Global Systems and Global Governance 6


Transnational Corporations (TNCs) are companies that produce, sell and operate in two or more countries:

In 2013, 80% of global trade was linked to TNCs.

They operate in all types of industry:

  • Primary - extracting natural resources, e.g. Shell.
  • Secondary - making material goods, e.g. Toyota.
  • Tertiary - providing services, e.g. Aviva.

TNCs bring lots of investment into countries, spread new technologies and can promote particular cultures.

Potential investment, the creation of jobs and provision of new technology means TNCs can have political influence.

They're one of the main driving forces behind globalisation due to the interactions that occur between the countries where they operate.

They connect countries together because of their spatial organisation; global supply chain.

TNC's headquarters are usually located in big cities in developed countries. These cities are well connected in terms of global transport and communications.

Research and development facilities tend to be located in cities and towns where there's a supply of highly educated people.

Some TNCs locate regional research and development facilities closer to the markets they are selling to, so they can make products that are specifically for that market.

Factories are often located in less developed countries where production costs are lower. If a product is made in the country where it is sold, the TNC can avoid paying import and export taxes and can 

TNCs form linkages between countries through investment:

TNCs make links between countries and companies by expanding their operations:

  • Mergers - when two companies agree to becmoe one bigger company.
  • Acquisitions - when one company buys another company.
  • Using subcontractors - use foreign companies to manufacture products without actually owning the businesses.
  • FDI - Foreign Direct Investment can involve mergers, acquisitons and using subcontractors.

TNCs expand their operations to gain more control over their markets. They can achieve this in two ways:

  • Vertical integration is when a company takes over other parts of its supply chain.
  • Horizontal integration is when a company merges with or takes over another company at the same stage of production.

TNCs organise production to take advantage of a global supply chain:

TNCs create a global supply chain, which gives them economies of scale and means they get the most value from the whole of their supply chain.

Primary industry - often invest in countries with natural resources that they can extract.

Secondary industry - often invest in countries with low labour costs and cheap land, expecially where governments encourage investment with tax breaks.

Tertiary industry - often invest in countries with a well-educated population.

They also often…


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