Lesson video

Hello, my name's Miss Gilliat, and I'm going to be your geography teacher for today.

In today's lesson, we are going to be learning about the advantages and disadvantages of TNCs, which is lesson nine of the globalisation topic.

Let's get going.

So, your lesson outcome for today is that you can explain the advantages and disadvantages of TNCs for both high and low income countries.

We've got four keywords for today's lesson.

So, the first one is infrastructure, which all the basic systems in a country such as transport and power supply.

A host country is a country which a TNC has set up a new factory, office or shop in.

Standard of living is the level of necessities and comforts of daily life that is available to and affordable by a person.

And the multiplier effect is more people having jobs, so more money to spend, giving other businesses more money, so they can expand and employ more workers.

We'll explain that last one in a little bit more detail further on the lesson because it's a little bit of a tricky concept.

Now, those four key words are highlighted in bold throughout the lesson if you need to refer back to them at any point.

So, we've got two learning cycles.

So first of all, we're gonna look at the advantages of TNCs and then we're gonna look at what some of the disadvantages of TNCs are, okay? So, let's get going with the first learning cycle, what are the advantages of TNCs? So, as a quick recap, a transnational corporation, or TNCs, are large businesses that operate in at least two countries.

Now, can you remember any examples of TNCs in the last couple of lessons? Now, the host country is the country which the TNC has set up a new factory, office or shop in.

Often TNCs set up production in lower and middle income countries, where the labour is cheaper and environmental laws are more relaxed.

If the labour is cheaper, it means that the company doesn't have to pay its employees as much and therefore it keeps more of the profit themselves.

And if the environmental laws are more relaxed, the company may be able to cut corners and therefore also be able to make more money.

Now, there are many advantages and disadvantages of TNCs.

So, first of all, focusing on some of the advantages.

I want you to have a think, what advantages do you think a TNC could bring to a host country? So, it might be worth just pausing the video and discussing your thoughts with the person that you are sat next to.

So, here are some of them, which we're gonna look in a bit more detail.

So, it can increase employment and create jobs.

There can be an improvement in services.

Local businesses may see higher demand.

People may have more money.

There can be an improvement in infrastructure.

And improve skills of local people, okay? So, that's a very basic view of the advantages of TNCs on a host country, okay? Now, I'm gonna show you a flow diagram, which shows the trickle down effect that a TNC can have.

And then, we're gonna look at these points in a little bit more detail.

Now, if a TNC sets up a new factory or branch, this can lead to two things happening.

First of all, it can lead to increased employment because people need to work for the company.

But also the TNC can pay tax to the government.

Those two things can then have knock-on effects.

So, for increased employment, that means that workers can spend more money, but also more people are paying income tax.

Now, if the TNC is paying tax to the government, this means that the government can spend money on services and infrastructure.

Now, all of those three things can have a knock-on effect as well, so, let's have a look.

Okay, so if more people pay income tax and workers spend more money, this can mean that local businesses grow and employ more people, okay? So, all of this is having a positive effect on an area or a country.

So, let's go into some of these ideas in a bit more detail.

So, if a TNC employs people, it therefore reduces unemployment, so, more people in the local area have a job.

Alongside this, a TNC may provide some form of education or training to their employees, which increases their skills and their future employability.

Now, increased employment can have knock-on effects, so, let's have a look.

A higher rate of employment can lead to more people having more money to spend.

This can lead to local businesses getting more demand, make more money, and expand to employ more workers, leading to higher employment, okay? Now, this is known as the multiplier effect.

Now actually, this can go back around to the beginning.

So, if you've got higher employment, because local businesses are getting more demand, that, again, that means that more people have more money to spend.

So, this knock-on effect can keep on going, a little bit like sometimes you might hear it become the snowball effect.

So, more and more people have got jobs, more have got money, more money is spent, local businesses do better, and there's a positive spiral happening.

Okay, let's check our understanding.

So, true or false, TNCs can lead to higher levels of employment? That is true.

And can you tell me why? So, when a new branch or factory is set up, it will need to employ more people, therefore, lowers the unemployment rate and more people have got jobs.

Now, TNC may also choose to improve the local infrastructure.

It may do this, so it's easier to set up operations in that country.

And it means that their business will be able to run better as well.

So, some of the things that they might decide to improve is the local roads, so that might be because it'll be easier for lorries to come in and out where the new company is located.

They may decide to improve railway networks.

And internet coverage, as well.

Now, the main reason that they are doing that is so that their company can operate as well as it can do.

However, there is a knock-on effect of that.

These can all lead to a rise in living standards for residents, even though is not employed by the TNC.

