Prepared By T.Srinivas Reddy,S.A S.S ZPHS Appajipeta,(M)&(D):Nalgonda.Cellno :9494443332.
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Telangana Social Studies Teachers' Forum
Prepared By T.Srinivas Reddy,S.A S.S ZPHS Appajipeta,(M)&(D):Nalgonda.Cellno :9494443332.
9.1 Globalisation
How trade, investment, technology and ideas are drawing countries closer together
Trade
Investment
Technology
What is globalisation?
Rapid integration and interconnection between countries. It grew tremendously in the late 20th century.
Goods & services
Exchange of goods and services between countries
e.g. India exporting goods and IT services
Labour
Migration of people in search of employment
e.g. workers moving to another country for jobs
Capital
Money moving for short-term or long-term investment
e.g. a foreign company investing in an Indian factory
More than markets
Political
Arab Spring, 2010–11
Movements in Tunisia and Egypt were influenced by developments in other countries, and the media played an important role.
Global concern
Disasters and civil wars
Natural disasters and civil wars receive international attention, sympathy and support.
Globalisation also means sharing ideas and technology
From national to global production
9.1 · PRODUCTION ACROSS COUNTRIES
Until the mid-20th century
Enter the MNC
A multinational company owns or controls production in more than one nation.
It sets up factories and offices where labour and resources cost less, which cuts costs and lifts profits.
One product, many countries
9.1 · EXAMPLE
United States
Product design and research
China
Manufacturing components
Mexico and Eastern Europe
Assembling products
India
Customer care through call centres
Countries worldwide
Markets for finished products
Each stage can sit in a different country, so MNCs gain from every location's resources, skills and markets.
Where do MNCs set up?
9.2 Interlinking Production Across Countries
1
Close to markets
2
Skilled and unskilled labour at low cost
3
Assured supply of other factors of production
4
Government policies that protect their interests
Foreign investment is money MNCs spend on land, buildings, machinery and equipment in another country, in order to earn profits.
Chapter 9 · Factors influencing MNC location
How MNCs control production
METHOD 1
Set up units
Build factories and offices in other countries.
METHOD 2
Joint production
Team up with local companies, bringing investment and technology.
METHOD 3
Takeovers
Buy local companies and expand their production.
METHOD 4
Placing orders
Order from small producers and sell under the MNC's own brand name.
Orders from MNCs can shape prices, quality, delivery schedules and labour conditions, so far-apart producers become linked.
Cargill Foods buys Parakh Foods
9.2 · TAKEOVER EXAMPLE
Cargill Foods
A large American MNC with plenty of financial resources
Parakh Foods
An Indian company with four edible oil refineries and an established marketing network
An MNC can use its money to acquire a local company and expand its operations.
Chapter 9 · Interlinking production
Trade connects markets
9.2.1 Foreign Trade and Integration of Market
Producers sell beyond domestic markets
Buyers get a wider choice of products
Competition between producers rises
Markets in different countries get linked
Integration of markets: markets in different countries become interconnected.
Example: Indian steel imported into China links both steel markets, affecting producers and steel-using industries in each.
Ford Motors in India
1995
Ford, an American car maker, comes to India
₹1,700
crore invested in a plant near Chennai, with Mahindra & Mahindra
27,000
cars sold in the Indian market by 2004
24,000
cars exported to South Africa, Mexico and Brazil
The plan: make India a base for supplying components to Ford's plants worldwide.
Difference between foreign trade and foreign investment
Foreign trade
Example: exporting cars from India
VS
Foreign investment
Example: investing in a factory in India
MNCs and Globalisation
9.2.2
MNCs play a major role in globalisation by increasing foreign investment and foreign trade.
Foreign investment
Foreign trade
1
Search for locations where production is cheaper.
2
Establish factories and production units in different countries.
3
Purchase raw materials and components from different locations.
4
Sell products in domestic and international markets.
5
Export goods and services between their production units.
What made globalisation possible?
9.3 ·Factors that enabled globalisation
Technology
Faster, cheaper transport and fast communication let firms coordinate across countries.
+
Liberalisation
Governments removed or reduced limits on foreign trade and foreign investment.
Economic and technological forces together with political decisions shape how globalisation develops.
