AQA A2 Geography - TNCs

Geo File on TNCs 

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Geo file 513
Barbara Melbourne
Transnational Corporations
Transnational corporations (TNCs) are Figure 1: Top 20 non-financial TNCs in 2002, ranked by foreign assets
very large global companies. They have
an administrative headquarters (HQ), a 2002 Country Product
Research and Development 1 General Electrics USA Aero-engines, engineering
establishment (R & D) and production 2 Vodafone UK Telecommunications
centres in one country and at least one, 3 Ford USA Vehicles
but often many more, branches and/or 4 British Petroleum UK Oil-based activities
production centres overseas. Over the 5 General Motors USA Vehicles
past 30 years major technological 6 Shell Netherlands / UK Oil-based activities
advances in transport (containerisation, 7 Toyota Japan Vehicles
bulk carriers and air freight), along 8 Total, Fina, Elf France Oil-based activities
with developments in computerisation 9 France Telecom France Telecommunications
and communications (satellites and 10 Exxon USA Oil-based activities
internet), have brought about the 11 Volkswagen Germany Vehicles
globalisation of the world's economy 12 E.ON Germany Electricity, gas and water
and the resultant growth in size and 13 RWE Germany Electricity, gas and water
number of such TNCs. 14 Vivendi Universal France Media
15 Chevron, Texaco USA Oil-based activities
Approximately 90% of TNCs are based Corporation
in MEDCs, especially the USA, France, 16 Hutchison Whampoa Hong Kong Diversified
Germany, the UK and Japan (Figures 1 17 Siemens Germany Electrical and electronics
and 2). 18 Electricité de France France Electricity, gas and water
19 Fiat Spa Italy Vehicles
Overseas branches are in LEDCs 20 Honda Japan Vehicles
· production costs are usually less
than in MEDCs, with lower wages, Figure 2(a): Countries of origin of Figure 2(b): Countries of origin of
cheaper land and lower transport TNCs in Developed World (MEDCs) TNCs in Developing World (LEDCs)
· governments of LEDCs want to MEDCs LEDCs
host TNCs as they often encourage Italy Philippines
2 Australia 1
further economic development 1 Thailand
Argentina 1
(multiplier effect), and so they offer Netherlands 1
financial incentives such as low
rates and taxes etc. Taiwan
· LEDCs often have fewer Spain Malaysia Hong Kong
environmental restrictions which 3 USA 13 3 11
reduces production costs. Brazil
Switzerland 3
Rep. of Korea
TNCs also have branches in other Japan 4 Singapore
MEDCs, often choosing areas with: 4 9
· a suitable workforce (e.g. car 8
UK South Africa
companies usually choose places 4 7
Germany Mexico
with a history of engineering); 8 7
· cheap land ­ often in declining
industrial areas;
· well-developed transport facilities
to market areas; protect their own car industries' introduced a separate brand called
· high unemployment, providing a sales. Japanese companies have Lexus in 1989. This has now
good available labour supply; built factories within the EU, e.g. in become the number-one-selling
· past economic problems so that the the UK Toyota located at Derby luxury car brand in the US, and
government is prepared to offer (see case study), Honda at Swindon Toyota introduced it in Japan in
financial help, e.g. grants and lower and Nissan at Sunderland. These 2005.
rates and taxes. cars are considered as
`manufactured in Europe' and so Recently, firms in newly industrialised
By building branches in other MEDCs are not limited by quota restrictions countries (NICs), especially in the `tiger
firms can also: · focus on the tastes of local people, economies' of Eastern Asia, which
· establish operations within trade known as `host market' production, produce machinery, electronics and
barriers, thus avoiding quotas and and be more `visible' to the area's cars, have become TNCs. As wage costs
import duties, e.g. the EU countries consumers, increasing sales. To have risen in their home countries they
set up quota restrictions on the gain a higher share in the US have extended into neighbouring
import of Japanese vehicles to domestic luxury car market, Toyota LEDCs with cheaper labour, e.g.
Geofile Online © Nelson Thornes 2006

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January 2006 no.513 Transnational Corporations
Figure 3: Industries by type in top 50 non-financial TNCs, ranked by foreign assets assessment studies on possible
future sites;
MEDCs LEDCs · reclaiming degraded land by
Motor vehicles 9 1 remediation schemes, e.g.…read more

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January 2006 no.513 Transnational Corporations
Figure 4: effects of TNCS on host countries
Benefits Drawbacks
· Employment: jobs are created for locals both at the · Labour force: in LEDCs the local labour force is often
TNC and in associated building, transport and service exploited with long working hours and low rates of pay.
industries Young children are often employed and membership of
· Improved technology: new technology, expertise and unions is not allowed.…read more

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January 2006 no.513 Transnational Corporations
Figure 5: Shell: employment by sector · Deeside, 7 miles from Chester on a many years they have grown rapidly
well-prepared industrial park. with little control on their activities
Exploration and
and operations, especially in LEDCs.…read more


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