TNCs Flashcards
Definition of a TNC( transnational corporation)
A company which operates in at least 2 countries. Organisation is hierarchical
What are the 3 types of TNCs
1) Resource extraction eg shell,BP
2) Manufacturing-can be high tech ,consumer goods, mass produced consumer goods
3) Service operations - banking insurance
Growth of TNCs
Companies wanted to become TNCs to take advantage of
Cheaper labour costs
Government policies such as lower taxes,subsidies and grants
Less stringent legislation on employment and pollution
Other reasons for growth of TNCs
- Get round trade barriers
- Locate markets where they want to sell
- Grow to size to achieve economies of scale, reduce costs,more competitive
- Gain geographical flexibility
Impacts on host country - advantages of TNCs locating
- Employment
- injection of capital into local economy - more disposable income demand for housing, services ,transport increases
- multiplier effects - investment trigger more employment so more wealth
- new working methods- transfer of technology create more skilled workforce
Impact on host country - disadvantage
Competition Environmental concerns Labour exploitation Urbanisation Removal of capital Outside decision making
Impact on country of origin - positive
- High salary employment even when TNCs move operations over seas headquarters and R&D often stay in home country
- return of profits successful TNCs return profits to home country to be distributed among shareholders
Impacts on country of origin - negative
Unemployment
Reverse multiplier effects- unemployment increases disposable income falls
Case study for a TNC
Apple
When was Apple founded ?
1976
75th largest company in world in 2010 and 3rd in terms of global brand value
Intense brand loyalty
Spacial distribution of Apple - location
Headquarters - California
R&D - most of 49000 employees based in developed world. R&D in California
Data centre - New Jersey
Manufacturing - most advanced in cork, Ireland
NIC/RIC production - Asia - Foxconn and quanta computer - Taiwanese ( labour in China skilled but cheaper )
Consumers - most north of digital divide 44% of sales in 2010 in USA
All but 4 of its retail stores in developed countries
Criticisms/ problems and apples response
- outsourcing production
- outsourcing production has risks for Apple - news reports in bad conditions in factories and high worker suicides in 2009-10 14 deaths. Prison like working conditions,70hr weeks. Breaches of employment law - sweatshop
Apple now has supplier code of conduct
Criticism/problems and apples response
- environmental issues
Environmental issues
The greenpeace ‘a greener Apple”campaign urged Apple to produce greener products by recycling products and not using harmful chemicals
2010- scrapped use of pvc plastic and promoted recycling of its products
Is Apple a success in China
Nearly 30% of apples sales came from China in 2015
China been a source of problems for many big consumer companies as economy lost momentum
Concerns about pressures on apples Chinese workers
Apple considering making iPhones in India
Other TNCs
Nissan, Honda, toyota
Dyson
Unilever
Tesco
