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Describe how TNCs influence the location of manufacturing industry.

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Introduction

a). Describe how TNCs influence the location of manufacturing industry (20 marks) Transnational Corporations (TNCs) are companies that operate globally. They usually are based in MEDCs but have branch companies all over the world. TNCs control vast amounts of world trade, only 74 firms, with 50% of trade via TNCs in America and 80% via Britain, generates 12.5% of total world production. Examples of well-known TNCs are Nike, Coca Cola, Nestl´┐Ż, Sony, Ford, General Motors and Mc Donald's. Companies became multinational through Foreign Direct Investment (FDI). In the 1960s and 1970s, the economic recession, meant that profits dropped so companies became TNCs in order to expand and reduce costs. The Gross National Product (GNP) of a TNC is great, for example the GNP of Mexico is 142 compared to the TNC General Motors being GNP 127 and the GNP of Denmark is only 93 compared to Ford's, which has a GNP of 97. TNCs dominate the economy of both their home countries and most of the economy in Less Economically Developed Countries (LEDCs), where they choose to invest. Due to this their economic and political power is immense. They are the most advanced system, which creates economic growth, wealth and poverty. It is commonly thought that TNC invest primarily in LEDCs, because give them many advantages, including very favourable tax conditions, very cheap labour and minimal supervision in respect of human rights. Although, in fact 75% of all FDI is based in the United States, Japan, the United Kingdom, France and Germany (EU) ...read more.

Middle

Regarding the core competence the large globalised firm seeks to master all processes of learning related to the core competence. This include, among several other aspects, access to coded knowledge by establishing relationships with universities and research-centres with a key component to the efficiency being proximity and tacit knowledge through relations with bearers of knowledge which involves relations with reliable suppliers and other organisations in the regional system of improvement. To get information of whom the bearers of the needed tacit knowledge are that it is crucial to the globalised firm to get involved in the local social networks. So on one hand TNCs seem to have something to offer regional systems of innovation, as well as having an interest to relate to such systems, but on the other hand the interaction between TNCs and regional systems of innovation may not be very successful, as the TNC can be seen as an outsider, not attached to the regional innovation system and its institutions. The lack of institutions common to the local firm and the TNCs can be seen as an overall explanation to difficulties of knowledge transfers being no common incentives and no common frame of reference to language and cognition. The dual organisation of TNCs could be seen as a respond to this problem. The following research questions seek to capture the problem of knowledge transfers and the relations between TNCs and regional systems of innovation. Growth of TNCs has occurred because global markets exist for many products and services and those organisations with sufficient capital and expertise have establishes branches in new countries. ...read more.

Conclusion

and technology intensive (electronics). In 1998, these industries accounted for 71% of total manufacturing output compared to 48% in 1986. Taiwan is one of the worlds leading supplier of motherboards, monitors, personal computers, mice, keyboards, scanners and laser disk drives. The core of Taiwan's high tech industry is the government established Hsinchu Science Park near Taipei. Known as Silicon Valley East, it accounts for one-third of Taiwan's manufacturing exports. A second science park is currently being built near the southern city Taiwan. The speed and success of Taiwan's industrialisation, investment into areas in China and South-East Asian countries as well as Taiwan's own inward investment has caused severe environmental degradation. However there is no doubt that the environmental problems have been made worse by the country's geography. Taiwan is a small country with a large population and a mountainous relief. Most of the population and industrial activity is centred in the western alluvial plains that comprise less than half the island total area. Factories have routinely discharged liquid toxic waste into rivers and solid waster into landfill sites, resulting in contaminated food chains and soils. Are TNCs the problem or the solution? There is clearly no definite answer. With every TNC there is potential for both positive and negative effects on both the home and host nation. The true impact of TNCs cannot be evaluated unless we can be sure of what would have happened without the TNC. They obviously have a number of positive and negative effects in which are clearly waiting to happen. People themselves have little power to try and solve these problems and are therefore in a position to ignore the consequences and make the most of the advantages. Fabina Nazmin Hussain Page 1 of 5 ...read more.

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