The Benefits and Disadvantages of a Global Trans National Company Like Nike
Nike is an example of a TNC (Trans National Company); it has over 47000 branches in over 100 countries and approximately 700 factories that produce its cloths and products. Many of the factories are in LICs such as Cambodia and India. This is because the minimum wage over in those countries is a lot lower than the minimum wage in the UK or America. Also people over there often are willing to work for many hours for very little pay, also they will often have been sent there by their parents (children) in order to earn a living for themselves.
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* Nike will bring employment to the country, there would be a lot of jobs created by the factory because they would be able to afford a lot of people, rather than if the factory was in the UK
* This employment leads to the creation of the multiplier effect, this means that the local economy will improve because of the money that the workers spend in the shops for food etc. Also because the local economy is growing, there is more indirect employment.
* The money that is being brought to the country creates a bigger trade balance; this is sometimes called the balance of payments. It is the difference of the value of the country’s imports ad exports.
* Brands like Nike subcontract local firms to hire the factory workers, this is a good thing because there is employment generated by the use of local factories, this is better than the construction of Nike’s own factories making various local factories going out of business.
* Some of the factories use a code of conduct that says that the factory should never do things like: Employ children, not to make employees to stand up for longer than 30 minutes, at least 1 in 7 days off, No forced overtime (the employees work from 6:30am – 2:30pm), also to allow all employees sick days off, and many more.
* Sometimes much of the employment is low paid, low skill, long hours. This means that many people will be unhappy to buy the products because of they were manufactured in a sweatshop.
* The code of conduct is broken in most cases; by the forced overtime for the employees (6:30am to 10:30pm), children are employed, in extreme cases the employees are beaten if they refuse to work overtime, people who go off work 3 times in a certain period of time would be sacked; causing people to ignore illnesses to go to work in fear of losing their jobs, finally the average pay for an employee in Cambodia is ï¿½8 a week, which is the countries legal minimum. However the true conditions in most factories subcontracted by Nike show that there is: use of child labour. Some children lie about their age in order to get the job because they need to earn some money for either themselves, or their families. Because the companies often need the labour, the factories use documents that do not contain the year of birth in order to accept them as an employee.
* Much of the profit generated is exported, or ‘leaks’ back aboard. This is because although the products are made in an LIC, the offices and share holders are in other countries (HIC’s)
* Local industries may not be able to compete with the investing company. This is because the various companies in the LIC’s will have a low profit and be unable to compete with the various TNC’s in the country. These companies either lose employees due to a better pay in the TNC or the TNC’s products will be bought more than that companies products, thus making them go out of business
* Sometimes workers in the country may not be able to afford the consumer goods they manufacture. This means that when they are payed, the only thing that they can afford is some food, and then they might have to pay rent, taxes etc. this means that some of the products that they manufacture might be thrown away or exported. Some of the workers often wish that they were payed the equivalent to two of the things that they produce in their shifts. However, they are only payed the equivalent of say one. This is an issue because if they would not be able to afford the products once their wage is used for food, taxes, rent etc
Many TNC’s source their materials and make their products in LIC’s mainly because it is cheap and there is a large amount of willing people who will work for very little pay. Charities such as ‘save the children’, ‘Oxfam’ and many more. These Charities are trying to get the companies to change their ways, and treat their employees better.