TNCs

Key Concepts:

Terms in this set (14)

Transnational corporations
Companies that operate in at least two countries, with a headquarters based in one country but with business operations usually in a number of others.
Reasons that TNCs operate in more than one country
To escape trade tariffs, to find the lowest cost location for their production, to reach foreign markets more effectively, to exploit mineral or other resources available in foreign countries.
Company headquarters of TNCs
Traditionally based in a major city in the home country.
Research and development activities
Engaged in to maintain their position competitively and usually based in the country of origin.
Research and development activities often located near to centres of higher education
To take advantage of a graduate labour market, or to make use of university research facilities.
Production operations of TNCs involved in the primary sector
Based wherever there are unexploited resources.
A combination of rising world prices and new technologies
Make access to new reserves of raw materials viable in the home country, e.g. the recent development of fracking has revitalised oil and gas industry bases in North America.
TNCs in the secondary sector
Production operations have been largely located in the manufacturing regions of developing countries, especially in south east and south Asia.
Developing countries attract TNCs because
Labour costs are lower, investment in education makes it easier to train workers, high work ethic, government incentives such as tax-free breaks.
Spatial organisation of production
Allowed for TNCs from emerging economies to locate production where it gives access to large markets in developed regions.
Service-based TNCs in the tertiary sector
Locate operations either where there are relatively low labour costs with good education or in proximity to their markets.
Vertical integration
An arrangement in which the supply chain of a company is owned entirely by that company, from raw material through to the finished product.
Comparative advantage
Countries should specialise in providing goods and services that they excel at producing.
Horizontal integration
A strategy where a company diversifies its operations by expansion, merger or takeover to give a broader capability at the same stage of production.
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