What light can an appreciation of the process of internationalisation throw on changing patterns of

Extracts from this essay...

Introduction

What light can an appreciation of the process of internationalisation throw on changing patterns of The past few decades has seen an exceptional growth in advanced technology that has not only resulted in the widespread adaptation of new production methods but has revolutionised telecommunications to such an extent that the world could now be considered a "global village". With most of the last remaining communist bastions modifying themselves to the capitalist way of life, the world economy has become the largest and most complex market there has ever been. The increasing size and volatile dynamics of this capitalist market prompted the Brandt Commission to call it "a fragile and interlocking system" (Knox and Agnew, 1989); but can the growing importance of internationalisation within the new world economy be used to explain the changing hierarchical position of these "interlocked" nations? And if so where have these changes been taking place? Before answering either of these two questions however, it is first necessary to define what is meant by internationalisation. The process of internationalisation relates to the assumption that each nations economy is becoming less self-contained and more integrated into a global network of production. In its earliest phases internationalisation began with an expansion in foreign trading. The encouragement of businesses such as the East India Company, who invested in trading activities, plantations and mining ventures to supply raw materials to industrialising centres, signified the start of, what was possibly, the beginnings of a shift in the "economic hierarchy". As the evolution of the capitalist market continued, eventually instigating the birth of the Industrial Revolution, the number of companies taking part in this type of international activity increased and international trade grew.

Middle

Although the internationalisation of finance has played a part in determining the structure and order of the world "economic hierarchy", the key role is occupied by the TNC. The rise of the TNC and its growing economic influence since World War Two, has been seen by some as "the single most important force creating global shifts in manufacturing activity" (Dicken, 1988). These global shifts in manufacturing activity are the result of worldwide recession leading to a drop in demand for many of the products and services the TNCs offered. For the first time since the Second World War the TNCs were forced to scale down their operations to bolster their falling profit margins. In an attempt to improve their declining situation new strategies were implemented, focusing on rationalisation of products and services whose popularity had declined, diversification into areas of growth and reorganisation of production activities to improve their profitability. The reorganisation of production included increased automation and subcontracting, but more importantly also involved the movement of activities across the globe. As the search for greater productivity continued TNCs began to fragment their production processes, increasing the degree of specialisation and standardisation to enable the use of semi-skilled and unskilled labour. The present segregation of the "economic hierarchy" into core, semi-periphery and periphery has meant that TNCs are presented with an opportunity to improve their profit margins by utilising the location specific factors (Dicken quoting Dunning, 1980) offered by less developed countries. However, although Africa (one of the peripheral areas) offers the cheapest labour source (a positive location specific factor) the TNCs do not seem to be investing production activities here (see Appendix, figure 1).

Conclusion

With the increasing truncation of TNC activities, the branch-plants located in the host economy are also becoming more and more specialised production centres that lack any high level administration or research and development (these are still concentrated in the traditional core countries). This is resulting in a highly skewed set of employment opportunities for the host residents, with no chance of them ever developing any "high-level" skills for themselves. This factor is seen by Hymer (1979) and Dicken (1988) as one that limits the future posterity of these countries; "if the TNC was to ever leave the host country then the protective "shell" would be broken and a hollow core left in its place" (Dicken 1988). To conclude, the general process of internationalisation has played a fundamental role in the reshuffling of the "economic hierarchy" and the changing patterns of geographical inequality. The efforts and activities of the TNC has meant that the flourishing fortunes of some of the NICs, have leap-frogged them up the world economic order and past some of the more established nations; whilst the bypassing of some peripheral regions has categorically rooted them to its base. However, the volatile nature of this new and integrated global economy, and the TNCs thirst for ever increasing profits, means the future structure of this order is the most unpredictable it has ever been. Whether or not the economies of the NICs would survive if the TNCs pulled out, or if there was another world recession, is open to debate. So too is the future role of the remaining peripheral areas, one of the last places the TNCs have left to exploit. What is certain however, is that if companies and governments refuse to adapt to the changing nature of the world economy and the increasing importance of internationalisation within it, their position in the present "economic hierarchy" will be severely threatened.

The above preview is unformatted text

Found what you're looking for?

  • Start learning 29% faster today
  • Over 150,000 essays available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Over 180,000 student essays
  • Every subject and level covered
  • Thousands of essays marked by teachers
  • Over 180,000 essays
    written by students
  • Annotated by
    experienced teachers
  • Ideas and feedback to write
    your own great essays

Marked by a teacher

This essay has been marked by one of our great teachers. You can read the full teachers notes when you download the essay.

Peer reviewed

This essay has been reviewed by one of our specialist student essay reviewing squad. Read the full review on the essay page.

Peer reviewed

This essay has been reviewed by one of our specialist student essay reviewing squad. Read the full review under the essay preview on this page.