1. Transnational Corporations and Economic Dependency

2. Learning outcomes What is a TNC?
What are the advantages and disadvantages of TNCs?
What is over- dependency?

3. TNCs
Transnational Corporations are very large firms with branches or subsidiary companies in more than one country
They are big organisations that hold immense economic power and influence

4. How they work
The main advantage of TNCs is the large scale of their operations which enables them to run efficiently and reduce operational costs
TNCs have the capital to establish large plants which lower unit costs and this allows them to make savings
Reduced cost from mass production leads to increased profits and so TNCs can invest heavily in research, marketing, advertising and general development.

5. LEDCS and TNCs
TNCs have a very powerful influence on LEDCs and their economies
In many cases the corporations control most of, if not all, activities involved with a product from producing the raw material through to processing, packaging, transport, advertising and sales

6. Continued
TNCs provide LEDCs with the necessary investment and the provision of skills and technology
However they may decide to switch production from one country to another
Or change the production process
All these decisions are made 1000s of miles away at the TNC HQ

7. Decision making
The HQ and research and development activities of TNCs are most likely to be based in MEDCS of Western Europe, USA and Japan
These major decision making regions constitute the Global core while the LEDCs are the peripheral regions

8. Nike Nike operates in 80 countries
The company has 3 major HQ: Hong Kong, Netherlands and USA
The work is subcontracted to the Far East where it is manufactured
Good or bad?
Nike believe that the Far East subcontractors as partners who are responsible for the quality of goods leaving the factories
They also state that they involve local companies in decision making, research and development

9. Over-dependency
There are 3 main ways in which TNCs may affect the future of developing countries:
Dependency on investment and employment provided by a TNC may result in the host country losing control of its own economy
TNC domination can discourage local investment and damage indigenous enterprise
The operation of the TNC may harm the environment
See eg

10. Union Carbide India USA owned Union Carbide set up in India
Factory produced pesticides
Located 5km from populated town Bhopal
December tones methycyanate gas leaked from the factory
2500 died
200,000 were injured from cyanide related poisoning
Indian authorities filed for compensation but as the company closed, they are still awaiting this

11. Advantages to the country of a TNC
Provides secure employment and guaranteed income
Improves levels of education and skills
Brings investment into the country
Increased personal income can increase demand for consumer goods in the area
Improvements in the roads and infrastructure
Brings new technology to a LEDC

12. Disadvantages of a TNC
A lot of the industry is mechanised ,meaning low numbers are employed
Wages usually low
Decisions are made outside the country
Exploitation of the workforce
Insufficient attention paid to health and safety factors or the protection of the environment