Advantages and disadvantages of transnational corporations

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Student activities

Complete the table below.

Advantage Disadvantage Explanation

The TNC invests money by

opening mines, factories, shops

or offices in the host country

leading to infrastructure

growth, the development of

mineral wealth and energy

production, better roads and

airports and improved services.

The TNC creates jobs by

employing local people leading

to higher/more reliable

incomes and better skills and

knowledge.

The government of the host

country receives higher tax

revenues from the TNC and

through employees’ wages

which can be spent on public

services, such as health and

education.

The managers and directors of

the TNC bring their knowledge

and expertise to the host

country.

The TNC can exploit the

workers by paying them low

wages and by having poorer,

less safe working conditions.

Advantages and disadvantages of transnational corporations

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The TNC’s profits go to the

shareholders in the source

country and do not remain in

host country. This is called

leakage.

The TNC can relocate suddenly

and easily if circumstances

change, so the jobs may not be

as reliable.

The TNC can pollute the water,

land and air if there are either

no environmental regulations

or they are poorly enforced.

Local and national businesses

cannot compete with the range

and quality of products that a

TNC sells.

It is prestigious for a host

country to have TNC operate

there as it is a sign that the

country is a good place to do

business in.

Advantages and disadvantages of transnational corporations

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Teacher notes

Slide 3

The Role of TNCs.

Read the information and discuss with the class.

‘The most important role of TNCs is economic.’ To what extent do you agree with this

statement?

This statement is true to a large extent because the main role of TNCs is to bring investment

and jobs to a country. They do contribute in other ways as well, for example, providing funding

to help to improve the lives of the local people.

Slides 4

Advantages and disadvantages of TNCs. Possible answers could include:

Advantage Disadvantage Explanation

The TNC invests money by

opening mines, factories, shops

or offices in the host country

leading to infrastructure

growth, the development of

mineral wealth and energy

production, better roads and

airports and improved services.

Yes

The TNC can grow its

market share by

opening in other

countries. The host

benefits from all the

investment and

improvements.

The TNC creates jobs by

employing local people leading

to higher/more reliable

incomes and better skills and

knowledge.

Yes The TNC cannot afford

to bring in foreign

workers so relies on

local employees. Local

people’s incomes and

skills improve and

therefore they have

more to reinvest.

The government of the host

country receives higher tax

revenues from the TNC and

through employees’ wages

which can be spent on public

services, such as health and

education.

Yes The TNC often is given

lower tax rates as an

incentive to locate

there. However there

is more tax being paid

which can be used to

benefit the country as

a whole.

Advantages and disadvantages of transnational corporations

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The managers and directors of

the TNC bring their knowledge

and expertise to the host

country.

Yes The host country often

does not have enough

highly educated

people to become

managers and

directors, but local

people can learn from

those brought into

their country.

The TNC can exploit the

workers by paying them low

wages and by having poorer,

less safe working conditions.

Yes The TNC will pay the

local going rate for

workers and this is

often lower in a LIC or

NEE because the

workers’ pay less tax.

However this often

leads to workers being

exploited and over

worked in often

dangerous

environments.

The TNC’s profits go to the

shareholders in the source

country and do not remain in

host country. This is called

leakage.

Yes The shareholders

expect to be paid

dividends because they

have invested their

money in the

company, so lots of

the profits leave the

host country and can

therefore not be

invested here.

The TNC can relocate suddenly

and easily if circumstances

change, so the jobs may not be

as reliable.

Yes If war or conflict, a

natural hazard or if

the country is no

longer a source of

cheap labour, then the

TNC can relocate to

another country. This

strips away all the

advantages the TNC

brought with it very

quickly.

Advantages and disadvantages of transnational corporations

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The TNC can pollute the water,

land and air if there are either

no environmental regulations

or they are poorly enforced.

Yes To keep costs low,

sometimes TNCs do

not operate with due

care and diligence.

Pollution can be much

higher due to lack of

regulations or

enforcement of them.

Local and national businesses

cannot compete with the range

and quality of products that a

TNC sells.

Yes TNCs are large

successful companies

that can take over

local businesses in

order to increase

market share. They

often do not take the

locals skills or needs

into consideration.

This could also lead to

smaller national/local

businesses being put

out of business.

It is prestigious for a host

country to have TNC operate

there as it is a sign that the

country is a good place to do

business in.

Yes Many countries want to

attract TNCs as they

create jobs and bring

foreign investment.

Plenary answers:

The following are the answer to the plenary questions. In the discussion for question five, some

students could read out their ideas or you could do a hands up “who thinks they bring more

positives than negatives?” or the opposite.

1. TNCs: Coke, Gap, Unilever and Cadbury.

2. The role of TNCs includes investing in a country by building factories and employing local

people.

3. The advantages of TNCs to the host country are creating employment, training the local

people, paying tax and by enhancing the image of the country. This is called the

multiplier effect.

4. The disadvantages of the TNC to the host country are that the profits go to the

shareholders in the source country. This is called leakage.

5. Let’s discuss………