3. Spatial and organisational structures of TNCs

Question 1

Give an example of a horizontal an organisational structure of TNCs.

Answer 1

UK Toyota – horizontal

Question 2

Why can Toyota be described as a product specialist?

Answer 2

Each production unit produces only one product for sale throughout a regional market of several countries (e.g. all activities are focussed in one place to create 1 product to sell) - product specialist

Question 3

Why can horizontal management be an economic benefit?

Answer 3

Lowers their unit costs by accessing global markets (reduced costs with economies of scale). Avoids trade barriers by locating production to regional markets It is a footloose company.

Question 4

How can horizontal management benefit the host country?

Answer 4

More staff employed to control varying but specific aspects of the company Toyota owns many subsidiary companies.

Question 5

Give an example of a vertical organisational structure of TNCs.

Answer 5

Shell – vertical integrated organisation structure.

Question 6

How does a vertical integrated organisation structure work?

Answer 6

• A supply chain is formed where each part of the chain provides services (company is active at every level – locating deposits, extraction, transport, refining, distributing and selling)
• Crucial decisions made by the CEO -> implemented to employees directly through a large chain of people (e.g. CEO/ chairman to managers etc) [hierarchy]
• Each production unit performs a separate part of production sequence & are linked across national boundaries (output of one plant is the input of the next)  final assembly occurs in a different place

Question 7

What are some key facts about the company Shell?

Answer 7

• Shell operates in 140 countries
• Employs more than 112,000 people worldwide
• 3% of world’s oil
• Extraction occurs in the Niger Delta (SW)

Question 8

Describe export-led development.

Answer 8

• Activities are concentrated in the home country where labour and sourcing are established
• Exports subject to tariffs and restrictions
• Development of supplier and consumer markets

Question 9

Describe overseas location of branch plants

Answer 9

• Cheaper labour, access to markets and financial assistance (e.g. incentives) from host governments
• Infrastructure investment
• Rapid growth of market seeking and resource-based investment

Question 10

Describe the shift of functions (R&D and HQ)

Answer 10

• New locations become semi-autonomous as products are developed in line with new markets
• Expansion in size

Question 11

Describe rationalisation.

Answer 11

• Increasing competition or recession - focus activities in the most favourable locations
• Growth of alliances and outsourcing