Transnational Corporations Flashcards
What are transnational corporations?
Companies that produce sell out are located in 2 or more countries.
How much of global trade is due to TNCs?
80%
What is the primary industry?
Extracting natural resources
What is the secondary industry?
Making material goods
What is the tertiary industry?
Providing services
Do TNCs have political influence and why?
They bring investment, jobs and new technology giving them political influence.
How do TNCs bring countries together?
Their special organisation
Headquarters: cities in developing nations
Research and development: cities and towns near consumers
Factories: less developed countries
What is a merger?
When 2 companies of similar size agree to become one bigger company forming a link in where the countries operate.
What is an acquisition and how does it form links between countries?
When one company buys another smaller company.
How do TNCs use subcontractors?
Use foreign companies to manufacture products without actually owning the businesses.
What is vertical integration?
When a company takes over other parts of its supply chain. This means they own each step of the supply chain.
What is horizontal integration?
When a company merged with another company with the same production stage. Eg: Disney took over Pixar.
Give an example of a TNC in a primary industry.
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.
Give an example of a TNC in a secondary industry.
TNCs often invest in countries with low labour costs and cheap land. For example, Toyota invests in Indonesia due to low labour costs.
Give an example of a TNC investing into a tertiary industry.
TNCs often invest in countries with well educated populations. Eg: insurance form Aviva invested in Canada.
How do TNCs have an impact global trade?
-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.
How do TNCs use and benefit from global marketing?
Give an example.
They have a lot of money to spend on advertising and large marketing departments.
Eg: Coca-Cola
How do TNCs adapt to local markets? What is this called?
Give an example
Glocalisation is when companies gain knowledge of local markets and adjust their marketing accordingly.
Eg: McDonald’s have a McCurry in India
What is the largest TNC in retail?
Walmart
What is the spatial distribution of Walmart production?
Headquarters: America
Manufacturing: China (developing)
What are the economic impacts of Walmart in America?
+Employment
+Low prices
-Decline in manufacturing industry
-Loss of local business
How many stores does each Walmart create?
80 jobs
How has Walmart caused a decline in the manufacturing industry?
Walmarts suppliers are mainly outside of the US so it’s cause a loss of manufacturing jobs in the US.
How has Walmart caused a loss of local business?
Walmart stores can cause smaller businesses in the area to shut down as they can’t match the low prices.
What are the social impacts of Walmart in the USA?
+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.
What are the environmental impacts of Walmart on the USA?
-Walmart produces a lot of polluting gases
+Opened new green stores that run on renewable energy
How does Walmart affect its host country socially?
+Offers skilled jobs in less developed countries.
+Walmart donates millions of dollars in countries where it operates.
-Working conditions may be poor.
What are the economic effects of Walmart in its host country?
+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
