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10 Cards in this Set
- Front
- Back
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Define TNC |
A company which operates in two or more countries for production, sales etc. |
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Give 3 examples of a TNC |
Ikea, Honda and McDonalds |
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Define Conglomerate |
A TNC which owns a variety of companies which produces a wide range of goods - e.g. Samsung, Daewoo |
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Give some statistics showing TNCs large global dominance |
- 1/3 of world trade is intra-firm between TNCs - 2/3 of world trade is generated by TNCs - TNCs are responsible for 4/5 of global economic output - The top 500 TNCs account for 90% of FDI |
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Why do TNCs locate to other countries |
1) Escape trade tariffs (e.g. Nissan decided to manufacture cars in Sunderland to avoid EU tariffs) 2) Other TNCs may be seeking the lowest cost location for production (e.g. Nike manufacture in Vietnam) 3) TNC's may be attracted to an abundance of skilled labour, e.g. Tesco's outsourcing to Bangalore, India. 4) They may want to research foreign markets to increase sales and reduce unit costs 5) Some TNC's may be forced to locate to areas with resources which require large investment to develop as only large corporations can afford to provide this 6) Operate in areas with few environmental laws, so they can grow massively with more efficient production 7) Expand into markets where there is a gap, e.g. growing consumerism in developing countries 8) They are trying to create economies of scale with an optimum amount of output for a maximum profit, beyond this the product loses quality and before it the profit margins were too small |
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What are the socio-economic advantages of TNC's |
- To provide inward investment and create jobs for locals - Increase incomes and raise living standards of employee (they often pay wages between 10-100% higher than local businesses) - boost exports to help the trade balance - develop and improve skills amongst the work force - increase spending and create a multiplier effect with local economies - range of products is far wider and cheaper for countries buying them - TNC's origin country gains income for shareholders - if TNCs pay taxes the money goes back to the origin country - Nike sets up Nike villages - building houses for their workers, injecting capital into the area - Attract related investment by suppliers - provide more opportunities for women
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What are the socio-economic disadvantages of TNC's |
- They offer few high paid jobs in LDC's - Lack of security as TNC's often re-locate (e.g. Italian TNC Hoover-Candy closed its Merthyr Tydfil plant in 2009 due to high operating costs, transferring to Turkey. 337 jobs were lost and caused a spiral of depravation in the area and is currently the only Welsh district expecting future depopulation) - Lack of control, key decisions are taken overseas at HQ - TNC's may demand further financial incentives not to disinvest - Competition can lead to closure of businesses - A race to the bottom may occur between countries - Global shift and de-industrialisation lead to removal of employment, crime and social issues in the source country |
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What are the environmental disadvantages of TNC's |
- TNC's offshore manufacturing to LDC's in order to exploit weak environmental protection laws
In the twin cities of El Paso (USA) and Ciudad Juarez (Mexico) over 300 TNC's operate in CJ to increased air pollution whilst gaining closer access to American markets with cheaper production costs. - Agricultural land is lost in the host country |
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How many TNC's are there
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80,000
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What are the environmental advantages of TNC's
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TNC's invest in renewable energy |
