Trans National Corporations IB HL

What Is A TNC? A firm which has the power to co-ordinate and control operations in more than one country, even if it does not own them.

TNC Power Comes From… Their ability to co-ordinate and control the stages in a production chain, no matter whether those stages are within a single country or across many. Their ability to take advantage of national differences in production favour costs (natural resources, labour etc) as well as state incentives. Their ability to switch it’s resources and operations between locations at a global scale.

Conditions Of Engagement A firm possesses ownership-specific advantages (e.g. a patent or specific knowledge). It is more profitable for the firm to exploit these advantages itself rather than to lease or sell them to others. Location-specific factors (resources, markets, production costs) make it more profitable for the firm to exploit these advantages in overseas rather than domestic locations.

Advantages Of TNC’s To Host Countries Brings work to the country and uses local labour. Improves the levels of education and technical skills of local labour. Brings inward investment and foreign currency to the country. Increased GNP/Personal Income which can lead to an increased demand for consumer goods and the growth of new industries and services. Improvements in roads, airports and services. Prestige value. Widens economic base of a country.

Disadvantages Of TNC’s To Host Countries Local labour force usually poorly paid and have to work long hours. Very few local skilled workers employed. Most of the profits go overseas (outflow of wealth). GNP grows less quickly than that of the parent company’s headquarters, widening the gap between developed and developing countries. Big schemes can increase national debt. Decisions are made outside the country, and the firm could pull out at any time. Insufficient attention to safety and health factors and the protection of the environment.

Activities Using Geography For The IB Diploma P193-196, answer the following… What are TNC’s and what is the point of them? How have TNC’s become more powerful over time? Using Figure 9 (P193), explain how TNC’s offer both advantages and disadvantages to their host developing countries. How can TNC’s influence other international organisations.