TNCs and globalisation

Question 1

How can TNCs globalise their manufacturing operations?

Answer 1

1. Producing just in the plant country.
2. Producing for multiple countries e.g. Honda.
3. Integrating production - each plant performs separate parts of a process.
   Vertical integration - linkage across national boundaries.
   Horizontal linkage - parts are moved to a final assembly plant in one country.

Question 2

What are external economies of scale (agglomeration economies, and what can they be categorised into?

Answer 2

Firms locate near one another together in cities/clusters.
TNCs may encourage such concentrations.
1. Localisation economies.
2. Urbanisation economies.

Question 3

What are localisation economies?

Answer 3

Firms linked by the purchase of materials/finished goods locate close together.
Reduces transport costs.
Faster delivery times: just-in-time deliveries.
Better communication.

Question 4

What are urbanisation economies?

Answer 4

Cost savings from urban locations.
Enables linkages between manufacturing and services.
Savings from economic/social infrastructure of an area that exists beforehand.

Question 5

How has there been a shift of investment towards service industries? 4

Answer 5

1. Account for largest FDI share in many countries.
2. Continuous liberalisation/deregulation process of key services has led to a big FDI inflow.
3. Growing number of TNCs in service sector.
   E.g. 20 largest TNCs, 6 were service providers e.g. AXA.
4. ICT revolution - overseas investment.
   Better/cheaper communication.
   Able to split services - more efficient.