TATA. bananas and Apple (TNC example, food + manufacturing commodity)

what is a TNC

• A Transnational Corporation (TNC) is a corporation that has its facilities and other assets in at least one country other than its home country.

• Such companies have offices and/or factories in different countries and usually have a centralised head office where they coordinate global management

what is evidence that TNCs are global scale

• according to forbes, global top 2000 companies now account for $30 trillion in revenues

• globally, 72 million work for these companies

• A rough estimate suggests that the 300 largest TNCs own or control at least one-quarter of the entire world's productive assets

• TNCs' total annual sales are comparable to or greater than the yearly gross domestic product (GDP) of most countries

  • 69 of the top 100 economic entities being corporations rather than nations

  • e.g. As of late 2025, Apple’s market value exceeds $4 trillion, making its valuation higher than the nominal GDP of all but four countries (USA, China, Germany, Japan)

  • apple’s average annual sales sit around $400 billion - GDP of philippines is around $300 million

what is subsidiary and acquisition

Subsidiary - a company controlled by a holding company

• A parent controls a subsidiary by owning a majority of voting shares or having the power to appoint a majority of the board of directors.

Acquisition - an asset or object bought or obtained

why do TNCs operate in more than 1 country

• To escape trade tariffs- e.g. Nissan in Sunderland to access EU markets

• To find the lowest cost location for their production- e.g. HP in Malaysia

• To reach foreign markets more effectively –e.g. McDonalds

• To exploit minerals or other resources available in foreign countries e.g. BP in Nigeria

why are 21st century TNCs called a ‘globally integrated enterprise’

they locate different functions to gain an effective blend of cost, skill and environment

prepared to located different functions of the business elsewhere

has a target of integrated production (ignores state borders)

what are common characteristics to all TNCs

Characteristics include;

• Maximising economies of scale by organising production to reduce costs

• Sourcing raw materials / components at the lowest cost e.g. outsourcing and offshoring

• Controlling key supplies

• Control of processing at each stage of production

• Branding so that products are easily recognisable

• Outsourcing production to reduce costs

what is outsourcing vs offshoring

offshoring - relocation a part of an organisation

outsourcing - subcontracting to another company

what are reasons as to why TNCs have grown

• mergers and takovers - allows big businesses to buy out small competitors or increase their market share (leading to eventual monopoly) e.g. Microsoft acquired the world’s largest video game maker Activision Blizzard

• availability of finance to fund expansion - TNCs from emerging economics have heavily invested overseas to increase their portfolios e.g. India is the second-largest source of foreign direction investment after the USA - there are nearly 100 indian companies operating in the UK employing close to 150,000 people and revenues of over £50 billion

• globalised transport network - e.g. containerisation has revolutionised the movement of foods by creating a standard transport product that can be handled anywhere in the world - cheaper as production can be in cheaper areas and more efficient, no longer regionally bound to produce that suits the climate or is in season

• technological developments e.g. refrigeration or freeze dying allows perishable foods to be transported globally

• government encouragement - financial incentives such as tax breaks

• cheap land e.g. areas suffering from the effects of industrialisation or changes in land use - honda (swindon) built car plants on the sites of former airfields

• fewer environmental restriction - environmental controls may be less or weakly enforced e.g. oil exploration in Niger Delta - but concerns of race to the bottom’ or consequences of pushback e.g. coca cola in india

• cheap labour - lower wage demands from LDEs and also from unemployed HDE workers e.g. China has been accused of exploiting cheap labour from Ghana, Ethiopia and other countries in their pursuit of cheap raw materials

• flexible workforce - willingness to travel for overseas in jobs or to be retrained in situ

describe and justify the location of a TNC HQ and where their R&D is located

Apple has its HQ in Apple Park, Cupertino, California - its home city

but also has Europe, Middle eastern and African HQ in Cork, Ireland - acts as a global logistics hub

its R&D is located in Silicon Valley - agglomeration of high tech companies were info is exhanges and access to well qualified expert workers - often near large unis to share facilities and graduates

where does TNC production take place for different sectors of the economy, and why

Products in the primary sector

• Tends to be in developing countries because HICs have depleted their resources

• However, new reserves as technology evolves means some new reserves e.g. Fracking in Canada

Products in the secondary sector

• Tends to located in the manufacturing regions of developing countries such as SE and S Asia, because:

  • Low labour costs

  • Investment in education- easier to train workers

  • Work ethic in non-unionised labour environment

  • Government incentives like tax breaks, enterprise zones, low business rates or less restrictive environmental regulations

Service based

• Are footloose

• Low labour balanced with good education/ proximity to markets.

