Global groupings

Question 0

Case study - China

Answer 0

Recently TNCs such as Mitsui have concentrated on technology intensive industries, services or infrastructure projects as oppose to the initial labour intensive industry.

Question 1

Case study - Bangladesh

Answer 1

TNCs such as Daewoo have nene attracted to Bangladesh because of… Low wages in comparison to other Asian countries
“Spare quotas” to supply ready made clothes to the EU.

Question 2

What are the pros of TNCs to the host country?

Answer 2

Economic growth and political stability
Transfer of technology
Increase in jobs which leads to higher living standards
Multiplier effect

Question 3

What are the cons of TNCs to the host country?

Answer 3

Environmental degradation
Exploiting of countries resources
Local companies become less competitive 
Loss of autonomy
Inappropriate goods

Question 4

How do TNCs affect Global wealth?

Answer 4

They bring FDI to nations. Workers will use money money and so
stimulates the economy and local services. Eg workers at dysentery
in Malaysia are paid around £3 an hour, far more than in the past.
But TNCs very often exploit labour in LDCs in pursuit of profit

Question 5

CASE STUDY: Transnational Tesco

Answer 5

Key to their success has been diversification into new markets, becoming a “one stop”
shop for electrical goods, toys and home products.
Tesco products are usually manufactured in low wage countries.
The firm is now growing overseas, not just in the UK - they have entered Poland, Hungary
and a number of Asian countries like Thailand.
Rising number of Chinese elites led Tesco to open up a store in China in 2004. 60 % of
Tescos overseas profits come from Asia.
Worldwide sales topped £47 billion in 2006.
Technology played a role with online shopping

Question 6

Why do nations belong to trade blocs?

Answer 6

They exist for trading purposes bringing greater economic strength to
the nations that join. Free trade is encouraged by removing tariffs.
They can also protect members by establishing a common external
tariff for foreign imports.
Removal of tariffs brings advantages to the member states such as:
the market grows, increased demand and smaller firms can merge to
become TNCs.

Question 7

LDCs

Answer 7

Worlds poorest income countries. Is about 50 of the worlds 192 countries and can
be described as ‘fourth world’ countries to their bleak conditions and their populations’ lack
of engagement with globalising forces.

Question 8

NICs

Answer 8

Where exports and average earnings have unprecedented rates since the 70s. Most
famous of these are the Asian tiger nations of Hong Kong, Singapore, South Korea and
Taiwan.

Question 9

OPEC

Answer 9

Many of the worlds oil producers. The petrodollar earnings of states like Saudi
Arabia make it one of the wealthiest nations on earth, with a GDP of about $350 billion in
2007. Wealth of OPEC nations if often unevenly distributed among citizens.

Question 10

OECD

Answer 10

30 nations where levels of wealth are far more evenly distributed than OPEC.
Generally a high standard of living. This includes the G7

Question 11

What benefits does the removal of tariffs bring for member states?

Answer 11

1) Markets grow - for example when ten new nations joined the EU in 2004, Tesco gained 75 million extra customers.
2) Firms that produce a particular product or service should prosper - French wine makers thanks to their advantageous soil and climate produce a better product which is consumed in tariff free Europe.
3) Bigger market means bigger demand - increases volume of production and lowers manufacturing costs per unit.
4) Smaller national firms within a trade bloc can merge to form a TNC, making there operations more effective.

Question 12

How have TNCs developed into complex organisations?

Answer 12

1) They may build up their businesses by buying up foreign firms in mergers.
2) Much of the manufacturing work is subcontracted to third parties. This makes it hard to enforce good working conditions in factories where global brands are made.
3) Most manufacturing TNCs are assembly industries, relying upon a chain of suppliers. Some suppliers may be independent, some may be owned by parent companies.

Question 13

The case against TNCs: Tax avoidance

Answer 13

They may avoid paying full taxes in the countries where they operate, through transfer pricing and tax concessions. This means that governments find it harder to generate revenue and provide services.

Question 14

The case against TNCs: Growing global wealth divide

Answer 14

By selectively investing in certain region while largely bypassing others, TNCs are actively creating new geography of ‘haves’ and ‘have nots’

Question 15

The case against TNCs: Environmental degradation

Answer 15

Often they are the major cause of degradation, which has the greatest impact on the poor. One significant case is in 1984 - when poisonous methyl isocyanate gas was emitted from a pesticide plant in Bhopal, India owned by the US TNC Union Carbide.

Question 16

The benefits TNCs bring: Raising living standards

Answer 16

TNCs invest in the economies of developing countries. They sometimes raise wages and can help spread wealth. FDI has helped China overtake the UK and France to become the world’s fourth biggest economy.

Question 17

The benefits TNCs bring: Transfer of technology

Answer 17

For example South Korean such as Daewoo and Samsung have learned to design, make and sell their own products to foreign markets.

Question 18

The benefits TNCs bring: Political stability

Answer 18

In eastern Europe and China, investment by TNCs has contributed to economic growth and political stability. This may be contrasted with conditions in much of Africa, where instability, civil war and distance from markets has made investment less favourable.

Question 19

How do trade blocs differ from economic groupings?

Answer 19

To trade freely, agreements have to be drawn up that allows flows of goods and money to cross national boundaries, national laws have to be amended.
Trade blocs contain nations at varying levels of development, eg USA and Mexico both being part of NAFTA.

Question 20

Spatial division of labour

Answer 20

Large firms moving low skilled work abroad to places where labour costs are low. Important skilled jobs still remain at the firms headquarters in its country of origin.

Question 21

How do TNCs bring wealth within a trade bloc?

Answer 21

They can bring wealth to impoverished regions, even in richer countries, often by working in partnership with local governments that offer financial assistance.
By sourcing parts locally within trade blocs, TNCs can generate more work and greater profits for local suppliers.

Question 22

What social affects and cultural affects do TNCs have?

Answer 22

Social - they may help perpetuate inequality through giving unequal pay to men and women.
Cultural - products may alter local tastes and interfere with tradition.