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Transnational Corporations (TNC’s)

Transnational Corporations (TNC’s)

• TNC’s help to build bridges between nations. • TNC’s nothing new as the British Empire has been linking

people and places, e.g. The East India Company. • Some key characteristics of TNC’s are;

– That they build their business up through buying other companies (mergers and acquisitions) E.g. Jaguar is owned by Tata.

– Manufacturing is subcontracted to third parties (hard to enforce environmental standards)

– Manufacturing is more about assembly industries. I.e. the company (e.g. Jaguar) simply assemble what other people have made for them.

Transnational Corporations (TNC’s)

• Turn to p104 and copy out the key terms;– Branch Plants – Consumption– Glocalisation – Parent Company – Tertiary Sector

Pro TNC

Improved living standardsthrough minimum wage

Technology Transferspecific to markets

Political Stabilityaided by economic stability

Increasing Environmental Awareness

Coorporate images and green credentials

Anti TNC

Tax Avoidance – due to Concessions, so

governments struggle to raiserevenue

Limited LinkagesLocal firms not used, business

men com in from overseas

Environmental DegradationBhopal, India 1984

Union Carbide (USA) plant emitted poisonous gases leading to

the death of thousands

Increasing Wealth DivideInvesting in Asia and not Africa

TNC’s create new haves and have nots

Costs Benefits Host country

• Profits go to the HQ country

• Tax avoidance • Workers are paid low

wages and may be exploited

• Health and safety may be ignored

• Environmental impacts may be large

• Rise in Living Standards• Job creation• Supplier companies and

linked industries may grow

• Creates connections with the rest of the world

• Political stability

Source country

• Loss of jobs due to global shift

• Derelict land due to factory closures

• The costs of regeneration

• Dirty industries and pollution are ‘exported’

• TNCs may generate greater profits and pay more taxes

Host and source costs and benefits

TNC’s and Global WealthWorld’s top five TNCs (2006) TNC

2006 GDP of selected nations

TNC Revenue ($bn)

Country GDP ($bn) Rank

Exxon Mobil 377 Thailand 206 34

Wal-Mart 351 Nigeria 115 48

Royal Dutch/Shall

318 Pakistan 128 45

BP 274 Bangladesh 65 57

General Motors

207 Zimbabwe 5 131

TNC: Case Study Tesco

Your turn

• Using Tesco as a case study (p105-6) produce a mind map on this case study.

• Include;– Facts– Does Tesco exploit or look after its workers?– what are both the costs and benefits of Tesco for

host and source countries.