Summary, geography
Section 4, the supply chain of Nike footwear
What is the difference between knowledge, capital and labour-intensive activities?
It takes a lot of work, time, money and creativity to think about a new design for Nike’s footwear.
The research and development activities that are required in the design of Nike footwear are
knowledge intensive: activity in which requires workers to posses a high level of education, skill and
experience (knowledge)
Capital intensive: activity which requires a lot of money (capital)
Labour intensive: activity which requires a large workforce (a lot of labour)
So the difference is that ‘knowledge’ is the thinking of the process. ‘capital’ is the investing money of
the proces. And ‘labour’ is the large workforce needed for the raw materials in the process.
Important raw materials are rubber, leather and cotton. Largest rubber producers in world are
Thailand, Indonesia and Vietnam. But nike’s main cotton suppliers are in China, India and turkey.
One can conclude that most of the raw materials of Nike footwear derive from LEDCs (or NICs). The
extraction of raw materials is predominantly labour intensive, meaning that a large workforce is
required.
What part of Nike’s supply chain is done in which type of country (LEDC, NIC, MEDC)?
After collecting the raw materials, a lot needs to be done. The following:
1. Most of the raw materials are converted into intermediate goods
2. Different parts of the eventual shoe are stamped out of these intermediate goods in a
factory.
3. The different parts of the shoe are stitched together and will step by step form the final
good, the shoe
Just like the extraction of raw materials, most of the manufacturing activities are labour intensive.
Thus, most of nike’s manufacturing has been moved from North Amerika to NICs (or LEDCs) with
lower wages: the factories are mostly located in Asia, with Vietnam, China and Indonesia being its
largest production locations. Nike itself doens’t own a single factory in these countries, the activities
have been outsourced. So the manufacturing happens in NICs/LEDCs.
Now another part of the process, marketing. Marketing refers to the proces of promoting, selling
and distributing a product or service. Marketing includes researching the demands of customers,
exploring potential new sales markets and advertising. TNCs like Nike invest a lot in the promotion of
their products. E.g. a method is using famous athletes.
The final part, the marketing and finance department. This is most of the time found in MEDCs. This
can be explained by the relatively high standard of living in MEDCs, where people who are able to
afford the products live. Nike is also trying to explore the sales markets. Their production is
globalised and their sales markets also!
What is outsourcing and how is it different from offshoring?
Offshoring = the relocation of parts of the supply chain from one country to another.
Outsourcing = the process of moving production or services to a different party outside of the main
company.
Offshoring usually offers a cost-saving advantage by getting work done in different countries. ...
While outsourcing refers to the process of having work contracted out to a third-party company. It is
completely possible to outsource work without having to offshore it.
Offshoring is only carried out internationally, whereas outsourcing can be done both locally
and internationally.
, Summary, geography
Section 5, winners and losers of globalisation
What are the economic pros and cons of globalisation?
TNCs creates many job opportunities in MEDCs in the fields of research, development, management
and marketing. Globalisation can increase TNC profits. People in MEDCs benefit from globalisation as
consumers. Globalisation gives acces to products worldwide and makes them more affordable.
Ofcourse not everyone benefits from globalisation in MEDCs. MEDCs also lost certain job
opportunities because the labour in manufacturing is now in NICs/LEDCs. People who only did a low
level of education are now under pressure due to globalisation.
What a disadvantage is in a MEDC country is a benefit in a NIC/LEDC country. More jobs are offered
and in the case of factory work, the income is often more stable and reliable than it is in primary
sector work. Globalisation can lead to a better development base for NICs or LEDCs. TNCs bring new
technology and skills; improved education, investments in local infrastructure etc.
Lots of the profit of TNCs goes to MEDCs; and since TNCs can relocate to other countries at any time,
the jobs in low wage countries aren’t secure. Economic growth in one region might go hand in hand
with decline and emigration in another region. Furthermore, several TNCs have been accused of
using sweatshops in their supply chain. Here are the conditions very poor, workers often get paid
even less than the minimum wage, health and safety regulations are violated and instances of child
labour. Have also been found. Critics of globalisation speak of a race to the bottom. Because of much
competition, the wages and standards seems to get lower and lower and the TNCs ‘race’ each other
to a socially less and less favourable situation.
What are the environmental pros and cons of globalisation?
Globalisation is often associated with negative environmental impacts:
1. There an argument that it leads to natural resources being over exploited. Globalisation led
to more manufacturing and more consumption, but supply of the natural resources is not
boundless.
2. Globalised supply chains require a lot of transport. Which cost money and compared to the
costs that TNCs save through offshoring. The lots of transport pollutes nature.
3. Factories also produce lots of pollution. This includes air pollution like CO2, and the
production of nonrecyclable waste like toxic chemicals. It should be stressed that these
negative impacts are especially felt in NICS and LEDCS. This is partly because low wage
countries often don't have strong laws (nor a firm application of laws that are in place).
What are the cultural pros and cons of globalisation?
Culture is impacted by globalisation. Globalisation made it easier for cultural elements to diffuse,
which make cultures around the world become more similar every day. This process is called
homogenisation. This can be seen as advantage, people enjoy cultural elements from abroad. In
addition, globalisation can help spread societal values like human rights and can potentially prevent
cultural conflicts.
However, some people see globalisation as an disadvantage, for the loss of national identities and
languages. People can choose to go against outside influences so they can express their culture even
more than before. This makes cultures around the world less similar: heterogenisation.
