ToyotamanufacturescarsinothercountriesduetoearthquakesinJapan

STAKEHOLDERS MEDCs LEDCs

1. MNCs(supra‐govt) 1.Employees2. Employees 2.Consumers‐ Professionals(White‐collar) Risingmiddleclass‐ Labourers(Blue‐collar) 3.GovernmentCore(competency)vsPeripheral(processing)tasks3. Government

LEDCs/NICs + SOCIAL: MNCs enhance the wellbeing of society of both MEDCs and LEDCs Stakeholder:Employees

1. Jobcreation‐ Principle:“Halfaloafbetterthannone”‐ ProvidesemploymentforcitizensofLEDCs‐ Peopleliveinpoverty,lowwagejobspreferredtonone‐ Otherwise,maybeemployedininformalsectorTurntovices

EVIDENCE:LEDCslikeIndiawelcomeoutsourcingbyMNCstoprovideemploymentfortheirpeople

2. Betterwages&increaseddisposableincomeIncreaseSOLforcitizensofLEDCsRisingmiddleclassconsumers

CreatedbyMyrth405‘13Localeconomygrows

EVIDENCE:AveragepersonalincomeinChinain1978wasmeagre,butcurrentlyisUS$2000annually,IndianMicrosoftsoftwareengineerearns$11000,India’sGDPis$500

3. Spurcitizenstoupgradethemselves&developskills‐Accesstonewtechnologyencouragespeopletolearnnewskillsets4.Improvedaccesstohealthcareandcleanwater‐Provisionofadequatemedicalcare‐LoweredriskofinfectionImprovedlifeexpectancy

+ SOCIAL Stakeholder:Government

1. Development&Improvementofinfrastructure‐ UtilizationofprofitsAllowsforhigherefficiencyinLEDCs‐ParticularlyinIT/transportinfrastructure

LEDCs/NICs - SOCIAL: MNCs disrupt econ aspect destroy soc/cul fabric of MNCs & NIEs Stakeholder:Employees

1.PoorWorkingConditionsViolationofhumanrights‐Sweatshopconditions:workersworkforlongextendedhoursundersubstandardfactoryconditionsLabourexploitation‐Infringementonworkers’&humanrightsImpactQOLnegatively

EVIDENCE:‐ Apple’ssupplyfirmsinChina,workershavediedfromworkplacehazards‐ Labourrightsgroupsclaimthat18workershavetriedtokillthemselvesat

Foxconnplants‐ Foxconnworkersaretoworkfor10hoursadaywithouttoiletbreaksandare

notallowedtotalktooneanother,orriskfacingafine‐ Theoverallbasicwageissolow,comparedtothelocalcostofliving,workers

havenochoicebuttoworkmorehoursthanthelegallimit,sometimes11hoursperday,sevendaysaweek,essentiallystandinginplacealldayexceptfortwoshortmealbreaks

‐ GarmentfactoryinBangladesh:Factoryworkerscanwork20hourswith1hourofsleep

‐ 80%ofworkersarewomenaged16‐25lockedinfactoriesundersweatshopconditions

CreatedbyMyrth405‘132. LabourExploitation‐ MNCsofferlowwages(starvationwages)tolocalstoobtaincheaplabour‐ Meagreincome,belowfairwageCannotmeetdecentSOLUrbanpovertyprevalent‐ Manyliveinghettos‐ ChildrenexploitedasfreelabourNICs:Absenceoflawstoprotectthemfromchildlabour

EVIDENCE:‐ FoxconnworkersmakeonlyUS$1.78anhour‐ CHILDLABOURallegationsleviedagainstNikeinCambodiaandNikeinthe

1990s‐ InLEDCs,approx250milchildrenaged5‐14forcedtowork‐ Workerssubjecttolonghours,lowpay,compromisedsafety,verbal/physical

abuse

3. Health&SafetyCompromised‐ Inadequatehealth&safetymeasuresbyirresponsibleMNCsIndustrialaccidents/healthproblemsamongworkers

EVIDENCE:Apple’ssupplyfirmsinChina:workersreported“hazardousworkingenvironments,”suchasmetaldustfillingtheairatonefacility Stakeholder:Government,Citizens

1. PerpetuateExistenceofSquatterSettlements‐ Poorworkersbuildhomesillegallyneartheirplaceofwork‐ SpringupnearMNCfactories2. OverwhelmedInfrastructure‐ Increaseinurbanization‐ Governmentunequipped/unpreparedtodealwithmassindustrializationUltimatelydecreaseinSOL/QOL‐ Hugeinflationinland&housingpricesinurbanareasHitscommonmanhard

EVIDENCE:InIndia,suddeninfluxofcompanies&jobsintourbanareas(Bangalore,NewDelhi’ssuburbs)hasoverwhelmedexistingpoorinfrastructure,leadingtoimpossiblycongestedroads,water&electricityshortages

POINT: Poverty may not be alleviated by MNC presence ‐ Sweatshops:Peopleforcedtospendmajorityofpaycheckonfood,survival‐ EmploymentisnotlongtermHarshworkingconditionsHealthproblemsUnabletoaffordmedbills‐NICsgovernmentmaynothavemeanstocatertoneedsofpeople‐Unabletoescapeviciouscycleofpoverty


