Account for the growth of TNCs and evaluate their impacts at the global and national scales

Topics: Coca-Cola, The Coca-Cola Company, Diet Coke Pages: 9 (3262 words) Published: October 10, 2013
Account for the growth of TNCs and evaluate their impacts at the global and national scales (40 marks)

A TNC (transnational corporation) is a company that operates in no less than two countries and has a global outlook. TNCs have a long history going back to the 16th Century in terms of trade such as spices, but it’s not until C. 1945 that companies started to form acquisitions and mergers. The one key reason why these businesses have been so successful in their area of expertise globally is because they can take advantage of spatial differences in the factors of production worldwide. They are able to exploit differences in the availability of capital, labour costs and land cost, which we as a world have seen, especially in far-east Asia.

An example of a multinational company is Coca-Cola - a soft drinks manufacturer who is situated in Atlanta Georgia, USA where their headquarters are located. Coca-Cola is probably the best-known brand symbol in the world, and because of this has been very successful in branching out to over 200 counties. The expansion of Coca-Cola overseas took place in 1923 and ever since then the company’s presence worldwide has grown rapidly, and year after year, Coca-Cola found a home in more and more places: Cambodia, Montserrat, Paraguay, Macau, Turkey and more. Other TNCs include Vedanta Resources PLC in Orissa India; the Indian businessman, Aril Agarwal, founded it. He started his business 30 years ago in Mumbai, collecting and reselling scrap metal, and now it’s a global diversified metals and mining company. And Dyson, the UK company which pioneered the “bagless” vacuum cleaner, has erupted and James Dyson the inventor and founder is now worth an estimated £3bn.

Accounting for the growth of TNCs: their global outlook has increased rapidly over the past 30 years or so; this might be down to numerous reasons. Governments in NIC (newly industrialised countries) have desperately tried to appeal to every wealthy and powerful TNC, and thus have tried to lure them into their countries. These countries and provinces, (many of them Asian), attempted this by devaluing their property prices to extortionately low sums of money in order so the TNC can build factories cheaply. By building very inexpensively it results in cutting corners and certain regulations that should be kept to very closely in MEDCs, haven’t. However as these counties aren’t fully developed or particularly high up in the Demographic Transition Model (stage 3 usually), these NICs and LEDCs have a relaxed attitude to environmental laws so the TNCs do not have to pay out for expensive treatments for their waste. In addition, labour is especially low-cost, and trade unions are either; not permitted, criminalised or displaced if operating in many Asian countries and provinces. And the amount of “red-tape” in countries like Malaysia, China and Nigeria make it even more inexpensive for TNCs to locate there. But the amount of money paid to workers under minimum wage also saves the TNC money. Coca-Cola pay Nigerian day workers $2.60 per day! And although that may seem exceedingly low, it is actually quite a fair sum compared to what some workers receive in China. Nike workers in China only receive $1.60 and in sweatshops that is even lower - $0.44!

Politics plays an imperative role in the growth of TNCs, and without the negotiation between governments and TNCs this arrangement would not be able to go fourth. Therefore making economies and political trade barriers more lax, allows easier admission for TNCs into foreign markets. TNCs can locate to take advantage of government policies such as lower taxes, subsidies and grants, which is key to growth. They are able to get around trade barriers by locating production within markets where they wish to sell their produce. Toyota for example, a Japanese motor vehicle TNC, have been attracted to locations in the EU because of quota restrictions on the import of Japanese-made vehicles into...
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