Economic World Case Study

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Presentation transcript:

Economic World Case Study Fiat, a TNC in Brazil

What do you need to revise? What are TNCS? Introduce your TNC; Fiat. Which other TNCs have located in Brazil? Provide some information about Fiat’s Betim plant. Why did Fiat chose to locate in Brazil? Why has Fiat expanded its production in Brazil?

What is a TNC? A Transnational company. A company that operates globally and tends to have headquarters in their country of origin (often an MEDC) and branches or production lines all over the world.

Fiat, Brazil One of the world’s largest industrial groups. Operates in 64 countries. Revenue over 48 billion euros, 39% of which is made outside of Italy.

Which other TNCs are in Brazil? Many TNCs have located in Brazil. A few of which are: VW of Germany Ford of USA.

Betim Plant. Fiat’s first plant was in Betim in 1976 – employing over 10,000 workers and producing 130,000 cars pa. Betim is part of the industrial belt of Belo Horizonte (capital of Minas Gerais- a wealthy state in SE Brazil). 1990s Fiat invested a further $1.5 billion to update the plant & develop the Palio & Tipo cars. Now employs 12,000 workers and produces 650,000 cars pa.

Tipo & Palio cars Source:www.hotelsturkey.co.uk/misc/rentacar2.htm Source: www.edirectory.co.uk/pf/pages/moreinfoa.asp?p...

Why did Fiat choose to locate in Brazil? The Brazilian Government wanted a car industry (long-term employment) and offered large incentives to TNCs. Fiat located in Minas Gerais as the state gave 50% of the start up costs. Fiat would have a guaranteed market and could cope with demand ( 1970- 255,000, 2000: 2,800,000 cars produced and sold). Cheap labour: $7/hr (in UK $18/hr). Strikes unlikely (military government & good work ethic with 4 people waiting for a job for every person hired) so no production time lost.

Why has Fiat expanded in Brazil? State of Minas Gerais gave Fiat $135m towards opening of a new factory at Sete Lagaos (over half the cost). This was a joint venture to make Ducato vans to help increase share of the light van market from 9% to 15%. Also Fiat are expecting a huge increase in demand. If they are in the country they save costs of import duties and transportation to other South American countries.

Ducato Vans Source: : uk.cars.yahoo.com/car-reviews/car-and-driving...

Possible Exam Questions: What is meant by the term ‘TNC’? With reference to your chosen case study, explain the factors associated with a TNCs decision of where to locate. [6] With reference to your chosen case study, explain why a TNC may often chose to locate in an LEDC for its production while its headquarters remain in its MEDC of origin [6].