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The nature and role of TNC's (Common Characteristics of TNC's…
The nature and role of TNC's
TNC
Operates in multiple countires to escape trade tariffs, exploits resources, reach foreign markets, finding lower costs of production
Trans National Corporation
They are globally integrated because:
They locate different business functions elsewhere
Integrate production and deliver value worldwide
Common Characteristics of TNC's
Maximising global economies of scale by organising production to reduce costs
Sourcing raq materials or componenets at the lowest cost
Controlling key supplies
Control of processing at each stage of production
Branding of products/ services so they are easily recognisable
Outsourcing of production
Spatial Organisation
Head Quaters are usally situated in HICs and near higher educationalcentres such as universitys as tht is where they want their workforce from
Production
TNCs in the primary sector will locate near priamry products
TNCs in the secondary will locate
Low labour costs and education to train workers
High work ethic with less holidays
Goverment incentives like enterprise zones, less restrictive enviromental laws
TNCs in the tertiary sector will located where there are low labour costsbalanced with good education or proximity to market. Also called footloose.
Linkages/ Trading and marketing
Vertical integration
Owned entirely by the TNC from raw materials to finished product
This gives the TNC control over supplies and stock
Reduces cost due to economies of scale
E.g. BP harvest and also sell petrol
Horizontal integration
A TNC "Diversifies" its operations by expansion, merger or takeover
This can be complementary or competitive
E.g. the food industry wanting to diversify their products
Benefits and costs of TNCs
Benefits
For Host Country
Generates jobs
Brings new technology
Workers gain skills
Multiplier effect
For TNC
Lower costs as cheap as land and labour
Access to new resources
Fewer regulations
For country of origin/ TNC Base
Cheaper goods
Can specials in financial services and research and devolopment
Limitations