TNCs Flashcards
What is a TNC
A company that operates in at least two countries- its organisation is hierarchical
Resource extraction
Particularly for mining of materials such as oil and gas
Manufacturing
- high tech industries e.g. Computers
- large volume consumer goods e.g. TVs
- mass produced consumer goods e.g. Breakfast cereals and cosmetics
Service operations
E.g. Banking, advertising
Dyson
In 2002 moved production plant from Wiltshire to Malaysia - cheap labour
How can TNCs take advantage of government policies
Lower taxes, subsidies and grants, and less strict legislation on employment and pollution.
Avoid trade barriers by locating production within the markets where they want to sell
Japan
Motor vehicle firms attracted to the EU bc of quota restrictions on the import of Japanese made vehicles into Europe.
Why are governments keen to attract TNCs
Because inward investment creates jobs and boosts exports which assist the trade balance
TNCs serve a global market and they can globalise their manufacturing operations in several ways:
- producing for the country in which the plant is situated
- producing for a number of countries
- integrating production- each plant performs a separate part of a process
External economies of scale
- localisation economies (reduced transport costs between firms)
- urbanisation economies (cost savings result from an urban location- enabling linkages to develop between manufacturing and services
In recent years there has been a shift of investment towards..
Service industries
Largest use of FDI in many countries
Services (shift from manufacturing)
What has opened up overseas investment in trade able services
The ICT revolution- information can be sent at little cost, services can be split into components- each of which can be located in countries that are able to provide them most efficiently and cost effectively
