Using examples, analyse how foreign direct investment and glocalization are used by transnational corporations (TNCs) to help their expansion.

Examine the relationship between a country’s gross national income (GNI) and its level of participation in globalization.

Foreign direct investment (FDI) includes a range of different kinds of overseas investments made by transnational corporations (TNCs). These include: hiring outsourcing services (employing a third party to handle goods or services), establishing a “spatial division of labour” (building/buying company-owned branch plants or back offices in low-cost locations), mergers, acquisitions and franchises. Credit other possible financial outgoings (eg TNCs working alongside charities). Good answers should recognize more than one type of FDI, using examples.

Glocalization describes the adapting of a “universal” product to meet the cultural requirements of local markets (religion, taste, legal requirements may all vary from territory to territory). Glocalization is also linked to local sourcing strategies (using local suppliers), which may have political dimensions too (TNCs may be required to work with local partners eg in India). 

Candidates could comment on how geographic expansion is achieved through use of these strategies. TNCs achieve greater profits/market share through their geographic strategies, and can win local acceptance by embracing local people’s culture.

Candidates may additionally analyse how different strategies suit different TNCs (oil companies may not glocalize to the extent retailers do), or may analyse the weaknesses and not just the strengths of strategies.

Band C answers may describe examples of glocalization and/or FDI but with a lack of terminology and little mention of expansion (beyond asserting that it happens).

At band D, expect either a more detailed, exemplified explanation of both strategies (but do not expect balance) or some explicit analysis of how market expansion is achieved by particular TNCs.

For band E, expect both.

Credit all content in line with the markbands. Credit unexpected approaches wherever relevant.

Candidates will have studied global participation with reference to the Kearney or KOF globalization indices, which recognize economic, social and political strands of globalization. Therefore, accept a wide interpretation of what is meant by “participation” in globalization.

Possible themes suggesting a positive relationship between GNI and participation:

• well-known indexes (eg, KOF index) show high globalization scores for countries with a high GNI, as a rule [Guide 1]
• foreign direct investment by TNCs can bring many financial benefits that lead in turn to greater global economic participation for businesses and citizens (if incomes grow, allowing people to consume more globally-produced services or participate in tourism) [Guide 3)
• levels of sociocultural participation (an aspect of KOF) may also be higher for high-income countries [Guide 5]
• the role of remittances can be explored, as flows often take place between richer and poorer countries [Guide 3]
• poorer societies remain “non-globalized” eg, Amazonian tribes [Guide 7]
• poorer nations only experience one-way interactions – their assets are stripped by powerful nations/TNCs (raw materials, landgrabs) [Guide 4].

A more critical, thoughtful or nuanced response might take the view that:

• there are many types of global participation/interactions. People may participate in economic globalization but not necessarily cultural globalization (eg, Chinese factory workers with limited internet freedoms) [Guide 1]
• scale/disparities may be important. Some nations with higher GNI are “two-speed” societies: elite groups participate globally, not poorer groups [Guide 1]
• the relationship could be complex in the case of a migratory “brain drain” – remittances may boost GNI, but out-migration could reduce GNI too [Guide 3]
• the role of other aid/loans can be discussed – low GNI nations may be major beneficiaries of certain types of global financial flow [Guide 3]
• there are other possible exceptions/anomalies to the rule that can help lift a response into bands D/E.

At band C, some links between GNI/wealth and globalization should be described.

Band D should either provide a wider, detailed explanation of different links between GNI and participation or offer a more critical examination of what is meant by a country’s “participation in globalization”.

At band E, expect both.

While most candidates attempting this question were pleasingly familiar with glocalization, there was less familiarity with foreign direct investment (FDI). Some candidates explained why TNCs invest in foreign crime in order to reduce their costs (implying, perhaps, that such benefits might help a company’s future expansion). Only a few were able to demonstrate much understanding of how FDI flows operate beyond "building a factory". The best answers looked at outsourcing, while a tiny minority were aware of the geographical importance of mergers and joint ventures. Although McDonald’s is still the preferred case study of choice for candidates and teachers, most candidates remain in complete ignorance of how the company’s presence in India is in the form of a joint venture. This goes a long way to explaining why it has been so successful at glocalizing its products in India, due to the expert local knowledge of its Indian partner companies.

The command to “examine the relationship” (as opposed to “explain the relationship”) required candidates, ideally, to outline what underlying assumptions they would be making, preferably in their introduction. Weaker candidates generally established a simple positive correlation at the outset. Better answers suggested anomalies/outliers might need to be looked at too. At the very top end of the cohort, a small minority of candidates thought there could even be a reversal of the assumed relationship, whereby a wealthy country could maintain a degree of cultural isolation, whilst poorer countries sometimes become the global focus for international assistance and intervention, as in the case of Haiti. Sadly, most candidates did no more than assert that a strong positive relationship exists. To the credit of many, they performed a synthesis by suggesting that countries with a high GNI are likely to be home to many powerful TNCs, to be capable of cultural imperialism and to be highly attractive to economic migrants. Good answers sometimes made effective use of the KOF or Kearney index and demonstrated how some wealthy countries like the USA and UK score highly in all categories. However, it was a pity that more use was not made of interesting examples, such as China, which shows high participation in some ways but not in others.