Studybay uses cookies to ensure that we give you the best experience on our website. By continuing to use Studybay you accept our use of cookies view more on our Cookie Policy

Economic And Environmental Influences Of Transnational Businesses Economics Essay

Trans National Organizations (TNCs) are companies which operate in at least 2 countries. Its company is very hierarchical with the headquarters as well as research & development often located in the mother country. Creation centers have a tendency to be host countries. When group becomes more worldwide regional headquarters and regional research & development will broaden in the production countries.

This provides TNCs many advantages, such as right of accessibility to the global market, cheap labor, low development costs, & as a result greater earnings. The headquarters of these remains in its mom country, usually one of the most developed countries on the planet, like USA & UK. Their established factories across the world, which either make parts or whole finished goods for the company to sell on the global market.

Among all the TNCs on earth, Most of them are oil companies such as Exxon (Esso) & BP, & car processing companies (for illustration Toyota, Ford, Nissan and Volkswagen). Other familiar companies like Sony, IBM and Coca-Cola are also thought as being TNCs.

Trance National Companies are established globally because of their advantages, to earn more gains. They bring with them both negative and positive impacts for the country that plays coordinator to them.

Top 10 TNCs in 2009

TNC's manufacturing


Scientific instructions, pharmaceuticals & microelectronics, (Mitsubishi, Sony, Glaxo- Smithkleine)

Large amount consumer goods

Tyres, Motor vehicles, televisions & other digital products (Toyota, Daimler, Ford, Volkswagen, General Motors)

3) Mass produced consumer goods tobacco, beverages, breakfast cereals, cosmetics & top quality goods (Mars, Uniliever, Nestle, Kraft foods)

4) Service

Banking/ insurance, freight travel, advertising, hotel chains and fast food retailers (IN group, AXA, citigroup, HSBC, Allianz, Dexia)

TNCs organize & manage economic activities in different areas & develop trade inside & between products of the similar firm in different regions. This means they could control the conditions of trade and can reduce the result of quota limitations on the movement of products, bypass trade tariffs.

Advantages to TNCs

TNCs be capable of take benefit of spatial distinctions in factors of creation.

They can utilize differences in the ease of access of labor, capital, and building or land costs.

e. g.

2002 Dyson changed its development from a vegetable in Malmesbury, Wiltshire to Malayasia to adopt good thing about cheap labor. Dyson did preserve several hundred careers in Wiltshire for R&D keeping of 30% in development costs0

They must locate to take advantage of government policies such as lower fees, subsidies and grants and less restrictive legislation on employment and pollution.

They can get round trade barriers by locating production within the marketplace where they want to sell. E. g. Nissan in Sunderland, Toyota in Derby.

Japanese car companies have been drawn to locations in the EU because of quota limitations on the import of Japan made vehicles into European manufacturers and gain entry to the Western european market

What are NICs?

Country that has within recent decades experienced a complete into rapid production growth, immediate export oriented economical expansion, quick industrialization further a high amount of investment and assets formation basically funded from local cost savings, and a high tendency to export, with person durables and machinery accounting for a sizable talk about of exports.

Superior instances are South Korea, Hong Kong, Taiwan, and Singapore. These countries make investments capital and creation facilities in other expanding countries like China, Vietnam, India, and some countries in South East Asia.

Within 20th century tons of East Asia countries were industrialized such as South Koria, Taiwan, Philippines, Singapore, Thailand, and Japan.

These state governments are called as Newly Industrialized Countries or (NICs). Also, they are sometimes referred to as Tiger Economies due to growth rate of these counties.

The government authorities of NICs controlled over commercial development & encouraged sectors to export produced products to abrade such as more developed areas.

The exports revenue were re-invested in the neighborhood overall economy. Local businesses does grow; wages increased & workers do spend their new assets to buy local goods and services thus motivating further progress.

This type of rotation or knock-on result, in which money paid by businesses is reinvested inside the country, is often called the multiplier impact.

NICs have been being been successful for the last 30 years. That successfulness of these economies has added to the turn down of manufacturing sectors in MEDCs like UK. Companies struggled to contend with the NIC's competition, because their creation cost and pay were suprisingly low.

Characteristics of NICs

Countries whorled market exporter show is increasing, they often times copying existing products & then reproducing for a much low price.

Continues development in the production sector that results for further exports & carries on increasing of GDP.

Generally NICs Can be developed by three stagers, that's traditional modern culture to a developed country contemporary society. Three stagers are discussed below. The time frame of entire process can be bare minimum 30 years.

Traditional population:

There are usually more labors work under the industry, its labor oriented. Concentrating on small cottage-style traditional establishments, concentrated on local recycleables. Occasion could include food processing, textile manufacture

Most of that time period, lots of folks remain work in the primary sector, doing things include farming.

Using primary technologies & most of the people have less money.

