4.4 TNCs and globalisation Flashcards
What are the three reasons TNCs grow?
Motive
Means
Mobility
Under motive, what ways can companies control their costs to lead to more profit?
Controlling and minimising their costs (e.g. raw materials, labour)
Increasing their revenues by expanding their markets and merging with or taking over their competitors
Under motive, What are 5 ways in which TNCs can expand the markets in which they operate?
-achieving economies of scale: by expanding their capacity, (e.g Amazon warehouse size and Maersk ship size) in order to reduce their unit costs
-developing new markets: Expanding the market to new customers or creating frequently updated models that existing customers will want to buy
-horizontal integration: In which companies expand at one level of production
-vertical integration: a company controls and owns every stage of production
-diversifying their product range: Expansion of product range helps to future-proof a companies sales
Under capitalism, what is the one motive?
Profit
Under means, What are the mechanisms for company growth?
banking
free flow of capital
Under means, in what ways are the mechanisms for company growth variable?
-from year to year
-over the medium term (for example, they slowed during the 2008 financial crisis, when businesses reduced their levels of investment, but had largely recovered by 2014)
-over the longer term (Some countries that were receivers of FDI in the 80s and 90s are now providers of FDI to others
Under means, what is reverse colonialism and what are some examples?
Hong Kong, , Singapore, China, South Korea, Malaysia, India and Brazil are now high or middle-income countries and are all net providers for overseas investment. For example:
-in 2015, there were over 800 Indian-owned businesses in the UK- employing more than 110,000 people
-Russia invested US$87 billion overseas in 2013
-China has bought Japanese household brands, and is investing heavily into infrastructure in Africa, as well as the UK (Pizza express) and USA
What aspects of mobility have been fundamental to the spread of globalisation?
-Faster and cheaper transport through containerisation
-rapid communication systems, using optic fibres, satellite and digital technology
-new production technology such as ‘just in time’ and flexible production systems, which provide cheaper products and fast turn-around from orders to delivery
-global production networks, which link sources of raw materials, finance, manufacturing, market and sales. These are run from company headquarters, almost always in HICs.
What is ‘out-sourcing’?
When work is contracted out to another company (it’s known as off-shoring when that company is overseas)
What are some examples of mobility leading to controversial decisions by TNCs?
Kraft takes over Cadbury in multi-billion dollar deal to create confectionary leader- no guarantees for 4,500 workers at Bourneville Factories
What are some of the different operations that Disney has?
6 film/TV production and distribution companies, including Pixar and Lucasfilm, which makes Star wars
728 shops worldwide
5 record labels
14 theme parks and resorts and a cruise line
12 publishing companies, 15magazines and newspapers
2 theatrical production companies
What was Disney’s turnover in 2014?
US$48.8 billion
What are the benefits of just in time production for Disney
The company can wait to judge the success of a venture before investing in merchandise. It uses outsourcing and offshoring and demands quick delivery times. This avoids having to operate its own expensive production lines
What are the disadvantages of the just in time system for disney?
Overseas workers often earn low wages and have used toxic substances banned in the USA
In what ways is the world becoming disneyfied?
Disney owns 40 Spanish-speaking radio stations, together with foreign language television channels and a Chinese radio station in Hong Kong.
It also supplies reading materials to help teach English in Chinese and African schools.
It was one of the first global TNCs to glocalise, by tailoring its products to specific market areas.
