The Globalisation of Industry

The Globalisation of Industry

Today, manufacturing and service industries are increasingly organised on a worldwide scale (the globalisation of industry). One effect of globalisation has been the rapid growth of industry in the developing world. In 1955, the developing world accounted for only 5 per cent of the manufacturing industry. By 2005, the proportion was nearly 30 per cent. This global shift of manufacturing will continue for the foreseeable future. Thus, by 2020, we expect China to have the world’s biggest economy; and seven of the ten largest economies will be from today’s LEDCs.

The global shift of manufacturing is most evident in the Asian countries around the Pacific Ocean. Industrialisation in the Asian Pacific Rim began in the 1950s in Japan. This was followed in the 1970s, 1980s and 1990s by South Korea, Taiwan, Singapore and Hong Kong. Within the next 10 years, countries like Malaysia and Thailand will become the next wave of newly industrialising countries.

Ø      Globalisation allows very large trans-national corporations like Ford, Nestle and IBM to make products and but services in places where they can be purchased cheaply

Ø      Low labour costs in LEDCs encourage labour-intensive industries to locate overseas. In the last 20 years, large numbers of US factories have located just across the border from the USA, in Mexico. Nearly one million Mexicans work in these factories in cities such as Tijuana for wages that are only a fraction of those in the USA

Ø      TNC’s (Trans-National Corporations) benefit from global organisation because it gives them access to the largest of all markets – the world. By supplying the world market, TNC’s can increase output, and this helps to lower their costs, making them even more competitive

The globalisation of a company’s operations helps it to avoid trade restrictions. This is one reason why so much foreign investment has come to the UK since the mid-1980s. Firms like Nissan, Toyota, Sony and Samsung have set up factories in the UK to serve the EU market. As a result, they are exempt from tariffs and quotas, which they would otherwise face if they exported goods from Japan and South Korea. Globalisation has been made possible by great improvement in telecoms. The use of satellites and computer networks allows TNC’s to control their operations worldwide. Without modern telecoms, Swiss Air could not have moved all it’s accounting to Mumbai, nor could the southern Indian city of Bangalore have become a major software producer for Europe and North America. This is why the Globalisation of Industry has occurred.