ct2 geography

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Geography 
What are MNCs? 
A multinational corporation (MNC) is a company that has business operations in at least one country 
other than its home country, which is usually the headquarters, and generates revenue beyond its 
borders through subsidiaries and branches. The majority of MNCs have their headquarters in 
developed countries. The destination of the profits transferred by the subsidiaries, decisions on 
investments and cost cutting, research and development, design, brand creation and advertising all 
remain centered in the headquarters. Some of these companies annually move capital greater than 
the economy of several countries put together. 
 
What their goal? 
The main goal of a multinational corporation is to maximize profitability by expanding market reach, 
reducing production costs, and optimizing resource utilization across various countries. 
 
Production decentralization: 
Since the 1980s, MNCs have been able to decentralize production, dividing the production chain into 
multiple units spread across countries. They were attracted to developing countries by several 
advantages: 
● Tax reduction – or exemption – offered by local governments; 
● Cheap work force; 
● Softer labor and environmental legislation / enforcement; 
● Land with low price. 
To take best advantage of the decentralization without having to endure the legal (and moral) 
limitations associated with possessing subsidiaries in countries where social protection and 
environmental laws are disregarded, MNCs tend to organize their production on a network of 
unlinked companies. 
Innovations in the production style: 
- New IDL: The production decentralization generated a “new international division of labor” 
in which the old colonial division of labor involving Third World exports of raw materials and 
imports of finished goods has been transcended. According to this thesis, Third World 
countries have been industrialized to produce cheap labor-intensive manufacturing goods for 
export to the core capitalist countries in exchange for more advanced capital-intensive 
imports. 
- Fragmentation of production: Fragmentation of production refers to the process where a 
previously integrated production process is broken down into separate stages, with different 
parts of the process occurring in different locations, often across international boundaries. 
This can be driven by factors like lower labor costs, access to specialized resources, and 
reduced transportation costs. 
 
 
 
+ The influencing factor of decentralized production is globalization because the increasing 
interconnectedness of global economies and the movement of capital and labor across 
borders contribute to fragmentation. Also none of it would be possible without its drivers: 
Communication and Transportation systems. 
 
↪Transportation and Communication Systems are the drivers of globalization. They allow a much 
faster flow of products, info, people, etc. There are two types of transportation and communication 
systems: Modern Transportation Systems and Real-Time Communication Systems. 
 1 Modern Transportation Systems: These transportation methods help to move 
products more easily and cheaply. For instance, getting a dress to come from China would be very 
cheap, as it would come in a container with many other dresses and other goods, inside a ship with 
many other containers. 
→ Marine Transportation: 80% of the world's products; 
→ Air Transportation: high cost, but fast and efficient, "shortening" distances; 
→ Road and Rail Transportation: responsible for the flow of goods and people within countries and 
continents. 
 2 Real-Time Communication Systems: Satellite communication, fiber optic technology 
in submarine cables, and mobile communication with super fast 5G systems. 
 
🚨Consequences: 
1. Economic recovery of developing countries; job opportunities open up in many economically 
disadvantaged countries. 
As companies move their operations (like factories, customer service centers, etc.) to countries 
where labor and production costs are lower, this creates job opportunities in those developing 
nations. It can stimulate economic growth, reduce unemployment, and improve living standards in 
areas that were previously struggling economically. 
2. Loss of jobs in developed countries, which are deindustrializing. 
While decentralization can benefit developing countries, it can harm developed ones. As industries 
relocate to cheaper regions, many factory and production jobs in developed countries disappear. This 
leads to deindustrialization — where economies move away from manufacturing and heavy industry 
towards services and tech sectors, often leaving workers in traditional sectors unemployed. 
3. Countries compete to become more attractive (subsidies and flexibilization of fiscal, social and 
environmental standards). 
To attract multinational companies, countries may lower taxes, offer subsidies, or relax regulations 
on labor rights, environmental protections, and other standards. This “race to the bottom” can 
sometimes weaken social protections or environmental safeguards in an attempt to lure foreign 
investment. 
4. Multinationals are under pressure to adopt responsible business practices. Corporations become 
vehicles for spreading standards around the world – sometimes limited to greenwashing. 
With globalization and decentralization, multinational companies face growing public and regulatory 
pressure to act ethically — protecting human rights, preserving the environment, and ensuring fair 
labor practices. While some companies genuinely improve their practices, others engage in 
greenwashing: pretending to be environmentally friendly or ethical without making meaningful 
changes, just to improve their public image. 
 
