TNCs Flashcards
TNCs = companies that operate in 2 or more countries
E.g. Sony manufacture electronic products = China + Japan + sell many of them = Europe + USA
TNCs play = imp role in global economy - around 80% of global trade is linked to TNCs
Globalisation grows due to what strategies used by TNCs
- control supply chains
- focus = FDI
- Glocalisation
TNCs develop + control supply chains
That extent across multiple countries. They connect these countries through movement of raw materials, capital, labour, part-assembled components + manufactured products
TNCs focus on FDI
on some countries + not others which can create uneven levels of globalisation
E.g. TNC is more likely to invest in a country that offers a potential economic advantage (cheaper labour force or a market within tariff- free trade bloc) = allow the TNC to maximise their profits
Glocalisation
When TNC adapts to local markets
E.g. changing the design of a product so it complies with local laws or fits better with local tastes + customs. TNCs use glocalisation 2 make their products more appealing to new local markets e.g:
- clothing may be sized differently for people from different countries (longer/shorter leg lengths)
- by law- tobacco companies have to use plain packaging in some countries
Fast food companies like McDonalds may change their menu to suit local tastes + religious observances (halal)
Offshoring
When a TNC moves branches of the company to other locations overseas
Outsourcing
When a TNC moves parts of its operations to local companies overseas
TNCs can take advantage of economic liberalisation - offshoring
Economic liberalisation (having freer trade + welcoming foreign investment) has allowed many TNCs to invest in other countries by offshoring elements of their company e.g. factories
Helped TNCs to grow rapidly + generate large profits since those countries can often provide cheaper labour + lower running costs
Contributes to international spatial division of labour (when labour force is split between different countries to take advantage of the cheaper wages for particular skill sets in each country)
TNCs can take advantage of economic liberalisation - outsourcing
TNCs can invest in other countries by outsourcing parts of their operations to local companies. E.g. Apple employs the component manufacturer Foxconn Shenzhen- China to complete the assemble of many of their products. Creates global production network for many well-known products
TNCs can take advantage of economic liberalisation - acquire + merge
TNCs may acquire/merge w/ local companies to be more competitive within their markets. The expansion of TNCs into new countries can also increase the international recognition of their brand which can increase the market for their products
Wal-Mart
Wal-mart = a chain of discounted department stores that has taken advantage of economic liberalisation in other countries
It divides labour across different countries
Headquarters = USA but most manufacturing is carried out where costs are lower e.g. electronic goods are made in China + clothing is made = India
Offshoring has opened up new markets = Wal-mart e.g. wal-mart + an Indian company = Bharti Enterprises are opening new retail outlets together in the style of Wal-Mart stores
Owning = 5300 stores across = USA it’s starting to have a more global presence through the acquisition of other retail companies in other countries