LEDCs/NICs + ECONOMIC: MNCs drive econ growth 1. MultipliereffectonNICseconomy‐ BringsinFDIs(ForeignDirectInvestment)FDIsincreaseincomepercapita‐PeoplecanaffordbasicSOLneeds(Eg.Housing,healthcare)‐ IncreasescapitalfundingavailableincountryPromotesecongrowth&developmentofNIEs

EVIDENCE:‐Vietnam’seconomygrew6%perannumafterGIS‐MicrosoftinvestedUS$400minIndia‐FDIhasgrownfrom10%ofworldGDPin1990to25%in2006

2. GeneratesRevenueforNICs‐ ContributestooverallGDP‐ Incomegeneratedfromincreaseinexports‐ IncreasedtaxrevenueWorkerspaytaxestogovernment,usedtoruncountry,staveoffurbandecay

EVIDENCE:ITwork&otherserviceexportsgenerated$57binrevenue,contributeto7%ofIndia’sGDPin2008

3. Improvementinfinancial/businessInfrastructure‐ CatertoneedsofMNCs‐ MNCsimproveprovisionofbasicneedsinspecificareasofoperation‐ Directly/ProvidefundsforthispurposetocivilsocietyorganizationsImprovesbusinessconditionswithin/invicinityofareasofoperation

EVIDENCE:Settingupofindustrialparks/relevantfinancialinstitutionsinSuzhou

4. IncreaseinIncomeLevels,ReductioninPoverty‐ Jobcreation&lessenedunemploymentrate

EVIDENCE:7%reductioninpovertylevelsinVietnamannuallyInChina,150miljobscreated,in2008ITsectoremployed4milpeople

5. MNCsFacilitateTransferofKnowledgetoNIEs‐ProvideFinancial&TechnologicalResources&Expertise‐ MNCsprovideimmenseresourcesandinvestments,technology,innovation&

expertisetohostsocieties‐ EncourageacultureofR&D‐ Humanresourcesdevelopedwithinorganization‐ KnowledgetransferbetweenMNCsandlocalsuppliersMNCsprovidetechnicaltrainingsupporttolocalfirmsincorporatedintosupplychains

EVIDENCE:Sino‐GermanVolkswagenjoint‐ventureinShanghai6. MNCsEncourageSoundBusinessPractices‐ Introduceaprofessionalworkingenvironment&cultureLocalorganizationsemulate,promotesoundmanagement&businesseducation


7. SpurCompetitivenessofDomesticProducers‐ Leadstoincreasedproductivityandoutputglobally‐ Domesticproducersbecomemorecompetent

8. OPPORTUNITIESFORFURTHERGROWTHPRESENTEDTOLEDCsa. Managementskillsimpartedtolocals

EVIDENCE:NikefactoriesinVietnam:Workersgothroughskillupgrading,supervisersarelocalworkerswhohavegonethroughmanagementtraining

b. R&DopportunitiesforlocaldevelopmentofindustriesEVIDENCE:Singapore:GoldenGateVentures(GGV)aimstobuildapartnershipbetweenSiliconValley&Asia,sendhigh‐performingAsianentrepreneurstoUStoworkwithleadingstart‐upsinSiliconValley

9. ElevatedPrestige/StatusofNIEs‐ Otherthanunethicalpractices

EVIDENCE:Chinaisathrivingglobaleconomy(World’s2ndlargest)IndiaisknownasanIToutsourcinghub

LEDCs/NICs - ECONOMIC:

1. “RunawayPlants”–MNCsareMobile‐ MNCshaveabilitytouproot&leavecountryquicklyatownvolitionMNCsarePROFIT‐DRIVENRelocatetolocationwithhighercomparativecostadvantages/escapepoliticalsituationornaturaldisaster‐ Over‐dependenceoflabourforceonMNCstobolstereconomyNICs

economyseverelycrippledshouldMNCsdecidetoleaveDrainwealthofNIEsMassiveretrenchmentwillresultwhenMNCsrelocateelsewhere2. StiflingofDomesticEconomies‐ DuetoinfluxofsuperiorgoodsfromMNCs‐ MNCshavemonopolyoflocaleconomy‐ Competewithlessefficientlocalfirms(SMEs)Overwhelm&monopolizelocaleconomyCancausebankruptcyDestroySOL/QOLoflocals’lives3. WorsenIncomeDisparityinNICs

EVIDENCE:PolarizationofincomesofVietnameseworkersatforeign‐ownedenterprises(higherwages)vslocalenterprises1992‐2002:Vietnampercapitaincomeofpoorestgroupincreasedby49.1%,richestgroupincomeroseby223.5%

CreatedbyMyrth405‘134. RaiseUnemploymentinLEDCs‐ Foreigntechnologiesreplacemanuallabour

EVIDENCE:India’schemical,pharmaceutical,manufacturingindustry

POINT: Gains are never completely reciprocal in reality ‐ Onepartytendstobenefitmoreeconomicallyoutoffreetrade,benefitcan

borderonexploitation‐ ProfitslargelyflowtoMEDCs,notLEDCs‐ GoodsthatLEDCsproducewillnotgotodomesticeconomybutinsteadto

foreigneconomiesEVIDENCE:1970s‐2000s:Kenya’seconomyhasdeclinedwfreetradeduetoexploitationbyMNCs,whoexploitrawmaterialsfromLEDCsandthenexport&sellthemforahigherpriceelsewhere

