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 services
o Enables development of natural resources
o Widens economic base of host countries
TNCs often help LDCs climb the ladder of economic development
o Improvement of infrastructure can be directly or indirectly
o TNC paying local taxes

Transfer of technology

o Large scale investments in R&D
o Technology being transferred to the local population
o 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 plant
o New technology, expertise and managerial skills
o Such as Quality management systems,Just-in-time production and
technical skills of workers may be upgraded
o markets acquired, sales raised
o 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 DCs
o Dividend payment to shareholders (from?)
o Consumers (from?) get cheaper goods available for sale

Disadvantages

Creating new jobs (Drawbacks)

o Limited employment offered
o 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 expatriates
o Studies on TNC management have shown that the assignment of
expatriates would increase an TNCs 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 labours
o Sweatshops
o 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 incentives
o 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 companys 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 TNCs 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 board
o 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 Thailands 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 factoriesthose 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=
$$$$$$$$
2. Division of Labour i.e. outsourcing, more specialised jobs
3. One person able to produce more products i.e. Higher GDP = $$$$$$$$
Trivia: First country to undergo Industrialisation was UK, during the Industrial
Revolution.

Reasons for De-Industrialisation:
1. Machine replacing people
2. Competition from overseas producing products at cheaper prices
3. More people are skilled preference in jobs in tertiary and above sectors
4. 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-Industrialisation
1. 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 worlds 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 year
o 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 Sarawak
o allows the country to earn income with the availability of National Parks
within the country - tourists purchase visitor passes for access
o 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