Nature and role of TNCs Flashcards
What are TNCs?
Companies operating in at least two countries, headquarters usually in one country, business operations in another.
What is offshoring?
Relocating section of the organisation overseas to exploit the lower costs + access foreign markets.
Toyota- manufacturing plant in U.K. to access wealthy market.
What is outsourcing?
Subcontracting part of a business to another country where costs are down.
What is vertical integration?
Companies supply chain owned entirely by that company.
What is horizontal integration?
Diversifying companies through expansion, merger or take over - Kraft foods took over Cadbury in 2010.
What is agglomeration?
Companies or similar industries locate near each other to share resources and ideas.
Define joint ventures
When two or more businesses pool their resources for to achieve a specific aim.
What are the benefits of a TNC for the host?
Jobs and income, tech, infrastructure, multiplier effect.
What are the benefits of a TNC for the business itself?
Lower costs- outsource work for cheaper.
Access to new markets
Looser controls - environmental legislation.
What are the benefits of a TNC for the country of origin?
Cheaper goods,
Reparations
High skill occupations.
What are the costs of a TNC on their host country?
Exploitation of resources and people
Negative impacts on local environment and culture
Reparations of profit.
What are the negatives of a TNC for the business itself?
Ethical issues. Poor reputation.
What are the costs of a TNC for their country of origin?
Lots of manufacturing jobs,
Deindustrialising
De multiplier effect.
What is the multiplier effect?
Initial import of capital can bolster income through creating more jobs and higher wages, spending and tax revenues that help further develop the area, increasing quality of life.
Why are joint ventures good?
Give examples
Can give invaluable insight
India’s Mc Donald’s + Vikram Bakshi’s plaza restaurants - most of profits also kept in India.