• Language is important, lower level services such as outsourcing to call centres are in India because of the high proportion on English- speaking workers.

how do TNCs integrate different parts of the business 

Vertical integration

• Supply chain is owned entirely by TNC

• E.g. BP has exploration and production rights in 40 oil and gas fields

• It owns or joint owns pipeline, and has its own shipping fleet

• It owns refineries usually in countries where  end-products are sold

• In UK has 1,100 retail service stations

Horizontal integration

• TNC diversified operations by expansion

• E.g. Kraft Food Group took over Cadbury in 2010 giving them a more diverse base in the grocery and confectionery market. In 2015 Kraft merged with Heinz for the same reason.

what are benefits and problems for the host country of TNC global production

benefits:

• multiplier effect

• generates jobs and income

• new tech and skills

• improved energy and transport infrastructure

problems

• poor working conditions

• exploitation of resources

• cultural and environmental impact

• economic leakages - repatriation of profits

what are benefits and problems for the TNC of global production

benefits

• greater access to markets

• fewer controls like environmental legislation

• lower costs due to cheaper land and wages

problems

• ethical issues like sweatshops - reputation

• social and environmental conscience

what are benefits and problems for the country of origin (TNC base) of TNC global production

benefits

• cheaper goods

• specialisation in management, financial services, R&D, and other higher skill occuptations

problems

• loss of manufacturing jobs

• deindustialisation

• structural unemployment

• Demultiplier effect leads to spiral o decline in former manufacturing areas

• Can mean derelict factories, areas of deprivation and poverty

what is the global distibution of TATA’s offices and subsidiaries

offics tend to be located in more developed countries e.g. Europe, East Asia

subsidiaries in more developing countries e.g. Africa, South America, SE Asia

though there are exceptions to both - just a general pattern

mostly Eurasia and Africa, only 1 in NA, SA and none in Australia

what is evidence that TATA is a global company

100 countries in 6 continents

935,000 employed globally

origins as a small trade company in 1868, Mumbai

to now $130 billion, 30 companies

revenue = 4% of India’s GDP

nearly 60% of its revenue comes from outside India (global)

international footprint and reputation

diverse workforce that invests in different areas

subsidiaries are successful in their own right as well as TATA the head company being successful

each TATA company or enterprise operates independently under the guidance and supervision of its own board of directors and shareholders - there are 29 publicly listed TATA enterprises e.g. Tata steel, Tata Motors, Tata Power, Tata Chemicals, Tata Global Beverages, Tata communications

comprised of over 100 independent operating companies

what are TATA’s principles, visions and values

philathropy

education

healthcare

volunteering

mission ‘to improve the quality of life life of the communities we serve globally, through long-term stakeholder value creation based on Leadership with Trust’

66% of the equity share capital of Tata Sons (the principal holding company) is held by philanthropic trusts, which support education, health, livelihood generation and art and culture

Tata trusts, majority shareholders of Tata sons, has endowed institutions for science and technology, medical research, social studies and the performing arts. The trusts also provide aid and assistant to non-government organisations and the performing arts. The trusts also provide aid and assistance to non-governmental organisations working in the areas of education, healthcare and livelihoods.

provides professional development and career opportunities for women e.g. all women IT centres

TATA Uk steel

Tata Steel closed its final blast furnace at Port Talbot, Wales, on September 30, 2024, ending over a century of primary steelmaking in the UK. This move is part of a restructuring to cut 2,800 jobs (social cost) and shift toward greener Electric Arc Furnace (EAF) technology, aimed at ending losses of over £1m a day.

Replacing the furnace with a greener electric arc furnace which will use UK scrap steel (environmentally better) - but this won’t be functional until 2028

cost £1.25billion, £500 million paid by British gov - opportunity cost + economic cost

new furnace will create 5000 jobs

place meaning - Port Talbot associated with steel

why might people have different attitudes towards the TATA group

job losses - lead to a negative perception - often affects those who do not earn a lot e.g. steel workers, factory workers

the consumer is likely to have better perception than employees - cheaper goods, high quality

India - sense of pride

negative view from small companies who have been squashed by monopoly (competition)

what is evidence that bananas are a global food commodity

1 of the 5 most consumed fruits on the planet

5th most traded agricultural commodity

16.5 million tonnes were exported in 2013

4th most important food product within least developed countries

400 million see bananas a staple food

what are the environmental effects of banana production

bananas are susceptible to diseases and almost all bananas are treated with chemicals throughout the production cycle

Commercial plantations operated by large TNCs apply around 30 kg of active ingredients per hectare, per year.