LEDCs/NICs - ENVIRONMENTAL: 1.ImproperDisposalofWaste/AirPollution‐Increasedproductivity&efficiency‐Rapidurbanization‐LEDCsmorelaxinenforcingenvironmentallaws‐LawsofpollutionlessstringentImproperwastedisposal,massiveconsumptionofenergyEVIDENCE:Chinaisoneoftheworld’slargestairpollutingcountriesIndustrialeffleuntsintoJakartaBay

LEDCs/NICs + POLITICAL:

1. GainPoliticalCloutonWorldStage‐ Enhancescountry’sreputation&standinginworldmarket2. PromotionofChangesinGovernance‐ IncreasedunderstandingofCapitalistideology‐ WidespreadinternationalexchangesCountrygainsideastomoveforwardShiftawayfromidealsofsocialism&communismatleastineconsphere

EVIDENCE:Myanmartryingtoopenupeconomythroughattractionofforeignenterprisestoliberalizeeconomically(Coca‐Cola&GeneralElectrichaveannouncedplanstodobusinessincountry)

LEDCs/NICs & MEDCs + CULTURAL: Impacts of MNCs

1. Pluralism‐ MNCsboostcross‐boundaryinteractionamongpeople‐ Education(particularlybusinesseducation)hastakenonglobalperspective‐ Opportunitiesforcross‐culturalunderstanding

CreatedbyMyrth405‘13IncreaseadaptabilityofstudentstoalienenvironmentMixingofcultures&practicesencouragespluralism&competitionCulturalexchangeleadstobetterunderstanding&goodwillbetweencountries

LEDCs/NICs - CULTURAL: Impacts of MNCs on Host Countries

1. PromoteCultureofConspicuousConsumerism‐ IncreasedmaterialismPresentation&cosmeticstakeprecedence‐ Emphasisoninstantaccess&quickrelief‐ Glamourizelifeinthefastlane‐ Spendingprioritieschanged‐ Promoteacultureofpeoplelivingbeyondtheirmeans‐ Simplicityislosingcurrency,peoplestrivetoliveinluxuryDecreasedemphasisoncharacterbuilding,social&ethicalvalues2. StressesontheFamily‐ Affecthostsociety’sfamilyfabric‐ Introducedtonewculturesandlifestyles‐ Overspending&livingbeyondmeansCreateseconpressures,developtensionwithinfamilies‐ Parentshavelittletimeforfamilies&children

3. CulturalChanges‐ WesternizationofvaluesTraditionalcultural&spiritualvaluesnotpreserved‐ Intheatmosphereofglitz&glamour,ethicalandmoralconsiderationshaveno

placeCorporateinterestbegintodeterminewhatiscelebratedandhow

MEDCs + ECONOMIC: Benefits of Outsourcing Stakeholder:Government,MNCs(supra‐government)

1. IncreaseinProfits‐ Profitmakingfromlow‐costlabour‐ Accesstocheaplabour‐ AccesstoNICsmarket,biggershareofglobalmarkets

2. DevelopCapacitytoSpecialize‐Throughdeindustrialization‐Shifttomoreprofitabletertiaryindustries‐Focusoncorecompetencies(Eg.R&Dservices)

EVIDENCE:SG’sshifttoaknowledge‐basedeconomy,offeringitselfasamanagementhub


- ECONOMIC: Repercussions of Outsourcing Stakeholder:Government,MNCs(supra‐government)

1. PublicBacklash‐ Immoralbehaviourenragespublic‐ Losecustomerbase,losecompetitiveedge‐ Damagecompanyimage‐ ProtestsagainstviolationofhumanrightsbyMNCs‐ Brandimagetarnished,affectssales

- SOCIAL Stakeholder:Employees,Citizens

1. DeindustrializationinMEDCs ThreattoWorkerSecurity‐ Causemassivelayoffsespeciallyamongstblue‐collarworkers‐ JoblossforMNC’shomecountrywhentheyoutsourceoperationstoNIEs‐ DownsizingofworkforceLossoflivelihoodLossofeconomiccapacitySocialwellbeingdeteriorates‐ Increasedratesofunemployment,poverty&crime‐ Urbanpoverty,homelessnessincreases(Eg.USA)‐ FactoriesclosedownBuildingsbecomederelict

EVIDENCE:BankruptcyofDetroitwhenMNCsautomobileindustrymovedoverseasHighestcrimeratesinUSnowoccurinDetroitHugeareasofcityareinstateofsevereurbandecay

2. PoorerQualityofGoods‐ Outsourcedmaterialsmadeofpoorermaterials&craftsmanship‐ HOWEVERpriceislowerDependsonbuyer’spreference

- POLITICAL Stakeholder:Government,Citizens

‐ BasedarounddominantpublicfearthatoutsourcingwouldleaveAmericansjobless

PollbyZogbyInternational:71%believeoutsourcingjobshurteconomy‐ Citizensrallyforlegislativeactiontobeimposedagainstcompaniesthat

tranferjobsoverseas‐ Outsourcingasatopiccouldbemisusedinelections

EVIDENCE:AmericansbelieveNAFTAwouldleadtoanincreaseinunemploymentintheUS


MEDCs & LEDCs/NICs: MNCs bring econ & soc advantages Stakeholder:Consumers

1. PromotesComparativeAdvantage(Bothhost&homecountries)‐ FDIinflow&growthforNIEsasexportingcountry‐ LowerpricesinimportingcountriesLargermarketbaseinLEDCsduetoloweredcostofgoodsthatareproduceddomestically

