Globalisation - Indexes, TNCs & Switched-Off Countries

A.T. Kearney Index:
  • Measures cities globalisation through business, culture, politics e.g. measures TNCs headquarters, museums, embassies
  • Top cities include: London, New York, Paris, Tokyo, Hong Kong
  • London is first because: Huge score on globalisation of culture e.g. English language, history, Shakespeare, Buckingham Palace, modern Art, fashion etc; around 8 million people: Human capital very high with many educated at degree level and working professionals, like bankers, insurance, services; the Houses of Parliament and the financial centre
KOF Index:
  • A indicator index for how globalised countries are.
  • Measures three main dimensions of globalisation: Economic (amount of FDI), Social (how many own a TV), Political (UN participation)
Summary Of Indexes:
  • A.T.Kearney Index measures cities globalisation
  • MEDC major cities are most globalised e.g. London, NYC
  • KOF index measures countries globalisation
  • Europe most globalised, and MEDCs, but Africa the least
  • BOTH indices measures include economic/business, political, social/cultural measures
  • All the world is getting more globalised constantly
  • Useful to compare factors and different places in a rank
  • Impossible to measure everything for an index – have to pick some indicators
Transnational Companies (TNCs):
  • TNCs are huge companies and play a massive role in many issues such as economic growth, globalisation, migration, trade, industry, environmental pollution and so on. An example is Google, McDonalds, Apple, BP.
  • TNCs use ‘glocalisation’ to sell more products, and make it easier to make products.
  • They use local materials e.g. types of food, and adapt/change the product to match the area e.g. McDonalds food in India or Chinese is ‘glocalised’.
  • McDonald's restaurants are found in 118 countries, serve 68 million customers each day, operates 36,615 restaurants worldwide, employing more than 420,000 people.
  • Economic liberalisation allows TNCs to use the following two strategies to make more profits by two methods (listed below)
  • Outsourcing: Obtain (goods or a service) by contract from an outside supplier e.g. call centre in India (or companies, Amazon)
  • Offshoring: The relocation of a business process from one country to another, e.g. manufacturing in China (HQs, branch plants, division of labour)
Key Terms:
  • Transnational Company: A company that has operations in more than one country
  • Foreign Direct Investment: The spending of money by TNCs to invest into a country’s economy e.g. setting up a new factory
  • Glocalisation: Changing a produce to suit customs and resources in one country
  • Multiplier Effect: Investment, industry, jobs, taxes, and growth all increase and spiral upwards
Tesco Case Study (An example of an TNC):
  • In 1919 Jack Cohen opened a small grocery store in East London destined to become Tesco. He made a whopping £1 profit on the first day… now they make £6.8 million profit each day. They have shops across the whole world.
  • Their key to success has been: develop markets, glocalise, production networks
  • They develop markets through methods like using the internet & technology to reach more customers, and diversify there goods that they sell, as well as expanding into other countries e.g. China
  • Glocalisation to ensure more products sell better around the world e.g. Tesco ‘Lotus’ stores in Asia
  • Production networks that help to reduce the cost of making and transporting goods and services, e.g. branch plants, offshoring and outsourcing
  • However TNCs (and Tesco’s) aren’t all good: They are exploiting people in Asia or spreading the wealth
  • Low wages – low living costs (exploitation, inequality and disparity?)
  • Global transport pollution – packaging, carbon dioxide emissions from transport
  • Cultural erosion – local products are in decline
  • Local shops are closing
Are TNC Good Or Bad:
Advantages:
Disadvantages:
Taxes are paid to the host country
 Local smaller businesses and shops have to close e.g. Tesco in Thailand
Improves infrastructure and creates a ‘multiplier effect’
 Environmental pollution e.g. Tesco goods transport releases CO2
Technology transfer – aids development and skills
 Cultural erosion
Creates jobs and wealth, and improves living standards
 Exploitation of very cheap labour or even children e.g. Nike Sweatshop in India
Removes wealth as profits go to richer source countries or parent company

Why Don't Some Countries Globalise - What The World Looks Like At Night:
  • MEDCs are the most switched on, LEDCs aren’t that switched off – they aren’t globalised.
Case Study – North Korea:
  • Switched off from world by being politically isolated by USA and other MEDCs due to threats of war. Very poor, undeveloped, and not globalised. Internet banned, watching Hollywood films results in execution, no-one can leave the country etc.
  • Politically most isolated country on earth
  • Enemy of Western governments, especially the USA
  • Dictatorship led by the Kim Jong’s: at present Kim Jong-un
  • Execution if you criticize the ‘Great Leader’
  • Lack of technology, electricity, goods and services = switched off
Case Study 2 - Sahara Desert and Chad:
  • Physical factors are those that are due to the environment and nature (not humans), such as climate, resources, and location
  • Chad is a very poor country with low level of development
  • Half the country is part of the Sahara Desert
  • It has a very hot and dry climate, so little agriculture, which limits food production
  • It has poor natural resources which means few exports e.g. no oil, little crops to sell to other countries
  • It is ‘land-locked’ so it does not have good access to ports and the sea for shipping, trade and import/exports
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