Beau Zilesnick 13AMH

To what extent do Transnational Corporations bring both benefits & problems to the areas in which they locate?
Globalisation can be defined as the process of large transnational corporations investing in foreign countries. The argument that globalisation is a bad practice that is only looks to exploit the poor so the rich companies can gain more, causing a greater wealth disparity, is one that has considerable truth behind it. But globalisation doesnt have to be bad, and they can bring some key benefits. Transnational corporations have the potential to bring large benefits to areas in which they choose to locate. IKEA, the Swedish furniture company, was founded in 1943 in Sweden but has since grown to become the worlds largest furniture retailer , famed for its for supplying its low-cost stylish, flat pack furniture to now over 50 countries. It has grown rapidly from opening its first store in Alhulmt, Sweden in 1953 to then expanding across Europe to Switzerland and Germany. The company has since spread out from Sweden and its headquarters are now located in Leiden, which is close to Amsterdam. This decision is due to its proximity to high quality services such as management consulting and advertising, essential areas that must be addressed to maintain a good global profile. The company then splits to into a highly complex network that consists of approximately 1350 suppliers across all 50 of its operational countries. One factor that that has allowed IKEA to have such a positive impact globally are the fact that whilst it may locate globally they are not simply exploiting its suppliers or unmanaged resources such as the rainforest. IKEA maintain a close relationship between the company and its suppliers. The suppliers must stay within strict environmental standards in relation to the sourcing of timber. This encourages the multiplier effect in areas where IKEA locate in areas such as forest management and the transportation of their goods. In addition to this the transportation of their goods is designed to reduce environmental impact through the use of their rail operations. Even the basic element of their furniture, the idea that is flat pack and self-assembled, helps to reduce transport costs and allows greater efficiency. IKEA really is a prime example of the benefits globalisation can have, it strive to be environmentally friendly in all sectors. It is anti-child labour and aims to have for sub contractors to ensure a fair wage to all of its workers, something that not all large transnational corporations do. IKEA has a large employment base of 118000 but if we were to incorporate the multiplier effect the total number of people IKEAs supplying companies the number would be much larger. Unfortunately not all TNCs operate such in such a diligent and controlled operation like IKEA. For example Fila Korea Ltd is one such company which unlike IKEA does own any factories but instead outsources and subcontracts all of its manufacturing in Asia, Latin America and eastern Europe. The manufacturing process is highly labour intensive and this had lead to the company leading the exploitation of the poor and those desperate for work to maximise margins and minimise costs, but this comes at the expense of the workers. They instill strict delivery times and threaten suppliers with the loss of contracts and workers with redundancy if they cannot stick to the companies demands. One such factory is the Tae Hwa sports factory in Indonesia. The factory employs it workers the minimum legal rate of US $72. This scales down to a miniscule forty-two cents an hour. This basic wage is too low to meet living costs in the area and means employees must work overtime. In Tae Hwa this is compulsory and breaks all 1

Beau Zilesnick 13AMH

the legal limits set by Indonesian labour law. It has even been known for workers to do shifts of 32 hours or work for a whole month with no day off. However workers dont have a choice, refusing overtime can lead to demotion or sacking so they have little choice but to work. In order to satisfy the demand of the transnational corporations departments set impossibly high targets and the workers must meet these targets somehow, leading to unpaid overtime to satisfy there demands. When they do happen to meet their targets, they are only then set higher, even more unobtainable ones. There are few and poorly managed unions for staff, often with links to the management. This means abuse, both verbal and sexual is rife within the factory. In addition to this there are poor health and safety regulations and there frequent reports injuries at work caused by long hours, repetitive strain. Many workers get sick from the unrestricted use of chemicals in the factory due to improper handling and ventilation in these highly cramped unsanitary conditions. In conclusion it is clear transnational corporations have the potential to bring large amounts of good to an area, if they have the correct ethics and attitude behind them, such as valuing their employees. For example IKEA have located all around the world and strive to ensure employees are well looked after and that their products are of the highest quality with minimal environmental impact during its production and transportation. However the case of Fila highlights that sometimes the drive for profit can lead to the exploitation of workers and not valuing them as they locate in an area where the people have so little they can behave how they want and people have no choice but to conform or fired.