These include fungicides, insecticides and herbicides.

In addition, fertilisers are applied regularly and after harvesting the fruit is washed with a disinfectant.

With the exception of cotton, the banana industry has the largest agrochemical input into the environment.

Banana plantations also cost the environment in terms of deforestation (as land is cleared), waste (for every one tonne of bananas produced there are two tonnes of waste), soil fertility (because of contaminants) and loss of biodiversity (especially aquatic life as pollutants run into water courses). 

where are bananas predominantly grown

Bananas are grown predominantly in hot, rainy lowlands of tropical regions.

• In a number of countries, such as India, Brazil and much of Africa, large quantities are produced but are mostly consumed domestically.

•  India is the largest producer of bananas globally and exports to the Middle East and other parts of Asia.

•   Similarly the Philippines are a large producer and export to Japan and other parts of East Asia.

•    The main commercial producing-regions for export, however, are geographically concentrated in Central America and the Caribbean.

•    Some of the countries in these regions are very dependent on banana exports.

what is the pattern of banana trade (exports and imports)

• World trade is dominated by 2 different groups of producers: 

  1. the ACP group (Africa, Caribbean and Pacific) 

  2. the so-called ‘dollar producers’ of Central American republics (primarily Ecuador and Colombia) controlled by large US TNCs. 

• Trade of bananas follows the traditional pattern of developing regions exporting a low-value primary product to more developed countries. 

• Exports are dominated by Latin America and the Caribbean countries, which produced 13 million tonnes (nearly 80%) of bananas for the export market. 

• The leading producers are Ecuador, Costa Rica, Colombia, Guatemala, Peru and Honduras. 

• Smaller countries in Central America are now exporting at a faster rate, though Ecuador remains the main exporting country. 

• In Asia, which produces 17% of the export market, the main country producing commercially is the Philippines

• In Africa exports are smaller (0.80 million tonnes in 2013). The two main producers are Côte d’Ivoire and Cameroon.

• The largest importers are the EU and the USA: in 2013, each consumed approximately 27% of the total exported (about 4.5 million tonnes for each region). 

what is the distribution of banana profits

• As with almost all commodities produced in developing regions but consumed in richer countries, around 90% of the price paid by the end consumer stays in the richer ‘north’ and never reaches the producer, who has most of the risks of producing a perishable fruit. 

• The largest slice is taken by retailers and bananas are one of the biggest profit-makers in supermarkets.

• banana producer gets 7% (the lowest out of the whole production chain)

• europe’s licenses and VAT get 13%

• transport gets 13%

• important multinationals get 20%

• distribution (wholesale and retailers) gets 41%

how have TNCs dominanted banana industry in the past

• In the past, 80% of the banana trade was dominated by just 4 large transnational companies Chiquita, Dole, Del Monte (all US-based TNCs) and Fyffes (based in Ireland). 

• The other important producer is Noboa, which is a national corporation based in Ecuador. 

• These companies are integrated vertically up the chain. 

• They own or contract out plantations to other producers; they have their own sea transport and ripening facilities, and their own distribution networks in consuming countries. 

• This chain allows them significant economies of scale gains so they can sell bananas in the USA and EU markets at a very low price (Figure 7.33). 

• They repatriate profits to their countries of origin. 

• Most bananas for export are grown on large monoculture plantations in Latin America and increasingly in Africa. 

The remainder of banana production not controlled by TNCs, is produced on smaller-scale family farms, particularly in the Caribbean.

how has TNC control over banana industry changed

• As recently as 2002, the big 5 companies controlled nearly 60% of the market but their share has now fallen by volume to 45%. 

• They are still major stakeholders in the business and have responsibility for and influence over labour standards on the plantations that they own or source from. 

• The organisation of the banana trade has changed in recent years (Figure 7.34). 

• The big companies have freed themselves of direct ownership of plantations, in favour of guaranteed supply contracts with medium- and large-scale producers. 

• An increasing number of national growing companies based in Ecuador, Costa Rica and Colombia sell their produce either to the banana TNCs (as distributors) or directly to retailers in the developed countries, for example, Wal-Mart and Tesco. 

• There has been a shift in power and retailers in the grocery sector in importing countries are increasingly dominating the supply chain. 

• As grocery market share becomes concentrated in the hands of fewer retailers, suppliers have little option but to accept conditions such as low prices, discounts and delayed payments or otherwise risk being taken from the supplier list. 

how has bananas been subject to trade dispute

Bananas were the subject of one of the longest trade disputes in history, lasting 20 years from 1992 until the 2009 Geneva Banana Agreement was reached, coming into effect in 2012. 

