What is an TNC?
A company who has operations in more than one country.
What is an MNC?
A company who has operations in a number of countries.
What is foreign direct investment?
This is investment usually by a TNC outside their country of origin into another usually an LDC.
Investment can also be from NGOs such as the world back or the international monetary fund.
Where are most headquarters, research and development centres of TNCs located?
- These are often located in host countries and HICs.
- This is due to high levels of education which provides a highly skilled workforce which is needed for development etc.
Where do most TNC sales and retailing take place in?
- Most of sales and retailing take place in HICs and NICs as this is where the consumer base is most likely to have high levels of disposable income to spend on products and services.
Where are TNC production plants usually located?
- Usually located in LIC and LDCs.
- Cheap production costs due little legislation regarding wages, health and safety etc.
- Also usually cheap taxes or tax incentives provided by governments in order to get them to locate there.
Why do trading blocs have an impact on the spatial organisation of TNCs?
- TNCs may choose to locate their production inside the bloc as it means they are able to ship their goods to all the countries inside it with no barriers.
- Allows them to receive cost benefits which may also be passed onto customers.
What is horizontal integration?
This is when a TNC extends its operations to similar areas at the same stage of production as them.
- E.G. Kraft acquired Cadburys through a takeover.
What is vertical integration?
This is when a TNC owns every or most stages of production from the raw material to the finished product including distribution.
- E.G. BP involved in the extraction, transport, refining and retaining of oil.
Employment advantages and disadvantages?
- New jobs are brought to the area when the business chooses to set up there.
- These are often low skilled jobs with low wages as TNCs aim to make use of comparative advantage.
- Limited job security as they are likely to relocate if conditions change.
Postitive multiplier advantages and disadvantages?
- Will need to prove support for new branches, this can generate additional wealth and employment in supply chains.
- Wages earned will be spent locally generating further incomes and taxes.
- If TNC chooses to relocate the negative multiplier effect will take place.
Infrastructure advantages and disadvantages?
- In areas which are undeveloped in LDCs a multi-national sometimes builds infrastructure transport the products to markers or accommodation for workers.
- Roads may only be a single route to the coast and accommodation is usually limited to single person dormitories.
- Governments may have to fund part of this in order to get the TNC to locate there originally.
Products advantages and disadvantages?
- Products and services provided by the multinationals will be sold in the country in which the new branch is built which local people can buy or use.
- Locals are unlikely to be able to to afford the products.
- May compete with local businesses.
- May also lead to a decline of the areas health and culture.
Taxes advantages and disadvantages?
- Multi-nationals will have to pay taxes to the government in the country they choose to locate in, which can be used to make improvements.
- Tax rates are often low as this is one of the main reasons the TNC chooses to locate there originally.
- Money may also be spent by corrupt governments.
Skills advantages and disadvantages?
- TNC is likely to train its staff to be able to complete tasks well which means workers develop new skills.
- Skills used may be basic and involve working on a production line which would be non-transferrable.
- Promotion is also likely to be limited.
Environment advantages and disadvantages?
- The TNC will have access to latest technology and funds to be able to monitor and reduct impacts upon the local environment.
- Amount of pollution (visual, air, noise) will increase.
- Wildlife habitats will be reduced.
- Just because they have access tot he technology does not mean they will use it as there are no laws which force them to do so, therefore would not as it increases the cost.
What did LG do in South Wales?
- In 1996 LG announced it was setting up a plant in Newport, South Wales.
- They claimed they would employed 6000 people with another 15,000 in the supply chain.
Why did LG choose this location?
- Large area of flat land to build on.
- Transport links were good to London and the rest of the UK.
- Located inside the EU which gave them access to 350 million wealthy consumers with no barriers.
- Low cost workers due to high unemployment rates due to de-industrialisation.
- UK government through the WDA paid subsidies of £180 million/ £30,000 per job.
What did LG do next?
- Economic slow down in East Asia led to a scaled back plan for the plant in 1999.
- 2003 announced plans to close the plant which led to a loss of 870 jobs.
- Blamed it on switch from CRT TVs to flat screen TVs.
- In 2004 repaid £35 million of the £90 million grant.
What is the old LG factory today?
- 2005 an Irish radiator manufacturer announced plans to create 500 jobs in the factory.
- Will produce 5 million radiators per year.
