Transnational corporations (TNCs) play a key role in globalization through their global production networks and ability to adapt products for local markets. TNCs establish production facilities in multiple countries to take advantage of lower costs through practices like outsourcing and offshoring. They also tailor products to local preferences through "glocalization" to develop new markets. Major TNCs have supply chains that span the globe and rival national economies in size. However, these complex networks are vulnerable to disruptions and may contribute to issues like unsafe working conditions.
1. What is the role of Trans National
Corporations (TNC’s) in globalisation?
2. 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.
4. 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.
5. 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.
6. B. How have TNC’s spread
globalisation
1. Global production networks
2. Glocalisation
3. Development of new markets.
7. 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.
8. 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
9. 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.
12. 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.
13. 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
14. How do TNCs take advantage of
economic liberalisation? (4)
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HINT: You should talk about outsourcing and offshoring.
