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Rise of transnational corporations

Rise of transnational corporations. Part III: Reasons for global expansion. Reasons for globalization trend. Consider the following four aspects: Cost Market Technology Government Are they important to explain the globalization trend in manufacturing industries?. Cost.

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Rise of transnational corporations

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  1. Rise of transnational corporations Part III: Reasons for global expansion

  2. Reasons for globalization trend • Consider the following four aspects: • Cost • Market • Technology • Government • Are they important to explain the globalization trend in manufacturing industries?

  3. Cost • Difficulties in developed countries: rising production costs due to • Higher labour cost • Higher land price • Result: look for low-cost site (least cost locations)

  4. Higher labour cost • Higher education level • Labour tend to be highly-skilled and professional • Lack of labour for low skill jobs • Labour shortage due to lower birth rate

  5. Higher land price • Keen competition of land in urban areas • With other land uses like commercial and residential areas • Shortage of industrial land for further expansion

  6. Market • Market expansion is necessary when the home market is saturated • The need of market diversification to lower risks • Some industries require close contact with customers in different countries • Setting up regional offices/headquarters help TNCs learn more about customers’ needs • Can respond to local market conditions quickly, e.g. adjustments made to the products to suit the needs of local markets • Bringing more business opportunities

  7. Technology • Advancement in technology can facilitate the growth of TNCs • In terms of • Transport technology • Computer technology

  8. Transport technology • More secure and rapid transshipments of goods • More speedy and frequent in freight and passenger transport, e.g. rail, road, sea and air • Rapid growth of transport and logistics • All reduce the problems of movement of personnel / enhance labour mobility

  9. Computer technology • Enhances easy handling and interpretation of data to global manufacturing operations • Texts or documents available in different languages • Setting up of corporation websites can help expanding global markets by providing sufficient information about the company • Development of e-commerce enhances online transaction • Advanced telecommunication networks facilitate easy management over regional offices • Can share ideas more efficiently in a global scale • Can obtain spontaneous information about local markets

  10. Government • Supported by national government • Incentives to TNCs to attract FDI • Offer preferential treatment like low taxes • Cut costs by direct sales abroad; lower tax is paid • Strict pollution laws increase production cost in developed countries

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