Multinationals & off-shore manufacturing Year 10 Graphics Multinationals & off-shore manufacturing Ethical design and manufacture

Multinationals A company that does business in more than one country Usually based in developed countries Have offices, branches or manufacturing plant in other countries They are usually extremely powerful and their budgets exceed the gross domestic product (GDP) of many developing countries

Offshore manufacturing Means manufacturing products in a different country and exporting back to the original country to be sold. Multinationals user the expertise from other countries to develop new products. Offshore manufacture works by using the internet and high-speed data networks that cover the entire globe. Multi-nationals manufacture offshore because it costs them less. It gives them better access to expanding overseas markets. i.e. A UK clothing company likes M&S might run a factory in Asia and sell the products back in the uk A book can be designed in the UK but sent to China to be printed via digital networks They achieve the same quality of work for a fraction of the cost if western companies manufacture something. Manufacturing a mould for injection moulding is generally more affordable in China (about 50% lower or 30% lower in Taiwan) By having bases in developing countries multinationals get better access to expanding overseas markets.

Advantages of offshore manufacturing Regenerates local areas by increasing employment Improves living standards through the potential for career development Development of road systems, transport and local amenities Widens the country’s economic base and enables foreign currency to be brought into the country Enables the transfer of new technology that would have been impossible without the backing of multi-nationals

Disadvantages of offshore manufacturing Employment issues: Lower wages than those workers in the developed countries where a minimum wage operates Promotion restrictions – managerial roles often occupied by workers from the multinational’s home country No unions Lower health & safety standards Devaluing of traditional skills and crafts, replaced with repetitive skills Locals become dependent on the multinationals for work – devastating for them if they leave the area

Disadvantages of offshore manufacturing Environmental issues: Increased pollution and waste because of large-scale manufacturing activities Destruction of the local environment to build factories, processing plants, roads etc.

Is it ethical? Task: In groups of 4 Discuss the advantages and disadvantages of offshore manufacturing for: Multinational companies Workers in developing countries Workers in developed countries You can record this on your table cloth. I will be displaying these Decide between you whether you agree that offshore manufacturing is ethical or not. Record your views briefly on your post it note. I will be asking to you to report back to the whole group what you have found out. Raises a number ethical issues – impact on unemployment in developed countries and the exploitation of labour in developing countries. Why would British based multinationals continue to pay minimum wages to UK employees when they could employ an Indian or Chinese worker for 50% less? But is it right that workers in developing countries may not be given the opportunities for promotion, pay rises, company benefits, union membership and working conditions that their Western colleagues demand as basic human rights? A multinationals build centres of operation in new areas , the local workforce may be displaced from their traditional trades becoming dependent on the largely unskilled labour that many industrial process require.

Exam question Explain one advantage, to a multinational company, of using offshore manufacturing. (2 marks)

Maximise your marks Example answer: The company will make products in another country because they are cheaper to make. (1 mark) Examiner comments: A good attempt but the student doesn’t fully justify why manufacturing in another country is cheaper.

Maximise your marks A better answer: It is cheaper to manufacture a product in a developing country (1 mark) because the average wage for workers is much lower than it is in developed countries . (1 mark) A question like this requires you to fully understand the topic and use specialist terminology in your response i.e. developing and developed countries.

Exam question Evaluate the use of offshore manufacturing by multinational companies. (6 marks)

Building better answers Basic answer (0-2 marks) Give up to two advantages to multinationals of using offshore manufacturing. Good answer (3-4 marks) Explain two advantages of using offshore manufacturing to multinationals and the local economy Excellent answer (5-6 marks) Explain two advantages for multinational companies but also explain one disadvantage regarding employment issues. Don’t forget that both advantages and disadvantages need to be included to achieve full marks