So, even though the TNC might not have been thinking, "Oh, we're trying to improve the lives of the local people," a knock-on effective in improving that infrastructure is that local people benefit from that as well.

Some TNCs set up schemes to develop facilities for local people.

So, for example, Shell has created the Shell Foundation, which aims to improve lives and increase the income of 60 million people in Africa and Asia, okay? Now, the Shell Foundation works with different types of people, and one of those types of people is smallhold farmers.

So, people that own small farms, basically.

So, here we've got a bit of a speech from a farmer that's been helped by the Shell Foundation.

And they have said "The Shell Foundation has set up a renewable source of energy at my farm.

They have also put me in contact with larger markets to sell my produce too.

This has helped my farm make more money." So, there is an example of a TNC deciding to help the local area, okay? The Shell Foundation also offers grants and loans to help entrepreneurs set up new businesses.

It's also gives to support to local businesses, okay? So, it might decide to give very low rate, interest rate, low interest rate loans, or just kind of to help new businesses make contacts with other markets, okay, helping them do better.

So, true or false, the Shell Foundation hands out grants? That is true.

And can you tell me why? So entrepreneurs can set up new business, this can help them make money.

TNCs can pay tax to the government as well.

This money can be spent on services such as healthcare and education, okay? The key word there is can.

So hopefully, the TNC should be paying tax to the government, and the government should be spending that money on those services.

But, that isn't always necessarily the case, okay? However, if it does, and you've got an improvement in healthcare and education, that can improve the quality of life for the local people.

Okay, so what are the advantages of TNCs? I'd like you to tick all that apply.

So you've got A, increased employment.

B, the multiplier effect.

C, less pollution.

And D, increased tax revenue.

Okay, let's have a look at the answers.

So, it can increase employment, it can lead to the multiplier effect, and increase tax revenue.

Generally, an introduction of a TNC doesn't lead to less pollution.

And in fact, it can lead to more.

Okay, so we're on to our first task for this lesson.

So, task A.

What I'd like you to do is use the statements below to explain how a TNC setting up a new factory/branch can lead to an improvement in living standards.

So, in the purple circles there, there are some statements that would be good to include in your answers, okay? So, use those to help you and help you structure your answer.

So, I'm gonna leave that on there now.

So, I'd like you to pause the video and have a go at explaining how TNC can lead to an improvement in living standards.

Off you go.

Okay, let's have a look at my model answer for this question.

"If A TNC sets up a new factory or branch in a host country, this leads to increased employment.

This means that workers spend more money, which can lead to local businesses growing and employing more people.

This is known as the multiplier effect.

Overall, more people are paying income tax.

This means more money for the government to spend on services such as healthcare and education, this can lead to an improvement in living standards." So, you didn't have to write exactly what I've put there, but hopefully, you've got something along those lines.

So, it might be worth pausing the video and seeing if you can add any extra detail to your answer here.

Okay, let's get going with the second learning cycle about what are some of the disadvantages of TNCs.

Now, there are many disadvantages of TNCs and many of these disadvantages are experienced by the host countries.

Now remember, most countries are lower income or middle of income countries.

Not all, but that's where they tend to be.

So, before we go through them, it might be worth pausing the video and seeing if you can think of any yourself.

So, what disadvantages could there be to a host country if a TNC moved in there? Right, let's have a look.

So, there might be poor working conditions for the people that work at the new company.

There might be increased air, water and soil pollution.

Those polluted environments can have impacts on the livelihoods of local people.

A host country does not have enough resources to meet its own needs because the TNC may be using those resources.

And also something called economic leakage can happen.

So, we're gonna look at some of these in a little bit more detail.

Now, many TNCs set up production in other countries to exploit cheaper labour costs.

This can mean that employees can be paid very poorly and have poor working conditions, which is not a good thing, okay? Now, when we say poor working conditions, what do you think that actually means? Or, what would that actually look like in real life? So, I'm gonna give you an example here.

So, in 2007, Nike was criticised for having sweatshops, which exploited workers.

So, these were some of the conditions that they were having to live with.

Overtime was enforced onto the workers, pay was below minimum wage, workers weren't given any rights and they were also working very long hours.

This was not good for the people that worked for the company.

Right then, let's check our understanding.

So true or false, many TNCs set up factories in other countries? Okay, that is true.

And can you tell me why? To exploit cheaper labour costs.

You might have also said as well for there to be more relaxed environmental rules.

Now, many TNCs set up production in other countries to make use of more relaxed environmental laws, okay? Now, this can lead to TNCs damaging the local environment and creating air, water and soil pollution, okay? And it does tend to be the case that in higher income countries, they do tend to have more strict amounts of how much pollution a company can emit and what they can do to the local area.

