Trans National Companies
A Trans National Company (TNC) may also be called a Multi National Company (MNC) and it is a company with its headquarters in one country which owns factories in one or more other countries and sells its products globally. The main priorities of a TNC are profit driven. They are always looking for the highest profit margins. This often means their factories are in LEDC’s to make the most of low wages and often have headquarters in MEDC’s.
TNCs control a substantial part of the global economy and have created a GLOBAL SHIFT.
A global shift is the movement of manufacturing from developed countries to cheaper production locations in developing countries
Bangalore is the centre of the world's IT outsourcing industry, where companies like Infosys help run the back end of many of the world's corporate computer systems. But as other countries catch on to the possibilities of outsourcing, India's entrepreneurs are finding new ways to use India's talent and experience in the field. This looks at how the outsourcing industry is moving beyond software and bringing a wide variety of skilled jobs to India.
Nike - a secondary sector TNC
Nike, originally known as Blue Ribbon Sports (BRS), was founded in the American state of Oregon in January 1964. The company initially operated as a distributor for a Japanese shoemaker, selling out of a van at athletic track meetings. Three years later it opened its first retail outlet in Santa Monica, California. The first shoe bearing the now famous Nike brand mark (the 'swoosh') was sold in 1971. In 1978, BRS was officially renamed Nike (the Greek goddess of victory).
Today Nike produces a wide range of sports entertainment. Their first products were track running shoes and today they make shoes, jerseys, shorts and base layers for a wide range of sports. The company has more than 700 shops around the world and has offices located in 45 countries outside the USA. Most of Nike's products are made in factories located in Asia - in Cambodia, China, India, Indonesia, Malaysia, Pakistan, the Philippines and Taiwan. These factories are the end points of production chains that involve the making of components such as textiles, leather, rubber soles etc.
Just as Nike's production has gone global, so too has its market and reputation. Its annual turnover continues to rise. The Nike brand mark is now keenly sought by shoppers the world over. Nike also continues to promote its sporting image through the sponsorship of sporting events and sports stars.
Tesco - a tertiary sector TNC
The supermarket chain Tesco is one of the few leading TNCs with its head offices in the UK and is currently ranked in the top 50 TNCs in the global league table. The company started life as a single grocery stall in the East End of London and didn't set up its first self-service supermarket until 1956. It was between 1970 and 2000 that the company really took off to become the largest food retailer in the UK.
The key to the company's success has been:
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Its strategy of diversification into new markets, such as toys, clothing, electrical goods, home products, financial services and telecommunications, in addition to its original business of food;
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Outsourcing it supplies of foodstuffs, clothing and other goods directly from producers, both in the UK and in LICs such as Kenya, Sri Lanka and Bangladesh.
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Globalising its chain of supermarkets. This did not start until the 1990s with the opening of stores in Eastern Europe (Hungary, Poland, Czech Republic and Slovakia). In 1998, it made its first move outside Europe, opening stores in Taiwan and Thailand, and in South Korea the following year. Tesco's presence in Asia has subsequently spread to China, Japan and Malaysia and 60% of the company's profits now come from Asia.
Tesco is the third largest retailer in the world and has a clear brand image - you would recognise a Tesco store whether it was in Leeds, Shanghai or Prague. When you go into one of these voerseas stores, it is highly likely you will find many of the same products that are on the shelves at your local Tesco. Equally you will also find products that reflect the particular diets and tastes of the host country - this is an example of 'glocalisation' (a mix between globalisation and local ideas).
From a single supermarket in 1956 Tesco now has over 6,000 stores and employs over 500,000 people in 14 countries with an annual turnover of over £65 billion - talk about a major global TNC!