Presentation Transcript

1. GEOG 240: Day 12

   Chapter 6 (cont’d)
2. Housekeeping Items Today we’re going to hear from Jim and finish Chapter 6. Anyannounce-ments? The 7th AnnualUrban Issues Film Festival is happening on November 9th and wecanalways use more volunteers!
3. Chapter 6 (cont’d) We talked briefly about the internationalization of services and cited some examples. Table 6.8 on p. 134 shows how that services as a component of FDI grew from less than 50% of the total in 1990 to close to 2/3rds in 2007, overtaking manufacturing in the process. The list of services invested in has grown from finances and trade to business services, electricity, telecommunications and water supply (see Blue Gold about the world’s three largest water companies, two based in France). The authors claim that, in internationalizing, services firms are seeking to evade national regulations, but they don’t explain this very fully.
4. Chapter 6 (cont’d) The authors devote considerable attention to the internationalization of the retail sector as retail firms seek new markets as their traditional locations becomes largely saturated. We saw part of a video about Walmart on Monday. While they are what is known as a “category-killer” in that they sell just about everything, they are also the world’s largest food retailer, followed by Germany’s Metro AG, France’s Carrefour, and the UK’s Tesco.
5. Chapter 6 (cont’d) Of course, in these new markets, MNC retailers are replacing traditional retail operations. Even in North America, small retailers are disappearing in droves (see Pam’s and my paper in the summer Plan Canada or on my web site). In the past two years, Vancouver has lost three independent movie theatres (with more on the verge), at least four bookstores, and a number of clothing stores.
6. Store Front: the Disappearing Face of New York -James and Karla Murray Since the book's release in 2009, about a third of the stores are gone.
7. Personal Dimension of An Issue “Small grocer closes amid big-box boom. Owner says nearby Save-On-Foods, Whole Foods hurt business…” Sources: http://www.yelp.ca/biz_photos/NQOjpeP1NhsRaxFT5zJ7uQ?select=JkYigwEsT-rd7SGglTGIww; Arlen Redekop, Vancouver Sun; http://www.facebook.com/pages/Hollywood-Theatre-Vancouver-BC/235717874496?sk=wall&filter=12
8. Gentrification is one reason stores are disappearing
9. The Re-invention ofWest 4th in Kitsilano Yogawear, designer kidswear, high-end restaurants, and doggie bakeries…
10. Chapter 6 (cont’d) Unlike other multinationals retail firms tend to focus more on specific regions because retail concerns are dependent on property markets and planning regimes have to be more attentive to local tastes and preferences often find it more convenient to source more of their materials locally, in contrast with manufacturing companies. In general, global markets are becoming increasingly important for retail firms, as is shown in Table 6.10 with Tesco as a case example (nearly 1000 stores and 87,000 employees worldwide).
11. Chapter 6 (cont’d) Box 6.3 describes how Tesco has adapted to the South Korean market in a way that takes into account the business and consumer culture there, thereby enabling them to out-compete other foreign MNCs. In all cases, increased FDI has been facilitated by liberalized trade rules and, in some instances, by privatization of public services, as with the provision of municipal water. (Again, see Blue Gold.) In Table 6.11, the authors compare the advantages and disadvantages for host regions of having MNCs. Advantages include: · investment & income opportunities; · transfer of knowledge & manage-ment skills; · increased tax base; · increased supply opportunities; · ‘piggy-backing’ into export markets;
12. Chapter 6 (cont’d) · upgrading of infrastructure; investment in schools and community services (sometimes); · new jobs at higher wages, etc. Disadvantages can include: · dependency on foreign capital and control; · vulnerability to vicissitudes of global economy; · loss of local skill and expertise; · disconnected ‘export processing’ zones (see map on p. 142) with few local benefits; · development path distorted with subordination to foreign firms; · foreign competition to domestic firms; · increase in factor prices; · corrosive effects on local culture/ society; · MNCs can (and often do) form alliances with local and national elites to the detriment of local people who can become even more alienated from the political process.
13. Chapter 6 (cont’d) Critics, with regard to export processing zones (such as the maquiladoras in Mexico), have commented on lax safety and environmental regulations and have feared a ‘race to the bottom.’ The authors also discuss the phenomenon of branch plant economies. Many companies in Canada are branches of American firms. The auto industry has been allied with the U.S. industry right from the beginning and the 1965 U.S. – Canada Auto Pact was an early forerunner of the North American Free Trade Agreement (FTA) and gave a great boost to employment in the sector.
14. Chapter 6 (cont’d) One advantage for US firms to having branch plants in Canada is that they could export goods from Canada nearly tariff-free to other Commonwealth countries. A hazard of being dependent on branch plant operations is that, when conditions are favourable, companies will switch operations from one market to another, as with the loss of jobs from the UK to the Czech Republic, for instance, or the shutting down of operations in Mexico and their relocation to China. A similar relocation process has been occurring from Europe to China.
15. Discussion Question Do the benefits of FDI outweigh the disadvant-ages for host regions? Does this vary depending on the host region? Compare the world’s two largest non-financial MNCs: GE and Vodaphone, in terms of global reach, and sectoral/ product reach. For the first, see http://www.ge.com/company/worldwide_activities/index.html and http://www.vodafone.com/content/index/about/about_us.html. See what you can turn up in 5 minutes.