EVIDENCE:AmericansenjoycheaperimportsofgoodsmadeinChinaLocalsinNIEsalsohaveaccesstobrandedgoods(Eg.Nikeshoes)atalowerprice2.AccesstoComfortsofLife‐MNCsplayroleinkeepingcostoflivingaffordableImproveSOL,enhanceQOLintermsofmaterialcomfort&wellbeing‐Largescaleeconomies,qualitycontrol&healthycompetitionleadtopricecuts&otherbenefitsforenduserAccesstocomfortsoflifeLargervarietyofchoices

OUTSOURCING: Perspectives Globalperspective‐Dynamicrelationshipwithinternationaltrade‐Globally,outsourcingisnotalossofjobs,ratherarelocation‐UnemploymentinUShasnotincreasedwiththeincreaseofoutsourcing‐INSOURCING;Economicanalysisshowsthat“WhileUSisexportingsomejobstoothercountries,greatestbeneficiaryofoutsourcingisUSitself”TradeisaPositiveSumGain(Outsourcingisdabombz)‐Alltransactionsraiserealincomesonbothsidesasresourcesareadvantageouslyredeployed‐Addedinvestmentandgrowthinexportingcountry,lowerpricesinimportingcountryMYTH:InsourcingisaSolution(Outsourcingisbadz)‐SomesuggestthatjobslosttooutsourcingareoffsetbymillionsofAmericanworkershiredbyforeigncompanies‐HOWEVERvastmajorityofemploymentassociatedwithnewinvestmentsbyforeigncompaniesisinformofacquisitionsofongoingUScompanies‐Eg.Daimler’stakeoverofChrysler‐1991‐2001:Asaresultofinsourcing,2.78milUSjobslostinforeign‐ownedfirms


CONCLUSION‐ Outsourcingisapositiveandnegativeforceinshapingtheeconomy‐ Bringseconandsocbenefits/coststomanystakeholdersonbothsides

JUSTICE‐TheMNC‐ledglobalizationcurrentlyunderwayemphasizeseconomicintegrationandnotjustice.‐Justicerequiresthat,astheproductioncapacity,tradeandexportsofindustrialisedcountriesrise,developingcountiesshouldexperiencesimilarincreases—indeed,theirgrowthshouldoccuratahigherrateifpovertyandunemploymentaretobereduced.‐MNCSmustaddresstheworkingandlivingconditionstomatchtheSOLoftheworkerssoastobringaboutimprovementineconomicandsocialdevelopment.MNCscanbeboth‘good’and‘evil’inshapingtheeconomic,socialandculturalfabricofbothMEDCs&LEDCs.Whichstakeholderhasgreatestinfluenceindeterminingoutcomesofoutsourcingtoreachdevelopmentgoals?MNCs:Mustbewillingtoaddressworking&livingconditions,increasewagereasonablytoimproveSOL/QOLofworkersLEDCsGovernment:NegotiatewithMNCs,supportlabourunionEmployees:CanprotestagainstMNCstostrikeabetterdeal(BUToftenpowerless)CONSUMERS:CanformNGOs,participateinactivism&boycottsPARADOXES&PARALLELSINOUTSOURCINGParallel‐AllstakeholdersgainandloseParadox–Notanallwinsituation,outsourcingisanironyforstakeholder

‐ Outsourcinghaspositivelyandnegativelyaffectedstakeholders

‐ MNCsandGovernmentsshouldintervenetomakebetterinformedandethicaldecisionstoimproveSOLofworkers

‐ Inworldofcomplexityandinviewofdynamicsofoutsourcing,therewill

alwaysbewinnersandlosersGovernmentcaughtinaPARADOX

‐ Awareofexploitation‐ BUTeagertoincurprofitConflictarisesbetweeneconandsocdevelopment

Shouldsacrifices(inworkingconditions)bemadesothatthecountrycanelevateeconomicstatus?

‐ Dependsoncountry’sfocus:Isecongainmoreimportantthansocwellbeing?‐ Remember:Econgainisseenasanintermediatetodevelopmentgoals‐ SocandEconprogressionshouldmoveforwardsidebyside‐ Strikeabalancebetweenquestforecongain&needtomaintainwellbeing‐ HOWEVERduetorealworldcomplexities,issuesdifficulttoresolve

CreatedbyMyrth405‘13EXPLOITATION

‐ MNCsmainfocus:EconomicAspect‐ ThoughLEDCsaredependentonMEDCstoprovidejobs,theyshouldnotbe

exploited‐ Soundgovernance,abhorcorruptpractices,maintaintransparency‐ Broughtaboutbyabsenceoflaws,failuretoupholdpolicies

SOLUTIONSTOEXPLOITATION‐ Mediaattention:bringsituationtolightamongpublic‐ Raiseawareness:Peoplemaynotmindpayingmoreforgoodsiftheyare

madeawareofsufferingofworkers‐ ForceMNCstoaddressissue–itistheirresponsibilitytoregulatetreatment

ofworkers‐ PARADOX:Outsourcingbasedonideaofsendingjobsoverseassoastolower

productioncosts,treatmentofworkersisthereforeasecondaryconcernTHEORYOFOUTSOURCING

‐ Outsourcingasaconceptissound‐ Managementandregulationofoutsourcingisissue‐ Outsourcingisanagentofchangeanddevelopment‐ Itisatooltowardsreachingdevelopmentgoalsthatshouldbehandled

wiselyIsOutsourcingSustainable?

