The Global Economy

Forces Surrounding Global System of Production

• These five factors are affecting production patterns:
• 1. Trans-national or multi-national corporations (MNCs)-firms that operate in many nations
• Increasingly these firms have local production points and suppliers that operate across national boundaries providing and securing labor, capital and other resources from a variety of places and which have become very powerful and important influences in the global economy

Sequential Model of TNC Development

• Stage I- Serve domestic market only
• Stage II- Export to overseas markets through independent channels (sales agents)
• Stage III- Establish sales outlets in overseas markets by acquiring local firm and/or setting up new facility
• Stage IV- Establish production facility overseas by acquiring local firm and/or setting up new facility

Geographical Growth of a Multinational Corporation

Center

Nation

Other Nation

Tariff

Basic Enterprise

Penetration of a National Market

Penetration of Foreign Markets

Multinational Corporation

1

2

3

4

Factory

Distribution center

Representative