• The dispute started in 1975 when EU countries negotiated a trade agreement with former European colonies. The agreement was the Lomé Convention and was made with 71 African, Caribbean and Pacific countries (ACP countries), many of whom were banana producers. 

• These countries were given special and differential treatment (SDT) with preferential tariff-free import quotas to supply EU markets. The idea was to enable these former European colonies to develop independently without having to use overseas aid. 

• The agreement was extended to a list of banana suppliers to the EU including Cameroon, Dominican Republic, Belize, Ivory Coast, Jamaica, Ghana, Surinam and the Windward Isles. 

• The effect of the deal was to protect the mainly smaller, family-run farms in the Caribbean and Africa from competition with the large Latin American producers, whose bananas were produced more cheaply on mechanised plantations. 

• At the time, the US transnationals which controlled the Latin American crop were supplying around 75% of the EU market, while only 7% came from Caribbean suppliers. 

• Despite this, in 1992, the TNCs filed a complaint to the WTO that the EU practice was unfair trade. In 1997 the WTO ruled against the EU and the Lomé Convention and ordered the EU to cease the discrimination. 

• The dispute was not resolved as the EU proposals did not satisfy the larger producers. This led to a trade war between the USA and the EU as the US government retaliated under pressure from TNCs (mainly Chiquita) and imposed WTO-approved sanctions on a range of EU products.

• A compromise was eventually reached in Geneva in 2009 between the EU and 11 Latin American countries. The EU agreed to gradually reduce tariffs on Latin American bananas; the agreement was ratified in 2012. 

• There are still concerns from the ACP producers that they are not able to compete.

• Of the Caribbean countries, only the Dominican Republic (which had a larger number of medium-scale plantations), Belize and the Windward Isles are competing successfully with the larger producers but around 80% of bananas entering the EU now come from these sources. 

Their focus on producing organic and fair trade bananas is meeting the needs of a growing market in richer EU countries.

what is banana republic

• In the 19^th century, shipping magnates and railroad entrepreneurs discovered how lucrative the banana trade could be, with a growing North American taste for the fruit.

• United Fruit Company - loggied and bribed for cheap land in Latin America - nicknamed El Pulpo meaning the octopus for its far reach

• These profiteers worked, notoriously, to consolidate their monopolies, manipulating governments in Central America to ensure the cheap purchase of huge swathes of land for banana plantations. 

• Large areas were required to keep costs low.

• Spare land was needed to replace areas where the soil has become exhausted by such monoculture, making it more prone to disease

• Gros Michael banana hit by disease in 1910, led to abandoned plantations and unemployment - switch to Cavendish banana in 1960

• Their method of operating in these countries, being almost entirely export-orientated, gave little benefit to host nations and gave rise to the term ‘banana republic’. The term refers to a country whose economy is dependent on one or few commodities (pay for workers is consequently, kept low as people have few alternatives)

  • strikes to recognise labour union and plantation conditions

  • post ww2 - tried to buy back plantations

• They are often run by an incompetent or corrupt government ‘in hock’ (in debt) to large international corporations. Or the governments were made to look incompetent to benefit them. 

• United Fruit is now Chiquita

what is the race to the bottom in the banana industry

• Because of the low prices paid to suppliers by supermarkets, many of the larger companies are relocating their plantations, increasingly to West Africa, as companies search for lower labour costs and weaker legislation.

• This is called pursuing a ‘race to the bottom’ in terms of social and environmental standards. 

• Employers usually sub-contract labour so plantation work is increasingly casual. 

• The work involves long shifts in unbearable heat and many workers fail to earn enough to cover their basic needs. 

• The landscape will have had natural vegetation removed to create vast plantations –this is called monoculture and is very unsustainable and bad for biodiversity, which are treated heavily with pesticides.

how did TNCs dominante banana plantations

• TNCs have always dominated plantation monoculture. 

• Originally, this was because of the huge capital investment needed to develop a reliable harvest from bushes or trees, in tropical and sub-tropical climates where there was no tradition to export prior to colonial times. (Of course in the colonial era, indentured or slave labour kept wage bills low on, for example sugar plantations)

• (Spanish colonies in Latin America gained independence much earlier than the British colonies, it was around 1810-1825)

• Strong vertical and horizontal integration enabled economies of scale and secured market access. 

• Transport was always key in the profitable sale of fresh fruit. 

