Transnational corporations (TNC’s)

Transnational corporations (TNC’s) are very large global companies. They have an administrative headquarters (HQ), a Research and Development establishment (R & D) and production centres in one country and at least one but often many more, braches and/or production overseas.

Approximately 90% of TNC’s are based in MEDCs (more economically developed countries) especially the USA, France, Germany, the UK and Japan.

Overseas branches are in LEDCs because:

·         Production costs are usually less in MEDC’s with lower wages, cheaper land and lower transport costs.

·         Governments of LEDCs want to host TNCs as they often encourage further economic development (multiplier effect) and so they offer financial incentives such as low rates and taxes etc.

·         LEDCs often have fewer environmental restrictions

 

Recently, firms in newly industrialised countries (NICs), especially in the ‘tiger economies’ of Eastern Asia, which produce machinery, electronics and cars, have become TNCs. As wage costs have risen in their home countries they have extended into neighbouring LEDCs with cheaper labour, e.g. Korean companies to China, and to market areas such as EU countries.

TNCs are very dominant in the current global economy and are found in all sectors.

They also directly employ around 4.5 million people and provide jobs indirectly for millions more workers and also currently control over 75% of world trade, 40% of which involves the movement of goods between units of the same corporation in different countries.

 

Toyota- first established in Japan in 1937. By 2004, it was the 3^rd largest manufacturer of automobiles in the world and by far the largest in Japan, producing one vehicles every 6 seconds. It had 51 manufacturing companies in 26 countries from USA to India. They employed one quarter of a million people worldwide. Sold nearly 6.72 million vehicles from mini-vehicles to large trucks in over 150 countries.

Toyota chose the UK because of its excellent skilled and flexible workforce, strong tradition of engineering and vehicle manufacturing and favourable working practices, large market for Toyota cars, reliable industrial transport links to customers and the 230 British and European supply partners.

Within the UK, two sites where chosen, both offering good transportation links, Burnaston, 600 acre  site, flat, easy to develop, 7 miles from Derby. Deeside, 7 miles from Chester on a well-prepared industrial park. Both locations provided electricity, gas, water, telephones, business and personal support services. The first of the cars was produced in 1992 and Toyota is now the UK’s 4^th largest exporter of fully built cars. In 2002, Toyota made £500 million net contribution to the UK’ balance of payments.