‐ Changeisinevitable,ifeveryoneisloweringtheircosts,inthelongrunitmightnotbefeasible

‐ Competitiveness:everyonefightstolowercoststoaminimum,workersaffectedgreatly

ROLEOFMNCsIndividualcountries&societiesderivestrengthfromtheireconpower,whichenablesthemtoinfluencedecision‐makingattheworldstage

‐ RoleofMNCsininfluencingdecisionmaking‐ Economiesarecatalystsofglobalizationprocess,andtheyarerepresentedby

MNCswhichmaintainhigheststakesandstandtogainthemaximumbenefit‐ THEREFOREMNCsshouldbeawareofamoral&ethicalresponsibilityand

obligationthatcomeswiththeirpowerandinfluence‐ MNCsmustcheckandmaintainbalancefromwithin‐ Thereisaneedtochalkoutaglobalstrategyandcomprehensiveprogram

formovingtowardshealthycompetitionand‘balanceofpower’betweenMNCsanddevelopinghostsocietiesbyremovingpresentinequalities

‐ Businessesshouldbedriventocreatevaluenotjustforstakeholdersbutforthesocietyandenvironmentthathostthem

Ultimately,Outsourcingcaneitherbeatooltosolveglobalchallenges(promoteglobalharmonyandintegrationandthedevelopmentofallsocietiessoastoeliminatepoverty;minimizeunemployment,reduceincomeinequalities)oritcanbeusedtodriveafurtherwedgeintodevelopmentofbothMEDCsandLEDCs.


Case studies

CHINA Backgroundinfo:•In30yearsChinahasgonefrombeinganagriculturaleconomytoastrongmanufacturingeconomy.(3largestinworld)•ThePercentageofChina’sGDPthatcamefromagriculturefellfrom30%to15%between1978and2004.•Numberofproductsproducedhasincreasedrapidlye.g.1978.Chinasold4000TVs.2004.Chinasold75millionTVs•Chinamanufacturesalargerangeofgoodse.g.computers,furniture&Clothes.•ManyTNC’shavefactoriesinChinae.g.NikeandDisneyReasonsforGrowth:1.CheapLabor‐ Thereisnosingleminimumwageinchina;itdiffersfromprovincetoprovince.E.g.inShenzhentheminimumwageisabout$180permonth,whereasinBeijingitisabout$140permonth.•ThismakeschinamuchcheaperthanMEDC’sliketheUKwheretheminimumwageisabout£990permonth.2.Workinghours•Chineselawstatesthatworkersshouldworkforamaximumof40hoursaweekwith36hoursofovertimepermonth.•ThishoweverisnotenforcedandsomeTNC’slikeNikemakeworkerswork80hoursofovertimepermonthtomaximisetheproductionofgoods.3.LaxerHealth&SafetyRegulations•thoughthehealth&safetylawsinChinaaresimilartothoseintheUK,theyarenotheavilyenforced.•e.g.inthelast10yearshundredsofChinesefactoryworkershavebeentreatedformercurypoisoningdespitechina’sstrictlawswithworkingwithToxicmaterials.4.ProhibitionofStrikes•InChinaworkersarepermittedtogoonstrike,buttheAll‐ChinaFederationofTradeUnionsrequiresallworkersbylawtoreturntoworkasquicklyaspossiblewhichmeansproductivityismaximised.5.Taxincentives&“TaxFreeZones” •ChinahasmanySpecialEconomicZonesthatoffertaxincentivesforTNC’s.•TNC’susuallypaynotaxforthefirsttwoyearsinthezone,7.5%forthenextthreeyearsandthen15%fromthenon.•Thisisstillhalfoftheusualamountbusinesseshavetopayinotherareasofchina.•Becauseofthisthere’sbeenaround$30billionofinvestmentsfromTNC’s.


CHINA (cont.) a. 3rdlargestmanufacturingeconomyintheworld:Nearly19,000timesasmanyTVswereproducedandsoldin2004ascomparedto1978. b. Chineseeconomicgrowthcanbeattributedto i. cheaplabour(nominimumwages,makinglabourcostsmuchcheaperthanthoseinMEDCs) ii. longworkinghours(workinghourlawsarenotproperlyenforcedsoMNCslikeNikemakeworkersdo80hoursofovertimeeverymonthtomaximizeproduction) iii. laxerhealthandsafetyregulations(lawsarenotheavilyenforced,soMNCstakeadvantageofthis) iv. taxincentivesandtax‐freezones(MNCsusuallyarenottaxedfor2yearsinspecialeconomiczonesinthecountries,followedbysmalltaxesofabout7%,makingChinaanattractiveplaceforinvestmentsbyMNCs) c. WhyChina?Chinahadalargemarketandcheapandabundantlabour.TherisingmiddleclasswantedtobeWesternized,andNiketappedonthis:itsoldstatusthroughitsbranding. d. Phase1:MakingNikearecognizablebrand–topChineseathletesworeNike,alltheteamsinChina’sprobasketballleaguein’95weresponsoredbyNike e. Phase2:ChangingChineseculture:traditionallyinChina,academicsuccessisheldhigherthaneverythingelse:howdotheymakesportsattractive?NikebroughtplayerslikeMichaelJordanforvisits,sponsoredandfundedmatchesathighschoolsandfoundedtheNikeLeague,thefirsteverhighschoolbasketballleague.Throughthe1990s,salespickedup60%ayear. f. In2004,Nikewasopeningaround1.5storesadayinChina.

