TNCS Flashcards
TNC
Transnational corporation - A business that is operating in more than 1 country
e.g. HQ is in one country whilst its production operations are elsewhere
What are the reasons for TNCS?
- Escape trade tariffs E.g. Nissan producing cars in sunderland to gain access to lucrative EU market
- Find the lowest cost for production
- Reach foreign markets
- Exploit resources of foregin countries e.g. Africa is a mineral and nutrient rich countries outsource to use their resources
Common characteristics of TNCS
- Maximising global economies of scale - organising production to reduce costs
- Source materials at lowest cost
- Controlling key suppliers
- Outsourcing production
- Branding - easily recognisable e.g. Apple, Nike
- Controll of processing at each stage of production is enhanced by the improvements in communications
Spatial distribution of TNCS?
- Flexibile in the location of global assets
- Traditonally in a major city in home country (HQ)
- Have subsidary HQS in each continent so they can oversee work and where main operarions are based
- Engage in R and D - home country, higher education levels, uni faciloties, graduate labour market etc
Primary sector of TNCS
- Production operations - location of unexploited resources
- Developing countries
- Home country - new tech, rising world prices
- Fracking introduced to use resources in developed countries e.g. North America this has evitalised oil and gas industry
Secondary sector of TNCS
- Production operations - manufacturing regions of developing cpintries South and South East Asia
- This area attracts TNCS because:
- Low labour costs - high populations
- Investment in education, easier to train people
- Work ethic - long hours, few holidays, non-unioned labour enviroment
- Government incentive - enterpirse zones, low business rates, tax free breaks, few enviromental regulations
Tertiary sector of TNCS
- Low labour costs
- Good education
- Home country
- Proximity to markets
- Langauges - call centres in india low costs alternative, speak english and well educated
Why are TNCS important for globalisation?
Driver of globalisation creating longer and more frequent connections between countries
Economic growth - providing jobs, increased incomes etc
Social benefit - increased wealth, increased investment in services, increased qol
What is tertiary integration?
Takes over other parts of the supply chain
What is horizontal integration?
Companies merge or take ober another company at the same stage of the production process e.g. 2006 Disney took over PIXAR and they are both in film production
Advantages of TNCS
- Jobs
- Improved education
- Investment and aid
- Development of resources and manufacturting
- Development of energy
Disadvantages of TNCS
- Large portions of profits move overseas
- Exploited local resources
- Local labour is exploited
- Mechanisms reduce labour demand
- Few skilled people are employed
- Increased urbanisation (overcrowding)
- Competition with local businesses
- Enviromental laws less restrictive in LICS (Pollution)
BP
- Negotiated exploration and production rights in ober 40 oil and gas fields
- Owns or jointly owns oil pipelines and shipping fleet
- Owns refineries based in countries where end productd are sold
- 1,100 retail service stations
- Employs 79,800 peopel
- HQ - London
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Kraft foods
- Took over cadbury in 2012 for $20 billion so more diverse base in grocery and confectionery market
- Kraft foods group merged with Heinz in 2015 for same purpose
How much money does general motors (USA) have in foreign assets?
$475 billion
