Spatial Organisation, Production Networks and Marketing Patterns of TNCs

The branded manufactured goods sold by many TNCs are really the product of an entire world of small companies all working in an integrated way (the TNC’s actual role is to “run the team”, rather like a sports captain).

The following examples all serve to outline the geography of some global production networks of interconnected firms. In these cases, multiple “tiers” of production can usually be identified.

Computer manufacture

In order to produce competitively-priced machines at prices of £200 or less, firms like Dell and Hewlett Packard search for cheap suppliers of component parts such as the printed circuit board (PCB), processor memory - among many more. In a Hewlett Packard laptop there are around 20 major component parts, each of which may be produced by different companies located across several continents, arranged in different tiers:

• first tier: Prior to final assembly of laptops in Kunshan, China, the manufacture of each machine’s PCB (printed circuit board) is out-sourced to a company in Penang (Malaysia)
• second tier: The PCB in turn requires memory chips and a cooling fan. These can be sourced from other Malaysian factories and firms 
• third tier: The wire, screws and plastics that are used in the manufacture of each component part will need to be sourced too 

Clothing

Cheap garments sold by supermarket TNCs such as Tesco will require not just cotton or another fabric for their manufacture but also buttons, zippers, studs and other materials that all may be sourced from different suppliers. Even the production of a simple garment such as a T-shirt requires materials to pass through four to seven pairs of hands so the number of variations in the supply chain is huge.

Marketing patterns of TNCs

Marketing patterns of TNCs have become more sophisticated over time. The arrival of large numbers of new markets in Emerging Economies has meant that TNCs need to customise their products for an ever-widening range of national cultures.

In particular, the strengthening of Latin American, Asian and Middle Eastern economies has prompted an explosion of TNC interest in these emerging markets, where over 2 billion people have moved from dollar-a-day poverty into higher income brackets since 1990.

In order to maximise profit, many TNCs have, additionally, adapted their products to suit local tastes and laws. This is called glocalisation (combining a ‘global’ product with ‘local’ variations). It may involve paying attention to geographical variations in:   

• religion: Domino’s Pizza only offers vegetarian toppings in India’s Hindu neighbourhoods
• laws: the driving seat is positioned differently for cars sold in US and UK markets
• local interest: reality TV shows like Jersey Shore gain larger audiences if they are re-filmed using local people in different countries  
• availability of raw materials: SABMiller, a major TNC, uses local cassava (a tropical root crop) to brew beer in its African breweries to suit tastes there. This reduces the transport cost of importing barley, while changing the product’s taste considerably, but to one more in tune with local market preferences.