TNCs Flashcards
Most TNCS
Operate in few countries
Are in the manufacturing sector
HQs in DCS
What are TNCS
They are larg business’s organization that have economic activities and assets in more than one country
They exist
To explore new markets
To further expand existing market
Diversify product
Exploit economies of scale to out compete small and local companies
Tons have attained vertical integrations
Purchases suppliers customers to further expand market in order to Increase control over them
When a particular business supplier and customer are in the same country automatically becomes a TNCS
Responsible for large % for employment and trade and major contributor to FDI
Characteristics
They are large enterprises that have subsidiary branches in more than 1 country
They have sufficient capital to establish large plants to reduce cost of production and allows them to make profit
Usually deal export oriented economies such as mining and agro and large concentration I’m extraction like food processing
In most cases TNCS control most parts of the production chain from processing raw material to packaging, advertising and sales
TNCS choose to locate in areas that do not have political risk
TNCS annual sales tend to exceed GDP of the host country
Reasons of global shift of TNCS
Make use of comparative advantages such as cheap labour and to increase profit by reducing cost of production
To avoid trade BLOCS such as NAFTA and AFTA and EU
Positive impacts of TNCS
Injection of capital for the devt of industries through FDI
Increaes purchasing power of the people, and hence their SOL, stimulate economy
Bring in new working ethics that are alien to traditional method that are effective in increasing producing
Creating of NICS
Crictisms of TNCS
Largely dominate and can damage local investments
Dependency in investment and employment may result in a company losing control of its own economy
Only affects the urban workers and not the local workers causing a widening income gap
Operations may affect local economy and the environment
TNCS also influence govt policy
Also tax concessions by the host country and affects public revenue
Toyota case study
Toyota expanded their operation worldwide and with the help of the growth of global economy in mid 1960s that we say expansion of TNCS operations
Toyota expanded its share in the automobile industry
There was an increase in Toyota production while other companies like FORD suffered a decline
HQ locate in Japan at Aichi province
R&D locate in Canada and USA
Operating plants in LDCS like Thailand
Positive impacts
Provides employments more than 13000 ppl employed
Increases wages and hence PP and SOL
introduces new working ethics
Creation in SME
New technology
Negative impacts
Places Thailand in vulnerable position
Other associated business
Exploitation of workers,
Widens devt gap
Govt polices and tax concessions
