1.3 International division of labour

• Aardrijkskunde
• Middelbare school
• havo, vwo
• Leerjaar 3

1.3 International division of labour

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PIF

• Time-space convergence
• Intermodal transportation
• Prime (meridian) 

Learning objectives

After studying this section, you will be able to:

• Describe the different stages of a supply chain of a transnational corporation;
• Explain what sort of country usually is responsible for each part of the supply chain.

Transnational corporations

• A transnational corporation (TNC) or multinational is a company with branches in more than one country.
• TNCs increase globalisation by linking together countries through the sales of goods on the one hand and through the production of goods on the other. 
• This network of economic activities that covers all the steps to produce finished goods is called the supply chain.

Multinationals

Stages of the supply chain

The supply chains of most goods will go through three different stages: 

1. Raw materials: these are unprocessed or minimally processed goods. Raw materials are gathered through agriculture, mining, forestry or fishing. Examples are: crude oil, raw cotton, wood and ores like iron ore, gold ore or coltan.

Stages of the supply chain

The supply chains of most goods will go through three different stages: 

1. Raw materials
2. Intermediate goods: these are processed goods that are used as input in the production of other goods. Intermediate goods are not directly sold to consumers, but to other manufacturers instead. Examples are: the plastics that are used in a toy, the steel that is used in a bicycle and the wood that is used to make furniture.

Stages of the supply chain

The supply chains of most goods will go through three different stages: 

1. Raw materials.
2. Intermediate goods.
3. Final goods: these are goods that are directly used by consumers. Most final goods have been manufactured, which means they have been processed in a way. Examples are: sneakers, jeans, T-shirts, smartphones, notebooks, cars and so on.

After extraction, the raw material natural rubber is first processed into intermediate rubber sheets, which can be converted to final goods like car tyres.

Profit = revenue - costs

Offshoring = The relocation of parts of the supply chain from one country to another.

Who does what?

International division of labour generally looks like:

• LEDCs deliver most of the raw materials that are necessary in a supply chain. Relatively simple processing of raw materials is often done here.
• NICs often cover most of the manufacturing process (the factory work). They collect different intermediate goods and assemble them.  These countries are potential sales markets for the TNCs.
• MEDCs: the headquarters of TNCs are typically found in MEDCs, where the marketing and sales of the products is controlled. There are also huge sales markets.

Assemblage refers to the process of combining separate parts (often different intermediate goods) into one product.

Essence

The developments in technology and ICT have enabled companies to act globally. Many corporations are now transnational corporations (TNCs) and have supply chains that cover many different countries. TNCs locate the different parts of their supply chains in the countries with the lowest costs. This has led to an international division of labour in which MEDCs focus on design, sales and marketing, while the process of manufacturing and assembling takes place in NICs and LEDCs focus on providing raw materials and simple manufacturing activities.

Do you need any extra help or explanation?
Please write down the terms you don't understand yet.

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