Fashion industry: 
The fashion industry was one of the first sectors to globalize its production processes. This means 
different stages of garment production (like fabric making, dyeing, sewing, and packaging) are spread 
across different countries, primarily to exploit lower labor costs and weaker regulations in developing 
countries. 
This is part of what’s called the New International Division of Labor (NIDL) — a system where 
industrial production shifts from rich (developed) countries to poor (developing) ones, while rich 
countries focus on services, R&D, and high-tech manufacturing. 
Key Aspects: 
● Fragmented Production: Instead of one company doing everything, production is 
subcontracted to small and medium-sized firms, often in countries like Bangladesh, Vietnam, 
Cambodia, and Ethiopia. 
 
● These subcontractors operate with low costs and little oversight, making it easier for big 
brands to avoid direct responsibility for labor conditions. 
 
Fast Fashion: 
A business model where: 
● New products are released weekly or biweekly, instead of seasonally. 
 
● Cheap, mass-produced clothing is sold quickly, encouraging overconsumption. 
 
● Production occurs in small batches to react rapidly to trends and minimize losses on unsold 
stock. 
 
Example: Brands like Zara, H&M, and Forever 21 pioneered fast fashion. In 2013, H&M introduced 
new collections every week in its flagship stores. 
 
Sweatshops: 
A sweatshop is a factory, typically in developing countries, where workers endure poor working 
conditions, long hours, low wages, and labor rights violations. 
● 80% of workers are young females: Most garment factory workers are women aged 18-25, 
often because they are seen as docile, manageable, and less likely to demand higher wages 
or protest. In countries like Bangladesh, women make up over 80% of the 4 million garment 
workers. 
 
● Unskilled or semi-skilled labor force: Sweatshops rely on labor that requires minimal formal 
education. Workers are often from poor, rural backgrounds with limited job options. 
 
● Low wages and long working hours: A standard sweatshopshift can be 12-14 hours a day, 
seven days a week, sometimes under threat of dismissal if quotas aren’t met. Wages are 
typically below living wage standards. 
 
Violation of labor laws - 
Why it happens: 
- Sweatshops often operate in countries with weak enforcement of labor protections. 
 
- Governments are hesitant to regulate harshly because they fear losing foreign investment. 
 
- Unions are discouraged, banned, or violently suppressed to avoid collective bargaining 
demands for better wages and conditions. 
Greenwashing Connection: Brands may claim to care about ethical sourcing but often fail to ensure 
real improvements in their subcontracted factories, a practice called greenwashing or 
ethics-washing. 
Rana Plaza tragedy: 
The Rana Plaza disaster in 2013, which killed over 1,100 garment workers in Bangladesh, stands as a 
tragic consequence of the globalized, decentralized structure of the fashion industry. As one of the 
first industries to embrace the New International Division of Labor, fashion brands outsourced 
production to low-cost economies like Bangladesh, where labor laws were weak and enforcement 
even weaker. Driven by the relentless demands of fast fashion — with its emphasis on rapid turnover, 
small batches, and low prices — factories operated under sweatshop conditions: 80% of the 
workforce was composed of young, unskilled women, subjected to long hours, meager wages, and 
unsafe environments, without union representation. The decentralized, fragmented nature of 
production allowed multinational brands to subcontract to factories like those in Rana Plaza, avoiding 
direct responsibility for labor rights violations. This tragedy also exposed how companies, while 
pressured to adopt responsible business practices, often engage in superficial measures or 
greenwashing, prioritizing profit over ethical standards. The disaster prompted international outcry 
and some safety reforms but left the fundamental pressures of fast fashion and decentralized supply 
chains largely intact, continuing to endanger workers in economically disadvantaged countries.