3 The Global Economy The growth in world trade A multinational company The global nature of trade and the three key global economic areas Globalisation and how it has impacted on world trade

Reasons for growth in world trade  Industrialisation  Globalisation  MNCs Chapter 3: The Global Economy

Industrialisation  Industrial revolution: changes in how we work, communicate, interact  Move from being self-sufficient to reliance on world trade Chapter 3: The Global Economy

Globalisation  World is interconnected and interdependent  Pace of globalisation has increased due to:  advances in telecommunications and transport  removal of trade barriers, MNCs Chapter 3: The Global Economy

MNC  Produces or delivers services in more than one country  Management headquarters in one country, usually in the North  Operations in a number of countries across the world  Large and powerful Chapter 3: The Global Economy

Pfizer  Global pharmaceutical company  Headquarters in US, operations in 45 other countries  Sales: Almost $70 billion in 2010  Employs: 110,000 worldwide  One of first pharmaceutical companies to locate in Ireland  Opened first Irish plant in 1969  Currently has 15 plants in Ireland  Employs over 5000 in Ireland and has invested over $7 billion Chapter 3: The Global Economy

Factors attracting MNCs to locate in Ireland  Tax incentives  English-speaking  Excellent education system  Young vibrant population  EU member  Well-developed transport system Chapter 3: The Global Economy

Global trade  The buying and selling of services and goods across the globe  Key global economic areas: USA, Europe, the Pacific Rim (such as Japan)  Global triad: 70 per cent of world trade  Trade blocs: a group of regions or countries that have made agreements to reduce barriers to trade between them Chapter 3: The Global Economy

Core economic regions  Dominate world trade, industry and wealth  Include the triad regions  Dominate the service and manufacturing industries  Have political influence  Have trading relationships with many countries Chapter 3: The Global Economy

Peripheral economic regions  Include Africa, South America and Southern Asia  Lack industrial development  Less powerful than core regions  Rely on primary activities and exports of raw materials Chapter 3: The Global Economy

International division of labour  Some countries specialise in the production of certain goods or on providing certain services  Influenced by: growth of global trade, location of MNCs  MNCs: Outsource key business functions  Reasons: low labour costs, high populations, improvements in education Chapter 3: The Global Economy

Regions excluded from manufacturing  Peripheral regions: Southwest Asia, sub-Saharan Africa, Latin America  Reasons: colonialism, political instability, poor infrastructure, unfair trading systems Chapter 3: The Global Economy

Role of peripheral regions in world trade  Minority role in the global economy  Excluded from large-scale manufacturing  Main role in world trade is to supply commodities to the North  Commodity price fluctuations Chapter 3: The Global Economy

MNCs and the global economy  Influence local/global economy  Locating in an area can impact the local economy  Corporate strategy: close and open plants to maximise profits  Modern economic activity: mobile  Product life cycle: impacts the location of production Chapter 3: The Global Economy

Intel  Crucial to the prosperity of the Irish economy  5000 employees  Has invested €6 billion  Attracts FDI  Contributes to education Chapter 3: The Global Economy

Future of economic activities  Manufacturing: continue to move to peripheral regions  Research and innovations: core regions  Growth areas: Teleservices, e-commerce Chapter 3: The Global Economy