Multinational/Transnational Corporations

Transnational corporations, or multinational companies as they are often called, are very large businesses
that have offices and factories in several different countries. The headquarters and main factory are
usually located in developed countries, particularly the USA and Japan. Smaller offices and factories
tend to be in the developing countries where labour is cheap and production costs are low.
In the past ! years, transnationals have grown in size and influence. Some of the largest ones ma"e
more money in a year than all of the African countries put together. The world#s $!! largest companies
now control at least 70% of world trade and produce more than half of the world#s manufactured goods.
&eing so large, they also influence consumer tastes and lifestyles and are responsible for many of today#s
scientific and technological breakthroughs.
'any people are concerned about the effects of transnationals. They argue that they locate in poorer
countries (ust to ma"e a profit, and pay low wages, particularly to women and young children. )thers say
that without transnationals the poorer countries would simply not be able to develop their own industries.
*eople would have no (obs and their future would be very bleak. +iagram A shows some of the advantages
and disadvantages that transnational companies may bring to developing countries.
CA! T"#$% A multi&national company & '()!
,i"e trainers are sold and worn throughout the world. ,i"e
is a typical transnational corporation *T'C-. Its
head+uarters are in the USA, where all the ma(or decisions
and research ta"e place, yet its sports shoes are
manufactured in many countries around the world.
.i"e many T,/s, ,i"e subcontracts or uses independently owned factories in different countries to
produce its trainers. )ften this ta"es place in less economically developed countries 0.1+/s- where
labour costs are low. ,i"e say they are in the business of 2mar"eting2 shoes, not ma"ing them. 3owever,
,i"e dictates the terms to the contractor4 the design, the materials, the price it will pay.
,i"e#s main activities are in outh&!ast Asia, and up until recently it manufactured many of its trainers in
South 5orea. In the late 678!s labour costs in South 5orea rose, so ,i"e decided to move production to
Indonesia where costs were lower. /hina boasts the largest number of ,i"e contract factories 9 6:; in
total.
'any of the wor"ers in the Indonesian factories come from the surrounding countryside where they live
in poverty. The conditions they move to are better, but not much. Some of the problems they face are4
.ow wages and long hours
Industrial accidents
,o wor"ers# rights < trade unions are illegal in Indonesia
=here wor"ers do complain or protest they can lose their (obs.
The contractors say they cannot afford to pay the wor"ers more
and ,i"e says that it is difficult to control what is happening in
individual factories. This means that in a nation where
unemployment is high and employees can be easily replaced,
wor"ers will continue to be open to e,ploitation.
3uman rights and aid groups have for years criticised ,i"e for
not doing enough to tac"le poor wor"ing conditions in its supply
chain, particularly in developing countries.
/hairman *hil 5night admitted that the company had been slow to respond to evidence of poor conditions
in the past but said that they company was ma"ing progress in this area.
About >:!,!!! people currently wor" in contract factories around the world producing ,i"e branded
footwear, apparel and clothing, the ma(ority of which are women under the age of -.. 'ore than ?$% of
these wor" in Asia, predominantly in /hina, Thailand, Indonesia, @ietnam, 5orea and 'alaysia.
,i"e said it faced a number of 2ongoing challenges2 in its supply chain, including unsatisfactory levels of
compliance in "ey areas such as poor pay/ long working hours/ staff harassment and lack of trade
union representation0 3owever, ,i"e said instances of the illegal use of child labour were eAtremely
rare, with only five cases discovered in the past two years.
Although >!% of factories monitored met the required standards, a quarter of factories were found to
present more serious problems which ranged from a lac" of basic terms of employment and eAcessive
hours of wor" to unauthorised sub9contracting, confirmed physical or seAual abuse and the eAistence of
conditions which could lead to death or serious in(ury.
o =or"ers at nine ,i"e plants in Indonesia 0including Ja"arta- have been found to suffer from
se,ual and verbal abuse, lac" of medical attention and compulsory overtime.
o Bemale wor"ers have been found to have gained (obs through seAual 2favours2.
o +uring the 67?!Cs, most ,i"e shoes were made in South 5orea and Taiwan but when wages began
to rise, ,i"e loo"ed for 2greener pastures.2 It found them in Indonesia, /hina, and most recently
@ietnam99countries where cheap labour is abundant. Also in /hina and @ietnam, the law prohibits
wor"ers from forming independent trade unions.
o If ,i"e doubled the salaries of its !,!!! employees in Indonesia the annual payroll would be
roughly equivalent to what 'ichael Jordan is paid in one year to advertise the product.
,i"e said it would set up a tas"force to improve compliance with its code of conduct on wor"ing hours.