Trans-National Cooperations

What are they?

•A TNC is a company that operates in at least 2 countries

•Its organisation is hierarchical:
-Headquarters and research development departments are often in the country of origin
-Centres of production tend to be overseas
-As it becomes more global, regional headquarters and regional Research and development departments will develop in the manufacturing areas

•TNCs take many different forms and include a wide range of companies in the primary, secondary and tertiary sectors

•Resource Extraction:
-Particularly mining for materials like oil and gas

•Manufacturing:
-High-tech industries like computers, scientific instruments, microelectronics and pharmaceuticals
-Large volumes of consumer goods like motor vehicles, tyres, TVs and other electrical goods
-Mass-produced consumers goods like cigarettes, drinks, breakfast cereals, cosmetics and branded goods

•Service Operations:
-Banking/insurance, advertising, freight transport, hotel chains and fast-food outlets

•Worlds largest companies
-6 out of the 10 largest companies in 2013 (based on Revenue) were extraction companies (oil and gas)
-3 out of the 10 were Chinese companies

1. Royal Dutch Shell (UK/Netherlands) $481.7  Oil and Gas
2. Wal-Mart (USA) $469.2   Retailing
4. Sinopec Group (China) $428.2  Oil and Gas
8. Toyota Motor  (Japan)  $265.7  Vehicles
9. VW (Germany)  $247.6  Vehicles


The significance, growth and location of TNCs:

•TNCs control and coordinate economic activities in different countries

•They develop trade within and between units of the same cooperation in different countries

•This allows them to control the terms of trade and can reduce the effect of quota restrictions on the movements of goods

•They can exploit difference in the availability of capital, labour costs and land/building costs
-Eg. Dyson moved its production from Wiltshire to Malaysia to take advantage of cheaper labour, although some research is still done in the UK

•TNCs can also locate to take advantages of government policies eg. lower taxes, subsidies and grants, and less strict legislation on employment and pollution

•They can get around trade barriers by locating to where they want to sell
-Eg. Japanese motor vehicles firms are locating to the EU as they are then considered to be European manufacturers so miss the quota restrictions of Japanese made vehicles into Europe

-Honda has a vehicle plant in Swindon
  •In 2008 it employed more than 40,000 workers producing 200,000 vehicles annually
  •As the recession hit 2008/09 Honda laid off workers and temporarily closed the plant as it can shift  resources and production between locations at a global scale to maximise profit

•The size and scale of many TNCs allow them to achieve economies of scale (buying in bulk) allowing them to reduce costs, finance new investment and compete in world markets

•Governments are often keen to attract TNCs because they create jobs and boost exports

•TNCs have the power to trade off one country against another to get the best deal

•Within a country TNCs have the financial resources to research several potential sites and take advantage of the best communications, access to labour, low cost of land and building, and government subsidies


TNCs and Globalisation

•TNCs serve a global market

•They can globalise their manufacturing in several ways:
-Producing just for the country they are situated in
-Producing for a number of countries (eg. Honda in Swindon)
-Integrating production, so each plant performs a separate part of the process
     •Vertical integration - chain sequence across national boundaries
     • Horizontal linkage - components moved to a final assembly plant in one country