Definition of TNCs
Definition: Transnational companies (TNCs) are companies that have operations in more than one country.
Two key characteristics:
•They grow by buying up foreign firms in mergers __and __acquisitions
•That much of their manufacturing is subcontracted (or ‘outsourced’) to third parties.
Transnational corporations (TNCs) are agents of global change. They link together groups of countries through the __production __of goods.
e.g. Large assembly industries use parts sourced from many countries to contribute to the finished product – cars, computers etc.
TNCs also forge connections between people in different countries by shaping common patterns of consumption .
e.g. Global entertainment brands like Disney or food retailers such as McDonalds.
TNCs are sophisticated and complex. They invest in internationally (Foreign Direct Investment -FDI). They expand through acquisitions __(buying and taking over other companies) and __mergers __(joining with rival companies). They also use __sub-contractors __to manufacture products (e.g. Disney does not produce it’s own toys/clothes etc.) Many household names are now owned by larger companies (e.g. Disney owns Marvel Comics and Lucas Arts).__
TNCs are helped and hindered by __trade blocs __who can either make it simpler for TNCs to invest/imported or can complicate the process.
Impact of TNCs
TNCs are the ‘architects’ of globalisation – they really make it happen:
•TNCs bolt together different markets with supply chains – they have a global supply chain/Global Production Network __and create a __spatial division of labour
•They have __branch plants __in numerous nations
•They cause significant global flows of trade
•They cause FDI inflows into regions
•They help shape global cultures __through their products across many nations (encouraging shared patterns of consumption) –__Mcdonalds, Nike.
Glocalisation is when global firms and brands adapt their products to increase customer appeal in local markets
GLOBAL product adapted for LOCAL market = GLOCAL
•Major car firms making right hand drive cars for UK market
•McDonalds ‘McVeggie Burgers’ in India due to Hindu customs
•No alcohol in Disney in USA but wine in Paris
•Tesco don’t wrap fruit/veg up in Thailand as customers only trust what they select themselves
In 2013, the value of two-way trade between the Americas and Asia was nearly double that between Americas and Europe. Trade across the Pacific has now become more important than trade across the Atlantic.
Reasons for this shift in trade:
- Countries in Asia began to attract overseas companies to their countries through open-door policies.
- TNCs began to look for new areas for manufacturing their goods (China) and outsourcing services (call services in India).
- Capital began to flow into the emerging or re-emerging countries.
- Labour is cheaper there.
The graph shows FDI (foreign direct investment) into different countries. FDI into China did not begin immediately, even though restrictions were relaxed in 1978 and 1991, the flow did not increase significantly for 10-15 years.
- Explain what a TNC is, and its mode of operation. Use examples. Offshoring, outsourcing, global reach, employment, transport, cheap costs, profit.
- Evaluate the impact of TNCs, giving examples to back up your points. Do you think they are positive of negative? Why? Environmental, Social, Economic, Political, degredation,
- Explain what the global shift is, using examples. Asia, outsourcing, manufacturing, call-centres, wages, trade, FDI