SINGAPORE a. In2009,theEUwasSingapore’stoptradingpartnerbecauseSingaporehasanattractivestrategicposition,andthoughithasasmallworkforceandlandsize,itisstrongincapital,knowledgeandinnovativeability. b. Furtherprovingthis,morethan7000MNCsand10,000enterpriseshavesetuptheirstrategicoperationsinSingapore. c. Singaporeisthemostbusiness‐friendlycountryintheworld:companiescaneasilyconnecttopotentialclients,businessandresearchpartnerswhotheycanreachinlessthananhourbycar.Workpermitsarealsoapprovedveryquickly.Internetconnectionisalsoreliable:nearly8khotspotsprovidingfast,freewifiaccess.HighlyskilledR&DdepartmentsandstrictIPregime.


DETROIT (USA) a. Inthe1970s,automobilecompaniesmovedproductionoutofDetroitduetolowerwagesfoundelsewhere,astheyhadbeensufferingfromglobalcompetition. b. Duetotheoutflowofjobs,manyworkersinthemanufacturingindustrieslosttheirsourcesofincome.Thisreducedtaxrevenuetothegovernment,whichcouldnotproperlymaintainpolicepayrollorre‐traintheunskilledworkers.Thisresultedinincreasedcrimeratesthatcouldnotbecontrolledbecausepeopleweredesperateformoneytoensuretheirsurvival.Urbanpovertyandunemploymentratesincreased,asaresultofde‐industrialization. c. DetroitnowhassomeofthehighestcrimeratesintheUSandrecentlyfiledthelargestmunicipalbankruptcycaseinUShistory.Detroithadapopulationofnearly2millionin1950,whichisjust700kin2013–mostpeoplehavefledthecityforbetteropportunitiesofsurvivalelsewhere.

INDIA a. Hyundai:2ndlargestcarsellerinIndiawithnearly$1brevenue.HyundaiIndiahasbeensellingalmostentirelyinIndiaduetothelargemarketandonlyexportingasmallfractionofthecarsproduced.IndiaisHyundai’sglobalhubformanufacturingitssmallercars. b. FordMotorsaresourcing$120‐160mworthofautomobilepartsfromIndianmanufacturersin2years,MatsushitaissourcingPanasoniccolourTVsetsfromIndianmanufacturerstoexporttointernationalmarkets,andothersincludingVolvoandToyotawantIndiaastheirglobalmanufacturingoutsourcinghub. c. AdvantageoustoIndiainthatitearnsbillionsofdollarsandmorejobsareprovidedtocitizens. d. WhyIndia?Lowcostoflabourmeansproductionatverylowcosts,increasedprofitsforMNCsàIn2015,manufacturedproductoutsourcingfromIndiaisestimatedtobe$50b,anditcontinuestogrowatabout$1bperyear.ThoughcostsarelowerinChina,Indiahasaclearadvantageinengineeringandmanufacturing.MNCswanttotakeadvantageofIndia’shighly‐skilledmechanicalengineers.

e. However,MNCsfindithardtomaintainqualityinIndianproducts.MNCshavetoworkhardtoensureproductsaremadewithnodefects,andtogetpastthe“MadeinIndia”tag.


MACROCONCEPTS Systems ‐Themacro‐conceptisimbeddedinthesystemsapproachtotheteachingandlearningofgeographicalphenomenaandtheircomplexinteractionsonEarth,fromaspatialperspective.‐TheEarth,asasystem,ismadeupofsub‐systemsthatconsistofidentifiableelements(IPO)‐ElementsinteractwithoneanothertobringaboutCHANGEinthesystem‐ThiscomplexinteractioncantakeplaceatvariousSCALEs,rangingfrommicrotomacro‐ItisbestunderstoodthroughMODELS,simulationsofprocessesorbehavioursintherealworld‐Outsourcing,asasystem,followsbothspatialandtemporalpatternsofmovementIPOInput:Resources,Agents–Government,MNCstoprovidecapital&expertiseProcess:Manufacturing,Processing–Outsourcing/OffshoringTakingonaglobalperspectiveOutput:Developmentgoals(IncreaseSOL/QOL)Intermediategoal:Increaseprofit

Change 1.Changeisinevitable.‐Thelocationanddistributionofindustrieschangeovertime,inrelationtoglobalisationandtechnology.OutsourcingnotSustainable:

‐ Changeisinevitable,ifeveryoneisloweringtheircosts,inthelongrunitmightnotbefeasible

