How do TNCs influence global economics and culture?

• what are the two kinds of TNCs?


  publicly traded TNCs

  state owned TNCs
• what is a publicly traded TNC?


  shares owned by multiple stake holders (usually other TNCs, banks and other large financial institutions, such as pension funds) around the world
• examples of publicly traded TNCs


  apple and toyota
• what is a state owned TNC?


  TNC that is majority or wholly owned by the government (dominant in emerging superpower countries)
• example of state owned TNCs


  Perto China, Sinopec group
• growth of TNCs


  expanding globally, increasing links between countries
• how do TNCs grow?


  -economies of scale

  -mergers

  -acquisitions

  -vertical integration

  -horizontal integration

  -global marketing
• what does economies of scale mean?


  increasing the amount of products produced can lower average cost to manufacture, which leads to higher profit
• what does merge mean?


  when two companies become one
• what does acquisitions mean?


  company buys out another
• what is vertical integration?


  company owns different parts of supply chain
• what is horizontal integration?


  company buys out rival company
• what is global marketing?


  boost sales by creating globally recognised brands
• example of global marketing


  coca cola
• positives of TNCs


  • employment
  • investment
  • trade
  • technology transfer
  • economic development
• how do TNCs create investment in an area?


  use outsourcing and offshoring to maximise profits bringing foreign direct investment into less developed economies
• how does TNCs create economic development in LDE?


  due to foreign direct investment and employment, less developed countries start to achieve more economic growth
• what are negative impacts of TNCs?


  • environmental degradation
  • exploitation of workers
  • closure of local businesses
  • increasing inequalities
  • loss of culture
• how does TNCs cause loss of culture in LDE?


  cultural erosion

  TNCs spread western ideas and values which cause local cultures to disappear
• how have TNCs come to dominate the global economy?


  • economy scale of TNCs out competes small companies
  • TNCs have more money for technology and investment e.g containerisation
  • free-market liberalisation has made it easier for TNCs to trade and expand
  • investment into developing country has created influence in their governments
  • global brands spread western cultures
• examples of sanctions

  military sanctions- stop selling/ giving indirect support weapons

  economic sanctions- less trade in goods/ embargo

  diplomatic sanctions- removing embassies from the country

  social sanctions- banning the country from sport events