One consequence of globalisation is that transnational corporations have become increasingly adept at creating new ways of organizing and outsourcing production. Critically evaluate this statement
One consequence of globalisation is that transnational corporations have become increasingly adept at creating new ways of organizing and outsourcing production. Critically evaluate this statement - Essay Example
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Extract of sample One consequence of globalisation is that transnational corporations have become increasingly adept at creating new ways of organizing and outsourcing production. Critically evaluate this statement
Manufacturing was the life blood of a nation’s economy. This is not the case anymore. Although the productivity of the manufacturing sector in United Kingdom, and elsewhere, has improved, the share of manufacturing in the Gross Domestic Product (GDP) of the countries of the developed world has declined (OECD 2009).
In the United Kingdom, for instance, the share of manufacturing has come down from nearly 22% in 2000 to 16% in 2007 (OECD 2009). One of the most important reasons for this loss in the share of manufacturing sector is the emergence of Asian and other third world countries as a provider of cheap labour where the transnational companies could shift their manufacturing units and continue manufacturing their products at a fraction of the cost of what it would have had, had they continued to manufacture it in the developing world.
The multinationals have become adept at exploiting each and every opportunity to reduce the costs of their products by shifting their production base from one low cost centre to another low cost centre. This has resulted in increasing profits for the companies, and in some cases, lower prices for the end customer.
On the other hand, globalization has also lead to problems for the transnational organizations. They have received negative publicity over the alleged ill treatment of the workers at their low cost manufacturing centres, and for using the natural resources of the countries they are operating in and spreading pollution there.
The transnational corporations try to adapt themselves to the changing landscape of business in many different ways. Their responses have ranged from outsourcing a part of their business to acquiring strategic business partners abroad. The advantages offered by moving the manufacturing units offshore are not only related to cost, but also to quality, risk mitigation and the ability to concentrate on the core areas of business.
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This has led to the emergence and growth of several transnational corporations, especially after the World War II (Ietto-Gillies, 2012), that have now become some of the influential non-state global economic actors (Madeley, 1999; Nowrot, 2011). A transnational corporation (TNC) is a large business organization that operates in more than one country at the same time (Madeley, 1999, p.1; Ward, 2003).
Globalization is the expansion of economic, social and political activities of one region so that these activities have impact on people and their way of life in a different region of the world which can be miles away (Stohl 2004, P. 223). Globalization is a process of expansion of communal association across the world (El-Ojeili and Hayden 2006, P.12) as a result of lenient bylaws and enhanced communication in both public and private sectors.
TNC's are usually so structured that one "corporate" branch exerts influence over the others, and/or resources, responsibilities, knowledge, and protocol are shared among them. Transnational corporations participate in many globalising activities, and in the countries that host them they contribute in many ways to the dynamics of the economy.
In addition to size and financial strength, they have progressively become more potent; their significance amplified and they have become influential players in the global showground. With 800,000 affiliates abroad, 60,000 TNCs in the year 2000 had as foreign direct investment (FDI) an overwhelming $1.3 trillion (UNCTAD 2001).
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