7.3.4

Question 1

How much of trade is linked to TNCs?

Answer 1

80% of global trade is linked to TNCs which can operate in primary, secondary, or tertiary industry

Question 2

Who owns magority of TNCs?

Answer 2

The ownership of TNCs is dominated by superpowers and emerging superpowers

Question 3

What power do TNCs have?

Answer 3

The nature of TNCs means that they:

Have power over choosing their location this influences
Trade patterns
Global patterns of economic growth and decline

Question 4

How TNCs minimize their risks and what effects does it have?

Answer 4

1. Are able to spread risk by having factories and offices in many locations
   This reduces the impact on the TNC of any natural hazard, national economic issues or political events
2. Are able to subcontract manufacture which reduces labour costs because they are not employing people directly so avoid on costs such as sick/holiday pay, pensions
   Apple subcontracts manufacture to companies like Foxconn

Question 5

How TNCs connect countries?

Answer 5

TNCs connect countries through their spatial organisation and global supply chains

Question 6

Outline Organisation of TNCs

Answer 6

Their Headquarters (HQ) and Research and Design (R&D) functions are often in HDE countries where there are large supplies of highly educated and skilled workers

Sourcing of materials happens all over the world and depends on the natural availability of raw materials

Manufacturing often takes place in EME or LDE countries where labour costs are lower and environmental regulations are laxer
Sometimes manufacturing takes place in the country where the product will be sold to reduce transport costs

This can also enable TNCs to access the market within a trade bloc without having to pay tariffs e.g. Toyota invested in factories in the UK to access the EU market

Question 7

Outline 5 positive impacts of TNCs

Answer 7

Employment – TNCs create lots of job opportunities which can help to create a positive multiplier effect

Investment – TNCs use outsourcing and offshoring to maximise profits bringing FDI into LDE and EME countries

Trade – TNCs can increase trade between the countries they operate in due to the linkages they create

Technology transfer – TNCs introduce new methods of production in countries which can improve productivity and create further job opportunities

Economic development – due to FDI and employment, LDE countries start to achieve more economic growth

Question 8

Outline 5 negative impacts of TNCS

Answer 8

Environmental degradation – TNCs may exploit natural resources and cause pollution during the production process

The exploitation of workers – sometimes workers are forced to work long hours for low pay in poor conditions

Closure of local businesses – local companies may be unable to compete with TNCs because of their economies of scale

Increasing inequalities – the large profits generated by TNCs are not evenly distributed with rich people getting much richer while poorer people see fewer benefits

Loss of culture – this is sometimes referred to as cultural erosion – the idea that cultural differences start to disappear as TNCs spread western cultural values and ideas Loss of culture – this is sometimes referred to as cultural erosion – the idea that cultural differences start to disappear as TNCs spread western cultural values and ideas