1. TNC’s Role in Globalisation

2. 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

3. National to Transnational?
Why?

4. 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

5. 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

6. 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

8. 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

9. 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

10. 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?