Chapter 3: Plate Tectonics

Earth: Our Home 4 (Full Geography)

You Will Learn

•  To explain the trend of transference of manufacturing activities from developed countries to less developed countries

How Has the Global Manufacturing Industry Changed?

•  Development of large-scale manufacturing –  Characterised by the industrial revolution that began in the United

Kingdom (UK) and spread throughout the world during the 18th and 19th century.

•  Machines driven by steam power were developed. •  Steam-powered machines were first used in the manufacturing of

textile goods. •  These machines were then gradually introduced to other industries,

leading to large-scale manufacturing.

How Has the Global Manufacturing Industry Changed?

•  Industrialisation due to large-scale manufacturing –  Some countries has become highly industrialised due to large-

scale manufacturing. –  This led to the improvement of their economies, and

consequently, their living conditions and infrastructures. These countries are called developed countries (DCs).

–  Other countries continued to rely more on primary industries rather than secondary industries. As their economies did not improve as much as in DCs, they are called less developed countries (LDCs).

Trend of Transference •  A global shift in location of large-scale

manufacturing activities and a change in the types of industries from 1960s to mid-1990s are known as the trend of transference.

Trend of Transference

Large-scale manufacturing

activities started moving out of DCs

to LDCs.

Push Factors: Higher labour costs as workers

in DCs demanded higher wages.

Pull Factors: Incentives from governments of

LDCs and large markets in LDCs.

Capital-intensive industries began

to replace labour-intensive

Industries.

This is due to rapid growth of international trade

and investment, as well as technological advancements.

There was an increase in

high-technology Industries.

With rapid industrialisation, some LDCs became wealthier and their

population more educated.

For example, electronics,

pharmaceuticals and biotechnology.

Outsourcing trends began to develop.

Companies began to contract out parts of

the production process to other companies,

which could be foreign subsidiaries or external

suppliers.

1960s 1970s 1980s 1990s Mid 1990s

Why Do Industries Move Their Manufacturing Activities?

•  Companies may relocate their manufacturing activities, in order to maintain low costs in production and maximise profits.

•  By doing so, they achieve competitive advantage, which is a gain obtained from locating an industry in a new location.

•  This gain may be in the form of: -  lower costs -  attractive government incentives -  a large market.

•  Lower costs - The standard and cost of living in LDCs are lower, compared

to those in DCs. This leads to lower labour costs. -  The cost of land is comparatively higher in DCs, hence

industries may find it difficult to expand factory space. They prefer to shift to LDCs, where the land is cheaper and more readily available.

Why Do Industries Move Their Manufacturing Activities?

Why Do Industries Move Their Manufacturing Activities?

•  Attractive government incentives –  Tax exemption: Projects involving heavy investments and use of

high technology may be completely exempted from income tax. –  Free Trade Zones (FTZs): An FTZ is an area in a country where

infrastructure is built, government requirements are lowered, and incentives, such as tax exemption, are given to attract foreign companies to set up their activities.

–  Special Economic Zones (SEZs): SEZs include more specific zone types such as FTZs. For example, in China, Shenzhen and Zhuhai are designated as SEZs to attract manufacturers with benefits, such as tax incentives and relaxed labour laws

Why Do Industries Move Their Manufacturing Activities?

•  Large markets –  Closer proximity to immensely large populations of

countries, such as China and India. –  With the growth of their economies, their middle class

markets are predicted to rise.

China

India

Space Shrinking Technology •  The development of advanced technology has

helped to reduce the time taken to travel, transport raw materials and products, and communicate between countries. Such technology is known as space shrinking technology.

Space Shrinking Technology •  Transport technology

–  Cargo ships – large ships that are more cost-effective than air transport. They can transport large amounts of goods over long distances.

–  Commercial jet aircrafts – travelling has been made much easier and more convenient. They help make possible the transportation of perishable goods.

Containerisation •  Use of containers

–  With the use of standard-sized containers to hold goods, the loading and unloading of goods has become faster and more efficient.

Communications Technology •  Communication is the transmission of information

from one individual or group to another. •  Technology has made communication between

people in different places faster and more convenient, e.g. e-mail and video-conferencing.

Impacts of the Trend of Transference

•  Shift in manufacturing-related jobs from DCs to LDCs –  Fewer workers are employed in

manufacturing activities in DCs, while more workers in LDCs become engaged in manufacturing activities.

–  Manufacturing jobs in many LDCs used to be mainly low-skilled and labour-intensive. Since the 1990s, there were more and more high-technology manufacturing activities, e.g. electronics, life sciences and communications.

Increase in Foreign Investments in LDCs

•  More money flows into the country’s economy. •  When manufacturers introduce a new industry to

a country, they bring along the technology associated with it.

Increase in Export of Manufactured Products in LDCs

•  Exports of manufactured products in LDCs have also increased significantly as a result of the trend of transference.

Growth of Newly Industrialising Economies

•  Note that the trend of transference does not take place and benefit all LDCs equally. Countries such as those in Africa have received very little investment.

•  LDCs that have been significantly influenced by the trend of transference have been able to enjoy rapid growth in their manufacturing industry, resulting in industrialisation. They are known as Newly Industrialising Economies (NIEs).

What Have You Learnt in this Chapter?

!  The trend of transference of manufacturing activities from DCs to LDCs !  The reasons for the shift of manufacturing activities from DCs to LDCs !  The impacts of the trend of transference