Global System Development and Multinational Enterprises
1. Building a Global System
Beginning in the fifteenth century with the development of European shipping, the Age of Discovery emerged, giving rise to vast colonial empires.
2. The Globalization of the Economy
We live in a global economy dominated by capital, goods, information, and technology.
2.1. A World of Financial Flows
One key flow represents international trade. Exports are goods a country sells beyond its borders, while imports are purchases made abroad. Countries aim for a positive trade balance. A second flow is capital investment, including foreign direct investment and stock market investment (selling company shares or state bonds). This financial globalization is reflected in the continuous market. Most of these economic flows concentrate within the Triad countries (USA, Western Europe, and Japan) and Southeast Asia.
2.2. Factors Driving Globalization
Improvements in transportation and telecommunications reduce the obstacle of distance. International economic institutions favor market liberalization and openness by eliminating protective barriers. Imports face decreasing tariffs. Regional economic unions (like the European Union) accelerate the disappearance of borders for capital, goods, and information while maintaining control over migratory flows. For large companies, globalization offers significant advantages by expanding their customer base.
3. Geography of Multinational Enterprises
Major business groups are key players in globalization, sometimes exceeding the economic scale of many states.
3.1. Growing Importance of Multinationals
Multinational companies operate in multiple countries. Estimates suggest over 63,000 multinationals with 800,000 workplaces and 46 million employees, generating 40% of international trade. Some are gigantic. Holdings are financial groups controlling the capital and decisions of numerous firms across diverse activities.
3.2. Multinationals and Their Spatial Organization
Many companies replicate similar structures across all countries. Others diversify activities in different countries seeking profitability. Networked enterprises operate where each territory serves a specific purpose and can be replaced.
3.3. Location of Multinationals
Among the 500 largest companies, 45% have U.S. headquarters, with others in Europe and Japan. Subsidiaries in Asia are rapidly growing, attracted by emerging consumer markets and cheaper, less conflict-prone labor. Multinational presence remains limited in Africa and the Middle East, except for natural resource extraction.
4. Global Transport Networks
4.1. Freight Transport
Long-distance freight transport is increasingly crucial. Products from Japan, China, and Taiwan are sold competitively in European and North American markets due to lower transport costs. Sea transport, significantly cheaper than air, dominates long-distance goods exchange. Large ships maximize efficiency. A transport chain is essential for a product’s journey from manufacturing to market. Containers facilitate goods transfer. Large ports, equipped to handle these ships and containers, have gained importance.
4.2. Passenger Transport
Air transport is the most common mode for long-distance passenger travel. Tourism has become a global phenomenon thanks to air travel. Large aircraft serve longer routes, lowering ticket prices. Supply and dispersal systems are used. Madrid’s airport, for example, receives passengers from various Spanish cities destined for major world cities, and disperses them upon return. Some airports, handling significant global air traffic, become key connection hubs.
5. Telecommunications in Globalization
Information is transmitted instantly worldwide due to extraordinary technological advancements in telecommunications over the past century.
5.1. The Development of Telecommunications
Past information transmission was slow. The telegraph and telephone revolutionized this. Communication satellites supplemented landline and phone networks for image transmission, leading to the rapid spread of television and radio.
5.2. Internet: Network of Networks
Since the 1980s, the convergence of information technology and telecommunications has created immense potential for real-time information transmission. Initially for military use, the internet expanded into research and education. Consequences include the ability to transmit text, data, images, videos, and music. It has revolutionized company operations and institutions across diverse sectors, from trade and banking to education. The internet has been instrumental in enabling many companies to achieve global reach.