The nature and role of TNCs

  • Created by: steloah1
  • Created on: 02-05-22 15:43
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  • The nature and role of Transnational corporations
    • Spatial organisation
      • TNC's engage in research and developement to maintain competitive position
        • Near centres of higher education
        • Agglomeration of companies in Silicon valley, California
          • Agglomeration is when companies locate near each other to share ideas and resources
      • Assembly of Apple's main products is outsourced to Foxconn city, Shenzhen in the Guandong province, North of Hong Kong
    • Production
      • Primary industry
        • Based wherever there are unexploited resources
        • More prevailent in less developed countries
        • Hydraulic fracking makes more reserves of raw materials viable - North America
      • Secondary industry
        • Typically outsources to devoloping regions in east and south asia
          • Low labour costs
          • Investment in education - less training needed
          • Work ethic means that workers are willing to work long hours, with little holidays, in a non-unionised labour environment
      • Tertiary industry
        • Operate in areas where low labour costs are balanced with good education
          • India has a high proportion of English speakers - call centres
    • Linkages, trading and marketing patterns
      • Vertical integration
        • An arrangement in which the supply chain of a company is owned entirely by that company
          • Reduces cost because of economies of scale
          • For example, BP has negotiated exploration and production rights in over 40 oil and gas fields world wide
            • Owns its own pipelines and has its own shipping fleet
            • 1,100 retail service stations in the UK
      • Horizontal integration
        • A strategy when a company diversifies its operation by expansion, merger, or takeover
          • Kraft Foods took over Cadbury in 2010
            • Merged with Heinz in 2015
    • Nature and role of TNC's
      • Why might a TNC relocate?
        • To find lowest costs of production and exploit resoures. E.g. Arcelor Mittal in Liberia, Mongolia and Congo
          • Increase economies of scale
          • Out-sourcing


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