Transnational Corporations (TNCs)
Geography: Cambridge International GCSE (2027 Exams), topic 9.2.4
TNC Locations
TNCS often have HQ offices in HICs and their manufacturing in LICs.
Head Quarters
- TNCs are usually set up in HICs because they are nice locations and are usually where their clients are located.
Reducing production costs
- TNCs want to make the most money possible per item they make. To do this they must reduce production costs.
- People in HICs have the benefit of laws that protect their human rights.
- e.g. minimum wages, limits on working hours, and legislation that guarantees workplace safety.
- However, in many LICs, the government needs business there so much that they fail to enforce high working standards (even if the laws exist).
Workers in LICs 1
- TNCs can pay employees less if they have their factories in LICs and do not have to worry too much about workers’ rights or building regulations.
- This greatly helps TNCs reduce their costs.
- Some locations are warm and humid and workers work long hours in unpleasant conditions without enough breaks.
- These factories are often called ‘sweatshops’.
Workers in LICs 2
- Although workers in LICs are paid less than they would be in an HIC, they can make a decent living because the cost of living is a lot cheaper in LICs.
- This means that there are a lot of people who are willing to work.
- Lots of people are unemployed, so any work is better than none.
Raw materials
- In HICs, raw materials are not easily accessible (e.g. oil, coal and gas are in limited supply in the UK).
Impact on HICs
- As more and more industries are moved to LICs, this can have a negative impact on some areas in HICs.
- For example, when Hull lost its shipbuilding industry, the city became financially unstable.