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What do all these companies have in common? Lesson 3- OUTLINING THE ROLE TNCs PLAY IN CREATING A MORE GLOBALISED WORLD TNC- WHAT? A TNC is a This means that a COMPANY HAS BRANCHES IN MORE THAN ONE COUNTRY THERE ARE MANY OF THESE COMPANIES WE ARE ALL FAMILIAR WITH WHAT IS A TNC? Definition: A Transnational company/corporation (TNC) is simply a company that produces and sells its products in different countries. TNC’s increase globalisation by linking together countries through the production & sales of goods . TNC’s of fices and headquarters are usually located in MEDC’s because people have better education and administrate skills. TNC’s Factories are usually located in DEVELOPING COUNTRIES as labour is cheaper which means producing goods will be less costly and the company will gain more profit. Other TNCs like, use assembly industries - making dif ferent parts of the product in dif ferent countries, than assembling it in another, this means more countries make money from one company http://www.youtube.com/watch?v=pCEF0xG B64o the impact on the car industry. This map shows the numbers employed by General Motors around the world. It has its headquarters in Detroit USA but has factories around the world. The company sells over 400 brands in over 312 countries or territories. 90 billion servings of Coke’s products are consumed each day WHY DO TNC’S CHOSE TO MANUFACTURE IN DEVELOPING COUNTRIES? Cheap labour - In NIC’s there is a much smaller minimum wage than in MEDC’s like the UK. As the company pays less to its worker s in NIC’s, the cost of manufacturing is reduced and the profit that the company makes increases. Long Working Hour s - in NIC’s the rules regarding the hour s of work are ver y relaxed. This means that employees will have longer hour s and the company will produce more yield in a day. Laxer health & safety Regulations - in NIC’s there are fewer health & safety regulations due to lack of education and they are of ten not enforced. This lower s the cost of manufacturing as in a MEDC a company would spend out money to increase the working conditions. Prohibition of Strikes - Some NIC’s do not allow employees to strike over things like pay and poor working conditions. This means that money isn’t lost as the worker s are consistent. Tax Incentives & Tax Free Zones - Some NIC’s of fer a tax reduction to TNC’s who move their manufacturing to their countries. Some NIC’s also have tax free zones which means the TNC’s don’t have to pay taxes to move their manufacturing to a par ticular area. This is good for the TNC because they pay less in taxes and gain more in profit. Rank Company HQ Industry Revenue $bn 1 Exxon-Mobil USA Oil 377 2 Wal-Mart USA Retailing 351 3 BP UK Oil 318 4 Shell UK/ Netherlands Oil 274 5 General Motors USA Cars and vehicles 207 Annual turnover for top five transnational companies. Compare the income of the top five transnational companies with the countries listed in the table below. What do you notice? Annual income ( GDP) of selected countries. Country Total annual income for country GDP ( $bn) Sweden 444 Greece 360 South Africa 277 Malaysia 180 TASK –POSITIVES AND NEGATIVES OF TNCS Using the information stuck on the walls around the room Fill in your copy of the table Advantages of TNCs Disadvantages of TNCs Effects on country of origin Effects on host country Social factors Environmental factors Economic factors TOP TIPS 1) DO NOT COPY ALL THE INFORMATION FROM EACH CARDSUMMARISE THE KEY POINTS 2) SOME STATEMENTS CAN FIT IN MORE THAN ONE BOX TASK In small groups write responses to the 2 essay questions Use the statements to help you construct an answer to the following essay questions; “TNCs have had a positive impact on the level of development in both developed and developing countries. Discuss.” “TNCs have proved socially, economically and environmentally destructive in both developed and developing countries. Discuss.” RECAP How do TNCs create a MORE GLOBALISED WORLD? (4)