Manufacturing in LEDC & MEDC Countries Â
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EDC stands for Less Economically Developed Country that has lower levels of development whereas MEDC stands for More Economically Developed Country which a higher level of income and development. LEDC cities tend to be overcrowded with people living in poverty. For example in Sao Paulo the city centre is almost unrecognisable to their shantytowns where many extended families tend to live together to save money. Sewage systems tend to be inadequate in these areas or even non-‐existent and clean water may be very expensive or hard to come by. Housing may not be out of bricks and slate and may be made out of many different materials available such as tin. Education in shantytowns can also suffer, as there may not be enough education provisions resulting in some children being less educated than others. Healthcare many not be adequate for the large population and so disease can spread easily. Kenya is another country known as an LEDC as it is in its early stages of development with some very poor people and a low standard of living. Many of the people will work in primary activities such as farming and dealing with raw materials. The UK is classed as an MEDC as lots of people are working within tertiary activities at the end of the production line. Many workers have been replaced by machinery, and fewer people are working within primary or secondary industries. A country that was classed as an LEDC but is working its way upwards to an MEDC is Brazil. Brazil is becoming a much more developed country with less people working in the farming industries. More people are now working in towns and cities in factories, which is a secondary activity. As Brazils income becomes greater, there is a slow increase in tertiary jobs. Raw materials are labelled as a product that is used in the first stages of production. It is used in the primary production stage and is usually a natural resource such as oil, wood or cotton. Raw materials are sometimes referred to as commodities that are bought or sold on commodities exchanges around the world. A commodities exchange would normally trade future contracts to receive a product in the future. For example, a farmer who is growing corn can sell a future contract on his corn even though it will not be harvested for another 6 months. It guarantees that COTTON PICKING BY FARMERS the price he has been offered will be paid when the corn is delivered to the buyer and so protects him and the buyer from prices rises and drops. Raw materials are usually the least profitable products to trade and so countries that reply on exporting raw materials tend to be LEDC’s. If a country is exporting goods with low profit margins such as bananas, but importing goods with high profit margins such as manufactured goods it is likely that they will enter into a trade deficit. It is must easier for countries that export manufactured goods with higher profit margins to have better economies.
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nternational businesses can expand and develop with the help of industrialisation, globalisation, international companies, outsourcing and advancement in transport and Internet communications. International trading is part of globalisation and allows businesses and nations to trade outside of their borders and access new goods and services. Without international trade, globalisation would fail and nations would produce limited goods and services, as they would be unable to trade outside of their borders. The international trade that takes place across the world contributes to the Gross Domestic Product (GDP). GDP is the monetary value of all finished goods and services produced within any country and are usually recorded on a yearly basis. It reflects how well the economy of a country is. For a business such as G-‐Star or Chanel it contributes to their total revenue and profits.
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In Britain an average of £80 million is spent on clothing every single day with imported garments increasing competition for the UK’s own garment industry. Leicester is now classed as the capitol of the British rag trade with many businesses basing their head offices from there. One of the companies that are located in Leicester is JAK. JAK now works for many high street retailers such as Bay Trading and New Look to provide quality clothing at low-‐end prices. Originally JAK used to reply on the UK for manufacturing the garments but due to the demand from brands for cheaper prices, JAK has been forced to manufacture all over the world. JAK is one of the luckier firms in Leicester who do not struggle for orders and currently send out 200,000 garments per week to high street fashion retailers. I feel that the companies like JAK have had to expand into a bigger market due to the accessibility of the Internet and globalisation. JAK currently buy their raw materials from India, Pakistan and Bangladesh with Bangladesh being one of the poorest regions in the world. 130 million people live in Bangladesh with 1 in 3 living in poverty. Such a low standard of living means that cheap labour is on the rise and more garment factories are being built.
In 1985, Bangladesh had just 15 garment factories whereas now it has over 3,000. One of the largest manufacturing companies in Bangladesh is Beximco and they produce most of their garments for exporting around the world, including the USA. Globalisation has not just increased exporting products out of the country but it has also increased the opportunity for imports into Bangladesh. Although cheap labour has been on the rise in previous years, Western customers have put pressure on their favourite high street brands to stamp out child labour. Another country where competition is high for Beximco in terms of cheap labour and raw materials is China. China has a very large workforce and infrastructure and already has a good source of raw materials in its own country. The current time frame for Beximco to ship products to Britain is 5 weeks that is a considerable amount of time as compared to having your products made in JAK in Leicester. JAK have noticed that they are making shorter runs of garments for more niche markets rather than large runs of garments. Globalisation for the shopper means cheaper prices and more choices so although businesses may struggle in the UK, the consumer is benefiting from the lower prices.