• Created by: keeels
  • Created on: 10-05-14 18:40


TNCs accelerate globalisation by linking together groups of countries through the production and sale of good. In large assembly industries, the parts are often made in one country, assembled in a second country, then sold in a third. For example, BAE systems make defence vehicles like submarines. They use componants from all over the world, assemble the vehicles in large factories like the ones in Barrow (UK) then sell the vehicles to other countries such as the USA. TNCs create links between different countries in several ways.

  • Mergers - a merger is where two companies (usually of similar size) agree to become one bigger company, e.g the two oil and gas companies BP and Amoco merged in 1998. This helps links form between countries where the two companies operate
  • Acquisitions - an acquisition is where one company buys another company, e.g the US car company Ford brought the Swedish company Volvo cars in 1999
  • Using sub-contractors- TNCs can use foreign companies to manufacture products without actually owning the businesses, e.g NIKE products aren't always made in factories NIKE own. This links the countries of the TNC and the sub-contracted company together
  • Foreign direct Investment - this is any investment that gives TNC a long term interest in a country outside the one they're from. It can involve mergers, acquisitions and using sub contractors, e.g if HSBC acquire a bank in Indonesia, they're investing money in Indonesia 
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Criticism etc

A major criticism of TNCs is that much of the profit they make from foreign operations doesn't remain in the foreign countries- some of it goes back to the country of origin. E.g some of the money made by Volvo cars will be invested back in the USA, not Sweden.

TNCs can accelerate globalisation by bringing the culture from the country of origin to many different countries. The countries become linked by common patterns of consumption, e.g companies like McDonald's sell similar products in every country they operate in. People in different countries are linked together because they can buy similar products

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Help / Hinder

Trade blocs can reduce or remove imported taxes between countries in the bloc. TNCs operating within a trade bloc benefit from these reduced taxes, but TNCs that operate across countries that are in and out of the trade bloc will have to pay normal import taxes. This affects where TNCs locate their operations, for example:

  • Nissan manufacture cars in Sunderland rather than in their country of origin (Japan) because it means they don't have to pay tariffs to import cars into the EU
  • TNCs from the USA gain benefits from the NAFTA trade bloc. They can produce goods in Mexico, but still sell them in the USA and pay less or no import tax. This means they can cut costs and increase profit because labour is cheaper in Mexico and they can still sell them for the same price in the USA
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Walmart is a chain of discount department stores (ASDA is part of Walmart). It's one of the largest TNCs in the world and the largest retail TNC (many of the top TNCs are oil companies)

  • Walmart began when Sam Walton opened the first disount store in Arkansas, USA
  • More stores opened across Arkansas, then across the USA, and more recently across the globe via the acquisition of other retail companies. E.g Seiyu in Japan, ASDA in the UK and Bompreco in Brazil
  • Some Walmart stores continue to trade under their own name e.g ASDA. Other have been rebranded as Walmart e.g some stores in Canada
  • Some acquisitions weren't successful ,e.g Walmart was forced to sell its stores in Germany after struggling to compete with existing discount retailers there e.g Lidl
  • Walmart is starting to expand into NICs like India, which have huge new markets. For example, Walmart and an Indian company called Bharti Enterprises are opening new retail outlets together in the style of Walmart stores
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Like other TNCs, Walmart helps to accelerate globalisation- it links countries together through the flow of money, people, trade and information. It also brings the culture of its country of origin (USA) to other countries

  • In the USA, Walmart gives customers all they need in one building at low cost. They've successfully introduced this into other countries e.g ASDA now stocks more non-food items. This hasn't been successful in all countries. They're trying a different approach in India where people like to shop in traditional markets rather than supermarkets
  • Although Walmart is a global brand it's retained a local approach by buying local companies. Its stores aren't all exactly the same, though many of the products are, e.g George clothing supplies ASDA in the UK and Walmart in the USA. Selling the same products globally helps to create common patterns of consumption between different countries
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Walmart across countries

The spatial division of labour is basically splitting up the work of a company so that each part is carried out in a different location. Companies do this so each part is carried out in the most cost-effective place. For example, goods are manufactured where there's cheaper labour (e.g developing countries) but research and development is carried out where there's a highly educated, skilled workforce(e.g more developed countries)

Walmart's workforce is divided because it sources products from all over the globe and sells them in many countries

  • Some electronic goods are made in factories in China and Malaysia. Cheaper labour and bulk buying means Walmart can sell these products at lower prices than if they're brought goods in the USA
  • Clothing for Walmart (and ASDA) is made by companies like George, a British company. Criticisms of supermarkets for exploiting cheap labour in countries like China and India has led companies like George to switch some of their products to the UK
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Walmart Inequalities

When TNCs like Walmart divide labour across the globe, people from different countries are linked together because they work for the same company. But this doesn't mean the working conditions or wages are equal

  • Factories in China - Workers earn less than $1 an hour
  • Factories in the USA - workers earn the minimum wage of around $6 an hour
  • Headquarters in the USA - executives earn hundreds of thousands of dollars a year

This may seem unfair, but it's the relative amount that matters - the cost of living in China is lower than the USA, so $1 goes further. Also, TNCs can offer more reliable wages than income from jobs like subsistence farming, even if the money isn't great

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