Please enable JavaScript.
Coggle requires JavaScript to display documents.
Transnational corporations (TNCs) - Coggle Diagram
Transnational corporations (TNCs)
Benefits and costs of TNCs
benefits
for the TNC
low costs because of cheaper land and cheap wages
access to unexploited resources
fewer environmental and employment limits
for the country of origin
cheaper goods
can specialise and develop via research and development and financial services provisions
for the host country
generates jobs and income
brings new technology into the country
kick starts the multiplier effect
problems
for the country of origin
loss of manufacturing jobs
de-industrialisation
structural unemployment
for the TNC
ethical issues associated with environmental damage and using 'sweatshop' labour
for the host country
poor working conditions
exploitation of resources
economic leakage/repatriation of profits
spacial organisation
traditionally the headquarters of a TNC is in a major city in its home country
normally there will be a subsidiary in each continent
research and development facilities will also be located in the home country - often near places of higher education
production
for
primary sector
TNCs production will be based wherever there are unexploited resources, normally in developing economies (however due to new technologies this can also be done in the home country - fracking for oil and gas in the UK and the USA)
for
secondary sector
TNCs production will be based in developing countries, particularly South Asia - this is due to low labour costs, relatively good education levels, willing to work long hours and government incentives like tax breaks
for
tertiary sector
TNCs operations are more footloose and will locate services where costs are low and/or where markets can be accessed the most easily
linkages, trading and marketing patterns
vertical integration
- The supply chain is owned entirely by the company, from raw material to finished product
example : BP, own 40 oil and gas fields, as well as 1100 retail service stations in the UK
Horizontal integration
- where companies increase the size of parts of the supply chain via mergers or takeovers
example : Kraft foods takeover of Cadbury in 2010 gave them a stronger base in grocery stores and confectionary
case study - Apple
production
primary: 43 different countries provide raw materials for Apple products (IE Tin is mined in Boliva