‐ Competitiveness:everyonefightstolowercoststoaminimum,workersaffectedgreatly

2.Changeislinkedtotime.‐Outsourcing,asaprocess,followsbothspatialandtemporalpatternsofmovement‐TheinternationalisationofproductiontoLEDCs,basedonthecore‐peripherystructureofproduction,hasfavouredthegrowthofeconomyofthesecountriesandhelpstopacetheeconomyoftheMEDCs.OutsourcingwillcreategrowthopportunitiesforLEDCsasMEDCs(traditionalkeyglobaleconomies)strivetomaintainacompetitiveadvantageinthisageofglobalization3.Changecanbepositiveornegative.TheeffectsofglobalindustrialshiftsonLEDCsandMEDCsarebothpositiveandnegative.‐Resultinparadoxesandparallels


ECOTOURISM A Sustainable alternative?

QUESTIONSTOCONSIDER:1.WhatisanEcotourismdestination?

‐ 3Principles2.IsthetourismpracticeconsideredEcotourism?3.HowcanweturnthepracticeintoanEcotourismdestination?ENDURINGUNDERSTANDINGTourism,agrowingglobalphenomenon,needstobemanagedattheglobal,nationalandlocallevelsinorderforittobedevelopedandpursuedinasustainableandbalancedmannerECOTOURISMASANINDUSTRY

‐ Maindriverofeconomy‐ Influxofincome(significantportionofGDP)‐ Fastestgrowingsub‐sectorstourismindustryPopularityrepresentsachangeintouristperceptions,increasedenvironmentalawareness,andadesiretoexplorenaturalenvironments.

DEFINITIONOFECOTOURISMThepracticeoflow‐impact,educational,ecologicallyandculturally‐sensitivetravelthatbenefitslocalcommunitiesandhostcountries

‐ Responsibletraveltonaturalareasthatconservestheenvironment&improvesthewell‐beingoflocalpeople

Ecotourismshouldbe:

‐ Low‐impacttourism‐ Nature/greentourism‐ Ecologically‐responsibletourism

RATIONALETominimizetheincreasingnegativeimpactsofmasstourismontheenvironmentandpeoplebyprovidinganenrichingalternativetourban‐relatedtourism

CreatedbyMyrth405‘13PRINCIPLESOFECOTOURISMEcotourismisaboutunitingconservation,communitiesandsustainabletravel.Thosewhoimplement/participateinecotourismshouldadheretoprinciples:

1. EnvironmentallySustainable‐ Minimizeimpactonnaturallandscape,reducecarbonfootprint‐ Buildenvironmentalawarenessandrespect‐ Providedirectfinancialbenefitsforconservation2. Socio‐culturallySustainable‐ Providepositiveexperiencesforbothvisitorsandhosts‐ Helpretainculturaltraditionsandsecureculturalvalue‐ Preserve/promoteculturalpractices,beliefs,values&heritage3. EconomicallySustainable‐ Providefinancialbenefits&empowermentforlocals‐ Direct&indirecteconomicbenefits‐ Economicviability&long‐termsustenance

BENEFITSOFECOTOURISMConservation(EnvSustainable)

‐ Offersmarket‐linkedlong‐termsolutions‐ Provideseffectiveeconincentivesforconserving&enhancingbio‐cultural

diversity‐ Helpstoprotectnaturalandculturalheritageofourbeautifulplanet

Communities(EconSustainable)

‐ Increaselocalcapacitybuilding&employmentopportunities‐ Effectivevehicleforempoweringlocalcommunitiestofightagainstpoverty

&achievesustainabledevelopmentInterpretation(Soc‐culSustainable)

‐ Emphasisonenrichingpersonalexperiences&environmentalawarenessthorughinterpretation

‐ Promotesgreaterunderstanding&appreciationfornature,localsociety,culture

OTHERS:

1. MoneyFlowsintoLocalEconomy‐ ImproveSOLoflocals–improvehousing,schools,hospitals,electricity&

watersupplies2. CreateDomesticEmployment‐ Labour‐intensive(Eg.Hotels,entertainment,guides)‐ Reducemigration‐ Localsgivenincentivetoretaintraditionsinsteadofventuringintocityfor

jobs

CreatedbyMyrth405‘133. EncouragePreservationofCulture‐ Appreciateculturaldiversity,respectlocalcustoms&heritage4. EncourageProductionofAuthenticSouvenirs‐ Createmarketforlocalfarmproducts5. DiscourageBuilt‐upEnvironments‐ Landisprotectedfrombusinessenterprises6. EnhanceAwarenessofImportanceofConservation‐ Encourageeffortstosustainwildlife&nature

ECOTOURISM:OBSTACLES/ISSUESRAISEDRequiresKeyUnderstandingof‘Sustainability’

‐ Whatitmeansincontextoftourismoutcomes&development‐ EconomicgainsAttaindecentSOL&materialwellbeing‐ AttaininghigherQOLSocialwellbeingHappiness

TouristOvercapacity‐ Ecotourismmayonlybesustainableonasmallscale‐ Asflowoftouristsincreases,impactsgrow,becomeshardertoregulate‐ Ecotourism:Isitpossibletovisitplacesw/odamagingnaturalbeauty,

wildlife,indigenouscultures?Ecotourismisintendedforsmallgroups,amodestincreaseinpopulationputsextrapressureonlocalenvironment&necessitatesdevelopmentofadditionalinfrastructure&amenities