Not always, but it does tend to be that in lower income countries, these laws may be more relaxed.

So, a TNC might decide to set up a factory in that because therefore they can cut corners and they pollute the environment more.

Now, they might not want to pollute the environment, but in general, cutting corners is cheaper for a company, which means that the company can make more profit.

So, we're gonna look at an example of Nigeria and Shell, okay? So, Shell is a British-based oil company, but it has got oil refineries all in Nigeria, especially in the southern part of Nigeria, near the Niger Delta.

So, there have been at least 40 oil spills from Shell pipelines in the Niger Delta since 1989, okay? So, if we have a look at the map here, we can see the areas that have been highlighted in yellow are where those oil spills have been located.

Now, if there is an oil spill, and often it was because some of the pipes weren't properly maintained, what problems do you think that would create? Right, let's have a look at some of the impacts that the Niger Delta region had to experience because of these oil spills.

So, the local ecosystem was destroyed.

People cannot use the river for drinking water.

Fish numbers declined.

Workers in the fishing industry have lost their jobs because they couldn't catch any fish anymore.

And also people cannot swim in the river.

We can see there that there's a lot of social and environmental impacts.

So the people in the local area have suffered, but also the environment has.

Now, a TNC may exploit the host country's natural resources.

This can mean that the country doesn't have enough resources for its own needs.

Now, examples of resources that it might exploit are things like energy and water.

So, for the case of Nigeria, for example, when Shell takes that oil away, that oil is often transported to other parts of the world.

That might mean that Nigeria doesn't have enough oil for its own goods and its own needs.

Okay, let's check our understanding.

So, what are some of the disadvantages of TNCs in host countries? So, can you think of three? Pause the video and discuss with your partner.

Okay, so here are some examples you might have.

Labour exploitation, damaging the environment, including air, water and soil pollution, and countries not having enough resources of their own.

Often the TNCs are owned by foreign countries.

This means that the profit made by the TNC goes back to the country where the TNC originates from.

This is known as economic leakage.

So, let's say a company is doing really, really well in another country of the world, and it's making lots of money, that doesn't necessarily mean that that country is gonna hold onto that money.

The money goes to the company and that company will often go back to the country of origin of the TNC, okay? So, it's not benefiting the the host country as such.

It's more benefiting the country of origin.

Okay, we're onto task B for our lesson, okay? So, what I'd like you to do is fill in the table with some of the advantages and disadvantages of TNCs.

For task two, you're gonna have a go at this.

So, "TNCs are a disadvantage to the host country." Now, what you are going to do is you are going to decide how much you agree or disagree with that statement.

So, place yourself on the scale bar from agree to disagree with the cross.

And then I would like you to explain your answer.

There is no right or wrong for this, but I want you to make sure that you are thinking and referencing some of the advantages and disadvantages that you've learned about in this lesson to support your answer.

So, pause the video and have a go at task two.

Okay, so here is the answers for the table, okay? So, advantages can include a TNC may improve the local infrastructure.

There may be increased employment.

It can lead to local businesses getting more money.

The multiplier effect.

And increased income tax to the government, which they can spend on education and healthcare.

Some of the main disadvantages include labour exploitation.

Air, water and soil pollution.

Pollution can mean that local people can't use the land the way they used to before.

Economic leakage.

And not enough resources left for the host country.

So, pause the video and add in any extra advantages or disadvantages you've not got in your own table.

Now, I've put my answer for this, but obviously, you did not need to agree with me here.

So, I've put it more towards the agree side, so that TNCs are a disadvantage to the host country.

And I'll give my reasoning.

So, "I have placed my marker there as I don't completely agree with the statement.

Sometimes it can be an advantage for the host country if a TNC sets up a new factory or branch.

It can lead to increased employment and better services, which increase living standards.

Overall, I think TNCs are more of a disadvantage, as even though people may be employed, often they work in poor conditions.

Also, TNC's main focus is about creating money, not looking after the environment.

This can lead to places becoming polluted." So, that's my answer for that question.

I've tried to give a balanced argument because I've given some of the advantages and the disadvantages of the TNCs.

But I've placed my overall opinion of where I've put myself on the scale bar.

Okay, so here's a summary for today's lesson.

Transnational companies can bring both benefits and disadvantages to countries.

The benefits from TNCs include the creation of jobs, new trade markets, and better education to produce skilled workers.

Disadvantages of TNCs can include exploitation of the host country, poor treatment of workers, and environmental damage.

Right, that's it for today's lesson.

Well done.

That was quite tricky stuff to get our head around for some of it, so you've done a fantastic job there.

Right, that's it for me.

And I'll see you next time.

Bye.