Technology shrinks distance
9.3.1 · TECHNOLOGY
Transport
Information technology | Use in globalisation |
Telephone and mobile phones | Communication across countries |
Fax | Transfers information |
Satellite communication | Connects distant places |
Computers | Support business and production |
Internet | Access to and sharing of information |
Email and voicemail | Rapid communication |
Internet banking | Payments between countries |
A London magazine, made in Delhi
9.3.1 · EXAMPLE
Internet
Text is sent to Delhi online
Telecom
Design instructions come from London
Computers
Designers prepare the magazine
Air transport
Printed copies fly to London
Internet banking
Payment moves between banks
Transport and information technology together connect production and services across countries.
India's trade policy over time
9.3.2 Liberalisation of foreign trade and foreign investment policy
Liberalisation means removing or reducing government restrictions on foreign trade and investment.
After Independence
Barriers protected domestic producers from foreign competition.
1950s and 1960s
Industries were still developing, so imports were limited to essentials: machinery, fertilisers, petroleum.
Around 1991
Barriers cut so Indian producers compete worldwide, and foreign companies can set up here.
Trade barriers are government restrictions on foreign trade, such as taxes on imports and quotas that limit the quantity imported.
Chinese toys and trade barriers
9.3.2 · EXAMPLE
Tax on imported toys
Imported toys cost more
Consumers buy fewer imports
Indian toy makers gain protection
Restrictions reduced
Cheaper toys enter more easily
Consumers get lower prices
Indian toy makers face more competition
The World Trade Organisation
9.4 Institutions of Global Governance
What it does
An international body that aims to liberalise trade. Developed countries started it, and nearly 150 countries were members when the textbook was written.
The criticism
Fairer trade: negotiate better rules and cooperate
The upsides in India
9.5 Impact of Globalisation in India
Consumers
More choice, better quality, lower prices
Investment
MNCs have increased their investments in India
Jobs
New jobs in some industries and services
Local suppliers
Some firms supplying raw materials to MNCs have prospered
Indian companies
Some adopted modern technology and better standards
Indian MNCs
Some expanded their operations worldwide
But the benefits have not been shared equally.
Indian companies go global
9.5 · INDIAN MNCS AND SERVICES
Tata Motors
Automobiles
Infosys
Information technology
Ranbaxy
Medicines
Asian Paints
Paints
Sundaram Fasteners
Nuts and bolts
Services delivered from India
Call centres
Data entry
Accounting
Administrative tasks
Engineering services
Magazine design and production
Ravi's capacitors: compete or perish
9.5.1 Small producers: Compete or perish
1992: a bank loan starts a capacitor unit in Hosur
Within 3 years: more production and 20 workers
2001: import restrictions on capacitors removed
½
price of imported capacitors compared with Ravi's
< ½
the output he produced in 2000
20 → 7
workers, as similar units in Hyderabad and Chennai closed
Lower prices help consumers, but producers who can't compete lose out.
How can small producers compete?
9.5.1 · HELPING SMALL PRODUCERS
Infrastructure
Better roads, electricity, water, raw materials, marketing and information networks
Improves production, transport and access to markets.
Technology
Improvement and modernisation of technology
Lifts productivity, quality and competitiveness.
Credit
Timely credit at reasonable interest rates
Lets producers buy equipment and improve their businesses.
The government has a key role in providing infrastructure and supporting small producers.
Special Economic Zones
9.5.1 · ATTRACTING INVESTMENT
SEZs are designated industrial areas that encourage production and investment.
Electricity and water
Roads and transport
Storage facilities
Recreation and education
Tax concessions at first
Flexible labour rules
Why governments want it
Industrial development, more production, new jobs, and more investment and exports.
Why some oppose it
Farmland may be acquired, communities displaced, and flexible labour rules can weaken job security.
The struggle for fair globalisation
9.5.2 · FAIR GLOBALISATION
Fair globalisation creates opportunities for all and shares its benefits more equally.
What governments can do
What people can do
People's organisations can campaign for fair trade and investment policies, and their representations can influence decisions.
It takes cooperation between governments, businesses, workers, producers and people's organisations.
Nation-states and culture
9.6 · OTHER ISSUES
The nation-state
Homogenisation
Diversity
Some languages now serve global communication, while others are neglected and some risk extinction.
World Bank and IMF
9.6 · GLOBAL FINANCIAL INSTITUTIONS
The World Bank includes the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
Unequal votes
Voting power in these institutions is not equal across countries.
Wealthy lead
Wealthier countries have greater influence over many decisions.
Policy reach
They can influence the policies that governments adopt.
Thank You
Prepared By T.Srinivas Reddy,S.A S.S ZPHS Appajipeta,(M)&(D):Nalgonda.Cellno :9494443332.