Greenwashing‐ Organizationthatadvertisespositiveenvironmentalpracticeswhileactingin

theopposite‐ Moremoney/timespentadvertisingbeinggreenthanonenvironmentally

soundpractices‐ Trendtowardscommercializationoftourismschemesdisguisedas

sustainable,naturebased&envfriendlyecotourismEFFECTSOFGREENWASHING

‐ Resultofmassproductionofcheapsouvenirs(commodification)DiluteauthenticityoflocalcraftLevelofsacrednesscompromisedCraftsmanshiplost:hand‐madetomachine‐produced

OBJECTIONSTOGREENWASHING

‐ Schemesareenvironmentallydestructive‐ Economicallyexploitative‐ Culturallyinsensitiveatitsworst‐ MorallydisconcertingMisleadtourists&manipulatetheirconcernforenv

CreatedbyMyrth405‘13OTHERS:

1. LeakageofProfits‐ 80%ofmoneyrepresentsoutflow,10‐20%ofincomereceivedstays‐ Industryispredominantlyforeign‐ownedTourcompaniesownedbyMNCsECONOMICALLYNOTVIABLE!Localsdonotreceiveprofit2. Low‐skilled&SeasonalEmployment‐ Lackofeconopportunitiesforlocalscausesthemtoturntodegradationof

envasmeansofsustenance‐ Resentmentbyexploitedlocalpeople3. DisplacementofNatives/Land/TraditionalMeansofLivelihood‐ Duetobuildingofhotels4. OverdependenceonTouristsforLivelihood5. ExcessiveUseofWater‐ Shortageofwaterforlocalsfordomestic&farmuse6. DestructionofCulture‐ Customs&traditionsdestroyed‐ Emergenceofsocialproblems/vices(Eg.Crime,prostitution)

CRITERIAFORSUSTAINABLETOURISM

1. EconomicSustainability‐ Promotionofsustainableuseofbiodiversitybyprovidingjobstolocal

populations‐ Extendsrangeofeconbenefitstogreatestpossibleno.ofpeopleatallscales

&levelsofsociety‐ Likelytomakepeoplebetteroffinmediumtolongterm(aswellasshort)‐ Focusoninfrastructuralchangesthatbringimprovementstosocietyasa

whole(Eg.Healthcare/education)2. Socio‐CulturalSustainability‐ Sharingofsocio‐econbenefitswithlocalcommunities&indigenouspeople‐ Benefitsofecotourismextendtomaxno.ofpeople‐ Localpeopleabletoaffodland/homes/commoditiesintouristarea‐ Jobsandsocbenefitsoftourismarelonglasting‐ Culturaltraditionsretained,valuessecured‐ Localcommunityinvolvedinplanninganddevelopmentoftouristindustry3. EnvironmentalSustainability‐ Minimizationoftourism’senvimpact:limitinfrastructuredevelopment‐ Pollutionlevelsnogreaterthanbeforetourismcommenced‐ Resourcesnotexploitedataratefasterthanrenewal(notconsumedw/o

dueconsiderationofalternatives)

CreatedbyMyrth405‘13‐ Education:Contributestoconservationbyraisingawarenessofnatural

processes‐ Conservationofbiologicaldiversitythroughecosystemprotection

REASONSFORMISMANAGEMENT1. Lackingovernmentcommitment/capability‐ Tomanageecotourismsiteseffectively2. Vague&IneffectiveRegulations‐ Envprotection:hardtoenforce3. EconGainstakePrecedence‐ Pressingenvconcernstakeabackseat4. InfluentialGroups‐ Swayinterestsofgovernmentstotheirfavour

IMPROVINGSUSTAINABILITY

1. Regulation&Accreditation‐ Implementaglobalstandardofaccreditation‐ Differentiateecotourismcompaniesbasedonlevelofenvcommitment‐ GreenStarsSystem:Criteriaincludesmanagementplan,benefitforlocal

communityAllowecotouriststobeconfidentofagenuineexperience2. EnvironmentalImpactAssessments‐ Feasibilityevaluatedfromscientificbasis‐ Recommendationsmadetooptimallyplaninfrastructure,settouristcapacity,

manageecology3. Guidelines&EducationforEcotourists‐ Initiativescarriedouttoimproveawareness‐ Sensitizethemtoenvironmentalissues‐ TourGuides:Directmediumtocommunicateawareness

WAYSTOPROMOTEECOTOURISM

‐ NativesasPaidTourGuidesPromoteownculture&econsustainabilityAllowpeopletoappreciatediversityincultures‐ Small‐scaleDevelopment(Eg.Gamelodges)Minimalenvironmentalimpact‐ NatureReservesPromotenatureappreciation&enhanceawareness

CreatedbyMyrth405‘13INSIGHTSEcotourismperceivedassustainabletourismdevelopmentthatwillminimize–veimpactofmasstourismHOWEVERneedtoconsidernatureandextentofintensityinimplementation,managementandclosemonitoringofecotourismactivitiesEnsurethatinitialobjectivesareservedIfmismanaged,ecotourismmayturnouttobejustanotherformoftourism,withnoless–veimpactonenvironment&people