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TNCs: production networks, glocalisation and outsourcing
Edexcel IAL Geography · WGE01 Global Challenges
Transnational corporations are key players in the global economy. They build global production networks, adapt products to local markets and use outsourcing and offshoring, with costs and benefits for the places involved.
How TNCs drive globalisation
A TNC operates in more than one country, usually with headquarters in one and production or sales in many.
- Global production networks: design, components, assembly and sales are spread across countries to use each place's advantages (skills, low costs, markets).
- Glocalisation: adapting global products and marketing to local tastes, laws and cultures.
- New markets: growing middle classes in emerging economies.
- They take advantage of economic liberalisation (fewer barriers to trade and investment).
Outsourcing and offshoring
- Offshoring: moving part of the company's own operations to another country (for example a factory or call centre owned by the TNC).
- Outsourcing: contracting another firm to do work, which may be in another country.
Both reduce costs (cheaper labour, land and energy, fewer regulations) and give access to new markets.
Costs and benefits for host countries
| Benefits | Costs | |
|---|---|---|
| Economic | Jobs, FDI, exports, tax revenue, multiplier effects on local suppliers | Low wages; profits sent home; competition harms local firms; TNCs are footloose and may leave |
| Social | Training and skills, better infrastructure, higher incomes | Poor working conditions, long hours; cultural change |
| Environmental | Some bring cleaner technology | Air and water pollution, waste, deforestation where rules are weak |
TNC activity in emerging and developing countries
Worked example
Explain why a TNC might outsource clothing production to a developing country.
- Labour costs are much lower, cutting the cost of each garment.
- Regulations and land costs may be lower.
- Improved shipping and containerisation keep transport costs low, so the goods can be sold profitably in distant markets.
Answer: Lower costs of labour and land, with cheap global transport, raise profits.
Check yourself
- A bank moves its own call centre from London to another country. This is
- outsourcing to a local firm
- offshoring
- glocalisation
- protectionism
Show answer
offshoring. It keeps ownership but moves location.
- A phone company pays a separate manufacturer in another country to assemble its handsets. This is
- offshoring its own factory
- a trade bloc
- deindustrialisation
- outsourcing
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outsourcing. Another firm does the work under contract.
- A fast-food chain changes its menu in each country to suit local religious and food customs. This is
- outsourcing
- glocalisation
- time-space compression
- free trade
Show answer
glocalisation. Global brand, local adaptation.
- TNCs are described as footloose because they
- only use walking routes
- are tied to raw materials
- can relocate easily to places with lower costs
- never close factories
Show answer
can relocate easily to places with lower costs. They can move if costs rise or incentives elsewhere improve.
- Which is a benefit of TNC investment for a host country?
- Local suppliers gain business, creating a multiplier effect
- Profits are sent back to the home country
- Local firms are forced out of business
- Rivers are polluted
Show answer
Local suppliers gain business, creating a multiplier effect. Spending spreads through the local economy.
- Explain one environmental cost of TNC outsourcing to emerging and developing countries.
Show answer
Factories may release untreated waste and air pollution because environmental regulations are weak or not enforced, harming rivers, air quality and health.. Weak regulation allows pollution of air, water or land.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.