• Even in the 21^st century, the same TNCs own the banana plantations and linked companies that chemically treat, ship and process the fruit, often crossing several national boundaries. 

• Consequently, fruit companies such as Dole and Chiquita Brands International have the marketing power to bring bananas from tropical plantations to consumers all over the world. 

hat are the social effects of the race to the bottom

poor company management leads to accidents e.g. men inhaling pesticides

workers often work 10-12 hours

plantation owners would rather dismiss employees who complain than accept liability for worker health

Nemagon - very harmful nematicide - banned but still used on these plantations, detrimental to health of workers

what are the economic effects of the race to the bottom

plantation workers account for 1% of retail price

bananas and coffee make up 60% of export earnings in Americas

Tesco - £800,000 profit a week made from bananas

Workers can earn as little as 75p a day in Nicaragua

what are the environmental effects of race to the bottom

diminished soil fertility

herbicides and pesticides - agrochemicals

soil exposed, leads to soil erosion and loss of topsoil - leads to localised flooding due to increased runoff

30kg pesticides/hectare/year in tropics

deforestation

non-biodegradable waste

eutrophication

Fairtrade and Coobana story

5bn bananas eaten a year in the UK

very low wages for workers, poverety

100 years ago - United Fruit into Panama

1991 - 74 workers negotated a bank loan and bought the land their were on - Coobana

but they became locked into 10 year contracts fighting monopoly power

not profitable at first due to prices

2010 - selling on Fairtrade premium terms

contract with Co-op

improved living conditions

200 workers received grants for their homes

education - agricultural unis supported by grants

communities decide what to do with Fairtrade premium grant

faitrade for bananas

• In 2013 1 in 3 bananas sold in the UK carried the Fairtrade certification mark

• Fairtrade’s broad appeal is reflected in the growing participation of large food companies such as: Nestlé, Ben & Jerry and Cadbury’s 

• Over the last 40 years the price paid to farmers has halved for many products. 

• Fairtrade aims to pay farmers a guaranteed minimum price, offer fair terms of trade and pay an additional development premium for reinvestment in the local community

• Fairtrade cooperatives are able to develop local infrastructure, build schools and health clinics and provide training and some financial services such as bank credit and insurance services

• Today there are 1210 Fairtrade certified producer organisations in 74 countries benefiting around 6 million people.

• With the development of politics on the high street was the important role of the governments of LICs advocating “trade not aid” in international forums, including the UN conference on Trade and Development in 1968 in Delhi. 

El Guabo Association of Small Banana Producers

• The El Guabo Association of Small Banana Producers was formed in 1997 in south-west Ecuador.

• Today it is one of the worlds largest producers of Fairtrade bananas and exports around 30,000 boxes a week to the USA and Europe. 

• Before Fairtrade the 339 family farms sold their bananas through intermediaries at a price that was too low to cover basic costs. 

• Fairtrade has resulted in a range of individual and community benefits. 

long term benefits

• less dependence on aid which often has terms and conditions

• education means some people may be able to go into higher skilled and higher paid jobs

• improved economic productivity due to increased health

• economic growth

• investment in capital

• PME

what are the economic benefits of fairtrade

Stabilized incomes and improvements to standards of living Guaranteed fair wage and long-term supply contract, including direct access to new and international markets Producers able to raise additional capital for reinvestment for example tanks to wash bananas Migrant labourers are helped for example assistance to buy their own land

what are the social benefits of fairtrade

Health care benefits to families of cooperatives for example free use of El Guabo clinic Provision of educational and medical supplies Affiliation with social security system for example payment of retirement benefits Support for the poorest groups, e.g. food baskets Improved education provision e.g. new schools for children with special needs Marginalized groups helped to find employment e.g. HIV/AIDs sufferers

summary of bananas

The world trade in bananas demonstrates a number of relevant points about trade, especially in primary commodities: 

• Mass production in developing countries will have negative environmental consequences. 

• TNCs have a large element of control of markets & can influence political decisions. 

• WTO will support free trade against protectionist activities or agreements at all costs, even if the protection may be to help development (the lobbying power of US TNCs calling for free trade seems to have taken precedence over the ‘special and differential access to markets’ agreements for least developed countries, which were not very effective in this situation). 

• Geopolitical processes mean that trade disputes can spread and can escalate to trade wars between regional trading blocs. 

• Power and control of food production has shifted away from growers and towards retailers in HICs

• Supermarket price wars may ultimately decide where and how food is produced. 

More ethical, sustainable consumer markets are growing but relatively slowly and only in places that can afford products bought at a higher price.