Import the products what they want, that indicate region is not producing what they actually needed & addicted to transfer products.

Import substitution industries:

The country does promote its industries.

Newly began companies imitate products from popular market giants and then produce them for low price.

The government operates tariff barrios for the products are being brought in & trades that make similar products. The goal of that is protecting their own domestic companies whilst they increase.

Instance market sectors are computer make, car manufacture, digital goods and other electrical power goods, like hi-fi's.

Export orientated industries:

The new companies set up in their own country they are really unleashed after the global market.

Industries are being capital intensive, using high technology & targeted at earning a huge profit.

The gross local product (GDP) of the united states begins to increase, largely growing at more than 5% per yr which is a wonderful rate.

Now the country has been as an NIC.


Advantages: The companies earn, invest, & bring foreign currency in to the country. Though almost all of their earnings get back to the company's country of host, all the remunerations do come to the local economy

Disadvantages: The incomes paid to coordinator country workers are extremely low and a lot of companies have been accused of exploiting the workforce before benefiting it. There are often tax incentives for these TNCs to find in countries in the Developing World. Due to the fact that they get tons of their gains out of the country that says the true economic advantage to the united states could be limited.


Advantages: TNCs help the development of the NICs by attracting latest technology and new knowledge that the host country doesn't use.

Disadvantages: Unless the business actively participates in a program to teach local companies in the new systems, the country's industry won't really advantage. TNCs are not going to talk about too much information. If the neighborhood industry competition will increase because of new knowledge TNCs have to contend even with the neighborhood companies.


Advantages: The brand new TNCs mostly help develop transport links around the business area.

Disadvantages: Mostly serve only the direct roads, rails that needs of the business, not the surrounding area as well.


Advantages: They create careers opportunities for the NICs home employees.

Disadvantages: A lot of the jobs opportunities are highly skilled & therefore the company uses their own people to do the work. Due to the technical environment of the companies. Remain less careers opportunities.


-launching a TNC in a city in NIC will encourage urbanization. Young migrant staff gather to the town. It influence to the rural communities & their development


Advantages: Companies bring with them environmentally friendly friendly solutions & expertise to decrees harmful pollution & establish a safe working environment.

Disadvantages: a whole lot of TNCs have very bad record on pollution and worker safeness. They are complained of seeking to cut both protection of working environment and environmental air pollution in order to keep costs down.


Overall impact to the Economic growth

Development of NICs can be potentially advertised by transnational organizations through their activities that generate monetary growth.

Some evidence is out there that the foreign exchange and foreign direct investment that TNCs provide can improve the performance of the overall economy of the NICs that they operate in. "The procedure of economic growth is impacted by the TNCs through influencing the product quality and amount of new capital development, transfer of tender and hard technology, development of trade opportunities and the development of recruiting. "

Further, Such as for example Province of China, Taiwan, and South Korea demonstrate, that under some conditions monetary growth can foster public development. For instance in Taiwan, substantial growth of current economic climate has been coupled with increased educational levels, longer life spans, upgraded health conditions, advanced housing conditions, political liberalization and improved civil liberties.

Theoretically TNCs can uplift the introduction of the NIC's world by fostering economic growth; almost this relationship prevails for two reasons. Mainly, in the sponsor countries it is not clear whether transnational organizations are really in charge of the development of market. In the most recent two notable cases related to monetary change, Taiwan and South Korea, a negligible role was played by transnational businesses. Further, TNCs already have the capability to prevent NICs local economical growth by jogging local entrepreneurs from the business zone, along with the importing of main goods and services, lowering huge amounts of the profits using their company local NICs, and transferring royalties and fees to the main companies which are located from the host economy.

Secondly, even if the economy of the NIC is not developing, there's a tenuous relationship between communal development and monetary growth. Even though there is an global economic progress on a yearly basis, it is yet hard to prevent the problems of poverty, unemployment, inequality in riches, and such other issues of sociable malaise. For example In Cote d'Ivoire, from 1960 to 1975 the TNCs may have helped to foster aggregate the development of the current economic climate, they have only a very little to uplift the introduction of the world: increase in unemployment, income circulation extended and nationals progressively started losing the control over the commercial capacities of the country. In a few, under some circumstances TNCs can become the motors of growth of economy, the power of current economic climate is very almost never harnessed to the success of development.

Overall impact to the Environment

Transnational firms can have a negative impact by way of a demotion of resources in the surroundings to the interpersonal development. And over the past a decade such entities have been responsible for environmental disasters. For a good example, Union Carbide in Bhopal, India, Exxon's Valdez spill off Alaska, and Texaco in Ecuador.

