3.3B Role of TNCs

• Offshoring = Process of moving part of a company's own production process to another country
• Outsourcing = process where a firm contracts with another company to obtain goods or services from it.
• Why firms become TNCs =

  • Firms aim to maximise profit, becoming a TNC helps to do this by reducing costs, or generating higher revenues from new markets.
  • New foreign operation may be part of production process in a lower cost location, or a retail outlet to access new markets and increase revenue. 
• Glocalisation = Changing part of a product to suite the needs of the local consumers e.g. McDonald's
• Drawbacks of TNCs =

  1. GPNs (global production networks) may make TNCs more vulnerable to shocks in different parts of the world that halt production.
  2. TNCs have been accused of exploiting workers in the developing/emerging world by paying them low wages.
  3. Outsourcing jobs can lead to job losses in the home country. 
  4. Can lead to cultural erosion