TNCs

• TNC

  company which operates in two or more countries
• Vertical integration

  supply chain is owned entirely by the company which takes ownership of part of the supply chain
• Horizontal integration

  company diversities its operation by expansion, merger or takeover by taking ownership of another company
• reason for TNCs growth

  • cheap labour in LICs
  • mergers/ takeovers allow smaller competitors to be bought out
  • flexible workforce means willingness to work abroad
  • fund for expansion by investing overseas
  • fewer environmental restrictions
  • globalised transport - containerisation
  • technology - perishable fruits can be transported in fridges
  • governmental encouragement through financial incentives
  • cheap land - brown field sites
  • acqusitions when one company buys out another
  • economies of scale - cost advantage of increasing size
  • global marketing by creating a globally recognised brand
• Pros of TNCs

  • jobs and income to raise living standard
  • increases trade
  • FDI brought in LICs
  • more willing to become involved in foreign investments
  • multiplier effect
  • produce cheaper goods
  • new technology
  • greater access to resources and new markets
  • foreign currency brought in
• Cons of TNCs

  • ethical issues
  • environmental degradation
  • deindustrialisation
  • poor working conditions
  • loss of manufacturing jobs
  • workforce needs to relocate
  • loss of local culture
  • closure of local businesses
  • structural unemployment
  • exploitation of resources
  • increased inequalities
• Rana Plaza collapse

  • building collapsed in Bangladesh in 2013
  • killed 1,134 people
  • building was a clothing factory for TNCs
  • building was built and expanded with no permit and didn't meet safety codes
  • manufactured for Zara and similar brands