TNCS Flashcards
(22 cards)
what is a TNC
transnational corporation
companies that operate in at least 2 countries
where are headquarters usually
in a major cities with lots of high skilled worker and connections
why do TNCs operate globally
to escape tariffs
use lower production costs
reach foreign markets
exploit resources
where does research and development take place
usually in the country of origin
what are the main trading routes
usa
Japan
eu
how many tncs did usa have in 2014
564
where are factories often located for TNCs
in less developed countries where production costs are low.
production costs- labour, materials, land
what is a merger
2 countries agreeing to become one bigger company.
usually similar size.
positives of a merger
helps form links between where the companies operate
what are acquisitions
when one company buys another company, usually smaller
what is FDI
foreign direct investment
How can TNCs expand and gain more control
vertical integration - takes over part of the supply chain
horizontal integration- when a company mergers or takes over another company
what is a global supply chain
companies supplier might be in a different country to its factory
research and development might be in a different country as well
minimises costs
eg- apple
economies of scale
scale of supply chain means they get value for their money
make things more cheaply
TNCs - primary industry
extract raw materials from the earth
farming , fishing , mining
they invest in countries with natural resources they can extract
TNCs - secondary industry
manufacturing the raw materials into finished goods
invest in countries with low labour costs and cheap land and countries which have a large market for their products
tertiary industry TNC
provide services and retail
education, healthcare,
invest in countries with a well educated population
where else do TNCs invest
countries with weak - labour and environmental regulations
employees made to work long hours and disposing of waste cheaply
TNCs have a big impact of global trade
intra-firm trading
one part of a TNC trades with another TNC
this makes TNC globally very powerful because they have an advantage over smaller businesses
eg - intel / microchips
Costa Rica and USA
pg.135
TNCs have a big impact of global trade
multiplier effects
when a TNC opens a factory
it creates jobs for the local area which means people have more money to spend
this helps local businesses and governments
businesses sell more products and the government can tax more people
TNCs can take advantage of global marketing
they operate in many different countries
benefit from having a lot of money to spend on advertising
adjust their marketing to reflect cultures eg. maccies
what is the aim of TNCs
to create a brand which is recognised globally
eg. Coca Cola
