TNC’s Role in Globalisation

TNC’s Transnational Corporations Foreign Direct Investment A firm that has the power to coordinate and control operations in more than one country, even if it does not own them (Peter Dicken) Foreign Direct Investment Overseas investments in physical capital by transnational organisations

National to Transnational? Why?

National to Transnational? This is Why: Cheaper labour, esp in LEDCs Exploit new resource locations Circumvent trade barriers Tap market potential in new regions Avoid strict domestic environmental regulations Exchange rate advantages

TNC’s & Globalisation Driving force behind economic globalisation Production of goods and services Few parts of the world where they do not have importance Direct ownership and collaborative relationships

UNCTAD Figures 40,000 corporations cross national boundaries Ply their trade through 250,000 foreign affiliates The ten largest corporations in their field now control: 86% telecommunications 85% pesticides 70% computers 35% pharmaceuticals

Nike Does not manufacture for itself, provides designs to companies Contracts South Korean &Taiwanese companies Companies operate in home nations and lower wage Asian economies E.g. Philippines & Vietnam

2001-Nike Total sales = $9.5 billion Profits = $590 million (6.2% of sales) Price Chain Figures Nike pays average of $18 per shoe to contractor ($11materials, $2 labour, $4 other, $1 profit) Nike sells shoes to retailers for $36 (100% markup = advertising, R&D, marketing, shipping, production, other costs and profit) Retailers Markup another 100% to $72 (average) to cover; wages, insurance, advertising, supplies, services, depreciation, tax and profit

TNC’s Task Choose a TNC from the lists on the next slide. The TNC should be in the manufacturing or service sector. Check that you can find enough information to fulfill the requirements below. Produce a short summary of the companies interests, products etc. Outline the history and growth of the company - especially through the initial stages of globalisation. Detail the production of one of the company’s products (the most important/well known product?). Which countries are involved? Does the company operate within LEDCs? If so does it have policies about the use of labour, resources, pricing etc.? Detail the global market of the company? Which countries are involved? Are any countries not sold to? If so, why?

http://www.google.com/corporate/ www.basf.com www.newscorp.com www.roche.com www.nokia.com www.riotinto.com www.unilever.com http://www.halliburton.com/ http://www.nestle.co.uk/Home www.bp.com www.shell.com http://corporate.disney.go.com/index.html http://www.stolt-nielsen.com/ www.hsbc.com http://www.thecoca-colacompany.com/index.html http://www.ikea.com/ms/en_GB/about_ikea/index.html