A transnational corporation’s prime purpose is to co-ordinate and control its operations in more than one country, with its headquarters usually located in an
MEDC. With over 40,000 multinational corporations distributed globally, there power in the global markets has risen. Since the 1950‘s TNC’s have distributed factories and stores globally, increasing interconnectivity. Hunting for the cheapest labour and an abundance of resources, TNC’s are known for their unpredictability. Originally TNC’s would locate all their offices, operating and factories in their headquarter hub, however the discovery of cheaper employment and more skilled workers triggered the movement of TNC’s to NIC’s such as Taiwan, China, Vietnam and Eastern Europe and away from their MEDC base. This brought many advantages and disadvantages to both the headquarter and host countries.
MEDC’s, the headquarters for large TNC’s benefit from these companies as the TNC’s increase the global recognition of the headquarters. The TNC’s bring profits to their headquarters which is invested in improving infrastructure. TNC’s make a name for the area and improve politicaly stability with other countries. As the TNC’s invest in countries and provide employment to poorer areas, global linkages are created and this improves communications between countries through the distribution of TNCs.
The movement of TNC’S to countries with cheaper labour, meant the TNC’s were themselves more well off, saving money on cheaper salaries and cheaper manufacturing and transport costs. The host countries themselves do benefit from the movement of TNC’s to their countries, as in countries where unemployment is high the arrival of TNC’s brings a large influx of jobs to the local community and offers high skilled jobs that are usually more well paid than other local businesses. However, from the TNC’s perspective they are exploiting the workers skills at a low cost. Nike, the largest sportswear brand distributed factories across Taiwan and South Korea with over 700 manufacturing factories and 500,000 employees, however trickle down through the company means that workers in countries such as Taiwan receive as little as twenty cents per hour. More than 70% of the workers are based in Asia, although this benefitted those in the host countries, these TNC’s usually migrate from their headquarter where their factories were located to cheaper labour exploiting countries.
This in fact leads to mass unemployment in MEDC’s that relied on the TNC’s. This
increases crime and leaves large masses of the population homeless in towns which base their industry around the TNC’s business, this leaves many workers skilled only in working in factories unemployed. The town loses its purpose and the community completely deteriorates, with the area derelict possible regeneration may take decades to be introduced. This was seen in Wal Mart stores which moved to CBD’s and constructed stadium sized superstores on the fringes of the urban areas, which lead to ghost towns as other local businesses were put out of business.
The movement of TNC’s to developing countries allows previously underdeveloped countries to be at the forefront of technological advances. This was prominent in India which now exists as the centre of global IT services. India itself appealed as it had a highly educated workforce and good international data communication links. Microsoft
Corporation’s movement to New Delhi which began operations in 1990 propelled the success of India technologically. The growth of Microsoft from $14,569 in 2009 to
$18,760 million in 2010 included the Indian government and both worked to develop the Indian software and IT industry, this allowed India to be globally connected and allowed technological improvements at a fast rate, which kept India apart of the global market. Recently Cisco…