TNC's Flashcards
What are TNC’s
Are companies that operate in two or more countries.
In 2013, 80% of global trade was linked to TNC’S
One of the main driving forces behind globalisation because of the economic, political and cultural interactions that occur between countries.
How can TNC’s expand their operations to gain more control over their markets
Vertical integration is when a company takes over other parts of its supply chain. For example, through mergers, acquisitions and FDI, Shell now owns every part of its supply chain, from extracting and refining oil through to selling it to consumers at petrol stations.
Horizontal integration is when a company merges with or takes over another company at the same stage of production (e.g. a retail chain might take over another retail chain). For example, in 2006 Disney took over PIXAR Studios - both were film production companies making family-orientated animations.
TNC’s in primary industry
Often invest in countries with natural resources that they can extract. E.g. in 2016 Shell acquired fellow oil company BP Group to gain access to oil reserves in Brazil and Australia.
TNC’s in secondary industry
Often invest in countries with low labour costs and cheap land, especially where governments encourage investment with tax breaks, e.g. Toyota invests in Indonesia due to low labour costs and tax breaks on low-emission cars. TNCs also invest where there is a large market for their products, like Nissan” in the UK.
TNC most likely areas to invest in
TNCs also often invest in countries with weak labour and environmental regulations. Weak regulations allow TNCs to cut costs, e.g. by making employees work for long hours for low pay, or by disposing of waste cheaply.
