Transnational Corporations

Question 1

What are transnational corporations?

Answer 1

Companies that produce sell out are located in 2 or more countries.

Question 2

How much of global trade is due to TNCs?

Answer 2

80%

Question 3

What is the primary industry?

Answer 3

Extracting natural resources

Question 4

What is the secondary industry?

Answer 4

Making material goods

Question 5

What is the tertiary industry?

Answer 5

Providing services

Question 6

Do TNCs have political influence and why?

Answer 6

They bring investment, jobs and new technology giving them political influence.

Question 7

How do TNCs bring countries together?

Answer 7

Their special organisation
Headquarters: cities in developing nations
Research and development: cities and towns near consumers
Factories: less developed countries

Question 8

What is a merger?

Answer 8

When 2 companies of similar size agree to become one bigger company forming a link in where the countries operate.

Question 9

What is an acquisition and how does it form links between countries?

Answer 9

When one company buys another smaller company.

Question 10

How do TNCs use subcontractors?

Answer 10

Use foreign companies to manufacture products without actually owning the businesses.

Question 11

What is vertical integration?

Answer 11

When a company takes over other parts of its supply chain. This means they own each step of the supply chain.

Question 12

What is horizontal integration?

Answer 12

When a company merged with another company with the same production stage. Eg: Disney took over Pixar.

Question 13

Give an example of a TNC in a primary industry.

Answer 13

When TNCs invest in countries with natural resources that they can extract. Eg: shell acquired BG Group to gain access to oil reserves in Brazil.

Question 14

Give an example of a TNC in a secondary industry.

Answer 14

TNCs often invest in countries with low labour costs and cheap land. For example, Toyota invests in Indonesia due to low labour costs.

Question 15

Give an example of a TNC investing into a tertiary industry.

Answer 15

TNCs often invest in countries with well educated populations. Eg: insurance form Aviva invested in Canada.

Question 16

How do TNCs have an impact global trade?

Answer 16

-Intra-firm trading
-Multiplier effect when a new factory is built it increases income of the local area which is invested back in the local country.
-Make it easier for local companies to become part of their global supply chain.

Question 17

How do TNCs use and benefit from global marketing?
Give an example.

Answer 17

They have a lot of money to spend on advertising and large marketing departments.
Eg: Coca-Cola

Question 18

How do TNCs adapt to local markets? What is this called?
Give an example

Answer 18

Glocalisation is when companies gain knowledge of local markets and adjust their marketing accordingly.
Eg: McDonald’s have a McCurry in India

Question 19

What is the largest TNC in retail?

Answer 19

Walmart

Question 20

What is the spatial distribution of Walmart production?

Answer 20

Headquarters: America
Manufacturing: China (developing)

Question 21

What are the economic impacts of Walmart in America?

Answer 21

+Employment
+Low prices
-Decline in manufacturing industry
-Loss of local business

Question 22

How many stores does each Walmart create?

Answer 22

80 jobs

Question 23

How has Walmart caused a decline in the manufacturing industry?

Answer 23

Walmarts suppliers are mainly outside of the US so it’s cause a loss of manufacturing jobs in the US.

Question 24

How has Walmart caused a loss of local business?

Answer 24

Walmart stores can cause smaller businesses in the area to shut down as they can’t match the low prices.

Question 25

What are the social impacts of Walmart in the USA?

Answer 25

+Provides a wide choice of products at a low cost
+Open 24 hours a day
-Many jobs are poorly paid with few benefits like health care.
-Accused of having poor working conditions like long and irregular hours.

Question 26

What are the environmental impacts of Walmart on the USA?

Answer 26

-Walmart produces a lot of polluting gases
+Opened new green stores that run on renewable energy

Question 27

How does Walmart affect its host country socially?

Answer 27

+Offers skilled jobs in less developed countries.
+Walmart donates millions of dollars in countries where it operates.
-Working conditions may be poor.

Question 28

What are the economic effects of Walmart in its host country?

Answer 28

+Creates lots of employment opportunities.
+Local companies supply Walmart with goods.
-Local suppliers forced to accept low prices for their products
-Profits are sent back to the USA
-Local companies cannot compete