What is the role of Trans National Corporations (TNC’s) in globalisation?

What is a TNC?• Transnational Corporations (TNCs) are major companies

which have a presence (e.g. production, headquarters, sales) in at least two countries. The worlds largest TNC is Walmart.

• Many TNCs are so economically powerful and politically influential that they rival national economies in terms of wealth.

Top TNC’s

• Visualise the data here

A. Economic Liberalisation • The more ‘open’ a country is to foreign companies

the more it stands to benefit from globalisation. Therefore more and more countries have relaxed their laws to encourage economic growth – economic liberalisation. Subsidies and tax breaks are all part of the process of economic liberalisation. • For example the SEZ’s in China helped to kick start

China’s manufacturing boom.

A. Economic Liberalisation • Offshoring: TNC’s move parts of the production

process (factories or offices) to others countries to reduce labour or other costs (e.g. import tariffs)• Outsourcing: When a TNC contracts another

company to produce the goods and services they need rather than do it themselves. This can create a very complex supply chain.

B. How have TNC’s spread globalisation 1. Global production networks 2. Glocalisation3. Development of new markets.

1. Global Production Networks • TNC’s have produced complex global production maps

as products are made in one country and then sold in a host of other countries too. • There is a long chain connecting many different parts

of a TNC together. • Today many TNC’s outsource parts of their business to

other companies. This means that the size of the TNC is ever increasing. E.g. The BMW Minis engine is made in Brazil by a company called Tritec Motors. The other 2500 parts are made by lots of different companies and Mini just assemble them in Oxford at their factory.

1. Global Production Networks • Poorly managed GPN’s can have their drawbacks;

1. When a natural hazard strikes an area, production may have to stop and supply chains are impacted (e.g. 2011 Japan Tsunami)

2. Lack of control over produce (e.g. UK supermarkets and horsemeat scandal in 2013)

3. Relaxed production standards from outsourced companies can lead to tragic accidents. E.g. in Bangladesh when the Rana Plaza collapsed in 2013 killing 1100 people who were making clothes for Wal-Mart, Benetton and Primark. HERE and HERE

2. Glocalisation• To be able to be profitable in a variety of cultures,

different TNC’s have adapted what they provide to suit different and new markets. • This helps to maximise sales.

BEEF burgers …. yummmm

Whats this about???

Glocalisaton

• E.g. Mc Donald's in India does not sell beef or pork and McDonalds, they have the Chicken Maharaja Mac. HERE

• In 2012 a vegetarian Mc Donald's opened for Sikh pilgrims visiting the Golden Temple in Amritsar.

• McDonalds the UK sells organic milk and all its beef comes from GB farms. Consumers value this local sourcing of ingredients.

3. Development of new markets. • New markets are essential and they depend on

product design and desirability. This can involve expanding the market to new customers (e.g. Tata Nano) or updating models so that people want to buy a new model (e.g. mobile phones) • Tata Nano here from 48.10

How do TNCs take advantage of economic liberalisation? (4)…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….

HINT: You should talk about outsourcing and offshoring.