4.4 TNCs and globalisation

Question 1

What are the three reasons TNCs grow?

Answer 1

Motive
Means
Mobility

Question 2

Under motive, what ways can companies control their costs to lead to more profit?

Answer 2

Controlling and minimising their costs (e.g. raw materials, labour)
Increasing their revenues by expanding their markets and merging with or taking over their competitors

Question 3

Under motive, What are 5 ways in which TNCs can expand the markets in which they operate?

Answer 3

-achieving economies of scale: by expanding their capacity, (e.g Amazon warehouse size and Maersk ship size) in order to reduce their unit costs
-developing new markets: Expanding the market to new customers or creating frequently updated models that existing customers will want to buy
-horizontal integration: In which companies expand at one level of production
-vertical integration: a company controls and owns every stage of production
-diversifying their product range: Expansion of product range helps to future-proof a companies sales

Question 4

Under capitalism, what is the one motive?

Answer 4

Profit

Question 5

Under means, What are the mechanisms for company growth?

Answer 5

banking
free flow of capital

Question 6

Under means, in what ways are the mechanisms for company growth variable?

Answer 6

-from year to year
-over the medium term (for example, they slowed during the 2008 financial crisis, when businesses reduced their levels of investment, but had largely recovered by 2014)
-over the longer term (Some countries that were receivers of FDI in the 80s and 90s are now providers of FDI to others

Question 7

Under means, what is reverse colonialism and what are some examples?

Answer 7

Hong Kong, , Singapore, China, South Korea, Malaysia, India and Brazil are now high or middle-income countries and are all net providers for overseas investment. For example:
-in 2015, there were over 800 Indian-owned businesses in the UK- employing more than 110,000 people
-Russia invested US$87 billion overseas in 2013
-China has bought Japanese household brands, and is investing heavily into infrastructure in Africa, as well as the UK (Pizza express) and USA

Question 8

What aspects of mobility have been fundamental to the spread of globalisation?

Answer 8

-Faster and cheaper transport through containerisation
-rapid communication systems, using optic fibres, satellite and digital technology
-new production technology such as ‘just in time’ and flexible production systems, which provide cheaper products and fast turn-around from orders to delivery
-global production networks, which link sources of raw materials, finance, manufacturing, market and sales. These are run from company headquarters, almost always in HICs.

Question 9

What is ‘out-sourcing’?

Answer 9

When work is contracted out to another company (it’s known as off-shoring when that company is overseas)

Question 10

What are some examples of mobility leading to controversial decisions by TNCs?

Answer 10

Kraft takes over Cadbury in multi-billion dollar deal to create confectionary leader- no guarantees for 4,500 workers at Bourneville Factories

Question 11

What are some of the different operations that Disney has?

Answer 11

6 film/TV production and distribution companies, including Pixar and Lucasfilm, which makes Star wars
728 shops worldwide
5 record labels
14 theme parks and resorts and a cruise line
12 publishing companies, 15magazines and newspapers
2 theatrical production companies

Question 12

What was Disney’s turnover in 2014?

Answer 12

US$48.8 billion

Question 13

What are the benefits of just in time production for Disney

Answer 13

The company can wait to judge the success of a venture before investing in merchandise. It uses outsourcing and offshoring and demands quick delivery times. This avoids having to operate its own expensive production lines

Question 14

What are the disadvantages of the just in time system for disney?

Answer 14

Overseas workers often earn low wages and have used toxic substances banned in the USA

Question 15

In what ways is the world becoming disneyfied?

Answer 15

Disney owns 40 Spanish-speaking radio stations, together with foreign language television channels and a Chinese radio station in Hong Kong.
It also supplies reading materials to help teach English in Chinese and African schools.
It was one of the first global TNCs to glocalise, by tailoring its products to specific market areas.

Question 16

What are examples of glocalisation by disney?

Answer 16

Mulan marked a decision to enter a Chinese market
The Hunchback of Notre Dame was relaunched to rebrand Disneyland Paris
The Lion King was aimed at African markets, Aladdin at Middle East and Finding Nemo at Australia

Question 17

What are Disney’s influences from urban planning: ‘cloned towns’?

Answer 17

-shopping malls like Disneyland on suburban out-of-town developments
-Disney themed fast food outlets
-Crowd monitoring with CCTV cameras
-resort tourism with everything on site

Question 18

What are Disney’s influences on the media?

Answer 18

24-hour TV channels in North Africa, the Middle East, Europe, Australia etc
Disney owns shares in European and Brazilian commercial TV channels
Chinese state TV uses Disney’s ESPN for sports coverage

Question 19

How has Disney been able to influence governments?

Answer 19

The US government enforces copyright for US companies like Disney
The French gov paid US$2 billion towards Euro Disney’s construction
The Hong Kong and Tokyo governments paid US$1 billion towards their respective Disneyland’s

Question 20

what is glocalisation?

Answer 20

Refers to changing the design of products to meet local tastes or laws

Question 21

Why does glocalisation happen?

Answer 21

People’s tastes around the world vary (eg. Cadbury makes its Chinese chocolate sweeter, as people there prefer it that way.)
Religion and culture: Domino’s pizzas only offers vegetarian food in India’s Hindu neighbourhoods; MTV avoids showing overtly sexual music videos on its Middle Eastern channels.
Lack of availability of raw materials (SABMiller, a major beer brewing TNC, uses cassava to brew beer in Africa; this cuts the cost of importing barley from abroad, but also changes the taste.
Laws: Obesity laws in the UK means that food production companies have had to reduce the amount of sugar, fat and salt in their products.

Question 22

How has McDonalds used glocalisation?

Answer 22

By 2012, McDonald’s had established 35,000 restaurants in 119 countries. In India, the challenge has been to cater for Hindus and Sikhs, who are traditionally vegetarian and also Muslims do not eat pork.
Chicken burgers are served alongside the McVeggie and McSpicy paneer (an Indian cheese patty).
In 2012, McDonald’s opened a vegetarian restaurant for Sikh pilgrims visiting Amritsar, home to the golden Temple

Question 23

How has Lego used glocalisation?

Answer 23

Lego has not glocalised its products. They export identical products to all global markets. Like Apple and Samsung, Lego makes products with genuine global appeal. The company doesn’t need to take global tastes into account.

Question 24

Discuss BMW’s Mini’s global production network

Answer 24

2,500 different suppliers provide parts to assemble the Mini
The engine is from Brazil
The wing mirrors are made in Germany, although that company’s headquarters is in Canada
Wheels are made in Italy and Germany
Windscreen is made in Belgium

Question 25

What are some of the risks that outsourcing can bring to TNCs?

Answer 25

Natural hazards, such as the 2011 Japanese tsunami, can disrupt the global supply chain
UK supermarkets were stunned to find horsemeat had entered their supply chains in 2013
The collapse of the Rana Plaza textile factory in Bangladesh in 2013 killed 1100 people, making clothes for Benetton and Walmart, as part of an outsourcing arrangement

Question 26

What are some examples of glocalised McDonalds products

Answer 26

McShrimp in Russia
Mashed potato burger in China
McSpaghetti in Phillippines
Pineapple and orea McFlurry in Colombia