TNC - A transnational corporation that operates in more than one country across the world - tend to be large weathy organisations.
Reasons for Coca Cola to locate factories in India?
- Lower labour costs in LEDCs (low labour costs = higher profits)
- Reduces transport cost (low transport cost = higher profits)
- Working conditions are less strict (relaxed legalisation = lower overheads = more profit)
- Countries try to encourage multinational companies to invest in them (Indian states offered subsidized water, lower tax rates and financial incentives.)
- Widens market (more consumers = more profit)
- Brand status is raised
- Can adapt product to fit in with local market making it more 'local'
GLOBAL INCREASES PROFIT
Evidence Coco Cola is a TNC
- Headquarter is in a MEDC country - Atlanta, USA.
- Owns over 400 brands in over 300…
Case study 14 - Nokia & Coke
What do you need to know?
What are the local, national and regional impacts of these decisions?
Map showing the location of Nokia's operations
Reasons for the location of its operations
MNCs such as Nokia have branches in many countries because they want to reduce costs. With lower costs, their profits are higher. MNCs such as Nokia keep costs low by opening factories and offices in regions of the world that have:
Low labour costs
Cheap land or building costs
Low business rates(the tax paid by a company)
Locating business to be close to the customer:
Another reasons why Nokia is constantly expanding its range of factories and offices is to be close to its customers, who are spread right across the globe. Nokia's products have massive appeal. Nokia estimated that the mobile phone market had around 2.2 billion people in 2005 and this was expected to rise 4 billion in 2009. Growth in mobile phone ownership and subscription has been particularly strong in Newly Industrialising Countries (NICs). As consumers in LEDCs have become wealthier, Nokia has expanded its business into Asia, Africa and South America. It has, therefore, opened new sales offices in many NICs, located closer to these new customers.
Different jobs in different locations:
Nokia employ a wide range of staff. Some are highly qualified or skilled, such as business managers or R&D staff. Other staff, such as some assembly workers or sales stuff, do not require high-level qualifications or as much training. So, like many other MNCs, Nokia has chosen to locate the assembly of basic products in their range in NICs where wages are lower.
However, the more highly trained R&D staff tend to work in Europe. Here, Nokia develops new products, such as hand-held devices capable of filming video, playing games and surfing the web. These devices use the latest technology and therefore need more highly trained staff to develop and produce them. These high-tech products are also aimed at wealthier consumers, so it makes sense to make them in Europe.
Coca-Cola - not just bad for your teeth?
Pollution caused by the factories - lower standard of regulation
Jobs for local people
Local people can learn new skills
Development of local infrastructure
Development of mineral wealth
New energy projects such as dams built
Large-scale pollution in lakes and rivers
By manufacturing in Europe Nokia can avoid having to pay tariffs in the EU
Improve the quality of life of people living in the region