Trans National Corporations Flashcards
What are trans national corporations?
Worldwide companies that are bringing countries together by spreading themselves, and their cash, all over the world.
What do trans national corporations do?
Accelerate globalisation by linking groups of countries together through the production and sale of goods.
What is a merger?
A merger is where two companies (usually of similar size) agree to become one bigger company, e.g the two oil and gas companies BP and Amoco merged in 1998.
This helps links form between countries where the two companies operate.
What is an acquisition?
Where one company buys another (usually smaller) company e.g Ford bought Volvo in 1999.
What is using sub contractors?
TNCs can use foreign companies to manufacture products without actually owning the businesses, e.g Nike and Vietnam.
This links the countries of the TNC and the sub contracted company together.
What is foreign direct investment?
This is any investment that gives a TNC a long term interest in a country outside the one they’re from. It can involve mergers, acquisitions and using sub contractors e.g. if HSBC acquire a bank in Indonesia, they’re investing money in Indonesia.
What is a major criticism of TNCs?
Much of the profit they make from foreign operations doesn’t remain in the foreign countries- some of it goes back to the country of origin. E.g. some of the money from Volvo will go to the US not Sweden.
How can TNCs accelerate globalisation using culture?
The countries become linked by common patterns of consumption, e.g companies like McDonald’s sell similar products in every country they operate in. People in different countries are linked together because they can buy similar products.
How can trade blocs help TNCs?
TNCs operating within a trade bloc benefit from these reduced taxes.
E.g. Nissan manufacture cars in Sunderland rather than their origin Japan because it means they don’t have to pay tarrifs to import the cars into the EU.
How can trade blocs hinder TNCs?
TNCs that operate across countries that are in and out of the trade bloc will have to pay normal import taxes.
TNCs from the USA gain benefits from the NAFTA trade bloc. They can produce goods in Mexico, but still sell them in the USA and pay less or no import tax- cutting costs and increase profit because labour is cheaper and still sell same prices in USA.