To a group of environmental problems TNC's have been associated. Fifty percent of the garden greenhouse emissions are generated by them, in which they are accountable for global warming. Furthermore also, they are the users of ozone-depleting chlorofluorocarbons (CFCs) and they are also manufacturers of CFCs. Explaining further, transnational corporations are in charge of the pollution of land, air, wetlands, normal water and the oceans. In the end, through their mining activities and commercial logging, there's a contribution to deforestation by the TNC. For instance in the middle-1980s, there was a control of 90per cent of the logging by the foreign organizations in Gabon and in Congo it was 77 %. As a result of such mining and logging unwanted effects such as flooding, loss of topsoil fast run-off of rainfall have occurred; Farmers are financially not in a rich status to buy the land from forest owners and usually TNC's don't internalize such interpersonal costs. Hence such negative externalities can't be prevented.

The romance between TNCs and the surroundings is massively intricate even though transnational organizations will surely obstruct communal development through their environmental tactics. But yet the Critics don't discuss that usage of environmental resources should be abstained by transnational firms, instead they have to promote sustainable development and development via their activities. For the time being there is a practice by the TNCs to check out demoted environmental criteria in the producing countries with comparability to the developed countries; which is found with data that environmental procedures are more in charge in expanding countries than in local organizations working in such countries. Nevertheless, critics stress that, therefore of experiencing better resources they may have better usage of research and development, It is the responsibility of the TNCs to promote environmentally sustainable routines plus they bare that responsibility. Some companies starting so a lot of pressure have began to follow more environmentally liable procedures. Example, a maligned polluter called Dow Chemical, possessed to determine one-and-a-half days and nights each session with the environmentalists simple mature management quarterly. The salary of the director was pegged to the goals of the surroundings, and a poisonous release of 32 % between 1988 and 1991. Further some laudable environmental practices were also put in place by the IBM including rewards for the employees for technological improvements which helped to adhere to the environmental criteria. Finally 18 environmental honours were received by AT&T since 1990.

On the other palm, expect these three companies majority pillage to consume environmental resources from the countries that are expanding and they ingest these environmental resources in a destructive and unsuitable manner. - practices which certainly hamper potential clients for interpersonal development. Some of the companies that involves in issues related to the surroundings are General Electric and DuPont, for example, Dupont was responsible for toxic chemical releases in 254 million pounds during the period of 1991 in the United States, and this has resulted in minimize such methods that destroys environment.

e. g.

In December 1984, one of the world's worst industrial disasters took place in a Union Carbide place in Bhopal, India. Poisonous gas leaked from a negligently maintained chemical factory getting rid of 3, 000 and injuring over 200, 000. See Reinhold (1985), Lueck (1985) and Everest (1985).

An Exxon dispatch called the Valdez crashed from the shoreline of Alaska, spilling thousands of gallons of essential oil into the ocean and killing huge amounts of marine life. The company untruthfully maintained that the oil spill had brought on only minor destruction and that the oil spill had been satisfactorily neutralized (de George, op. cit. , p. 5).


-s-cool. co. uk. (. . . ). Geography GCSE: Industry. Recently industrialised countries: South Korea. . . . (. . . ), . . . . http://www. s-cool. co. uk/gcse/geography/industry/industry-in-the-developing-world. html


  • More than 7,000 students prefer us to work on their projects
  • 90% of customers trust us with more than 5 assignments
submit a project

Latest posts

Read more informative topics on our blog
The Educational Curriculum INSIDE THE Philippines Education Essay
Education The educational curriculum in the Philippines is low in comparison to other countries. Other countries are able to find out more advanced...
The Ecotourism In Scotland Travel and leisure Essay
Tourism Hospitality and travel and leisure are very closely linked; every time a tourist comes to Scotland there are lots of restaurant and hotels to...
Corporate Social Responsibility: Targets and Concepts
Business Abstract Corporate Social Responsibility is a management principle whereby companies integrate social and environmental concerns in their...
A Personal Reflection AROUND THE ITM Information Technology Essay
Information Technology I have been in information technology industry for a long time. I have first-hand information technology experience especially in...
The Theory Of Mcdonaldization Commerce Essay
Commerce McDonaldization is the process where the concepts of the junk food industry have come to dominate an increasing variety of organizations in...
The Interpretation Of Life Quotes
Philosophy As you all know most of us are here in this planet for a while only and our life or being blessed as a individuals is a gift irrespective of...
The Sex Appeal In Advertising Mass media Essay
Media Through the years we have found a diversity advertising resources for offering products which were calling the attention of the costumers, to be...
Impacts of Tourism Deregulation and National Security
Marketing National security is definitely an issue going out with back to as early as when man started out arranging himself in contemporary society....
Homogeneous And Differentiated Product In Microeconomics Economics Essay
Economics The economic issue in this observation involves the concept of homogeneous and differentiated product in microeconomics According to Lindeman...
Check the price
for your project
we accept
Money back
100% quality
Plagiarism free writing service