- Created by: charliedee
- Created on: 04-05-16 14:44
They accelerate globalisation by linking together groups of countries through the production of safe goods.
TNCs create links between different countries in several ways, including mergers, acquisitions, using sub-contractors, foreign direct investment (FDI).
A merger is where two companies agree to become one bigger company. This helps links form between the countries where the two companies operate.
An acquisition is where one company buys another (usually smaller) company.
TNCs can use foreign companies to manufacture products without actually owning the business. This links the countries of the TNC and the sub-contracted company together.
Foreign direct investment (FDI)
This is any investment that gives a TNC a long-term interest in a country outside the one they're from. It can involve mergers, acquisitions and using sub-contractors.
TNCs can accelerate globalisation by bringing the culture from their country of origin to many different countries. The countries become linked in by common patterns of consumption. People in different countries are linked together because they can buy similar products.
Trade blocs & TNCs
Trade blocs can reduce or remove import taxes between countries in the bloc. TNCs operating within a trade bloc will 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.
Nissan manufacture cars in Sunderland rather than in their country or origin (Japan) to avoid import taxes to ship cars to the EU.
Walmart is a TNC from a wealthy country and is one of the largest TNCs in the world.
Wal-mart first opened in Arkansas, USA.
More stores have since opened throughout the USA and the world via the acquisition of other retail companies.
Some Wal-mart store still trade under their own name e.g. ASDA, others have been rebranded e.g. some stores in Canada.
Some acquisitions haven't been successful e.g. in Germany they couldn't compete with Aldi and Lidi.
Wal-mart is starting to expand into NICs like India, which have been huge markets. For example, Wal-mart and an Indian company called Bharti Enterprises are opening new retail outlets together in the style of Wal-mart stores.
Wal-Mart accelerating globalisation
In the USA Wal-mart gives customers all that they need in one building at a relatively low cost. They've successfully introduced this in other countries. 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.
Wal-Mart dividing labour
Wal-mart divide their labour across many different countries.
The spatial division of labour is splitting up the work of a company so that each part is carried out in a different location.
Some electroic goods are made in factories in China and Malaysia. Cheaper labour and bulk buying maean that Wal-mart can sell these products at lower prices than if they bought the goods made in the USA.
Cloting for Wal-mart is made by companies like George, a British company. Criticism of using cheap labour in Asia has led the production to be bought back to the UK.
Factories in China - workers earn less than $1 an hour
Factories in the USA - workers earn the minimum wage of around $6 an hour
Headquaters in the USA - executives earn hundreds of thousands of dollars a year
This may seam unfair, but it's the relative amount that matters - cost of living in China is less than in the USA, so $1 goes further. Also, TNCs can offer more reliable wages than income from jobs like sustinence farming, even if the money isn't great.