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With Reference to One TNC, Discuss Its Impacts on the Society, Economy, And the Environment of the Host Country(Ies)

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TNC essay
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  With reference to one TNC, discuss its impacts on the society, economy, and the environment of the host country(ies) [16m]. A transnational corporation (TNC) is a capitalist enterprise which controls and coordinates production or service activities in more than one country globally. TNCs usually possess spatial flexibility and thus able to switch their resources and operations between locations on a global scale to take advantage of the differences in resource costs and state incentives based on their comparative advantages, thus achieving spatial fix and getting the lowest production cost possible, maximizing profits gained for the TNC. This essay will focus on the impacts of Bayerische Motoren Werke (BMW) ’s TNC activities on South Carolina in the United States. BMW is a German automobile and engine manufacturing TNC. Its headquarters (HQ) is located in Munich, Germany, and it acts as the apex management centre and as the financial controller, coordinator, and transmitter of market and their company’s products manufactured. BMW’s Research and Development (R&D) centres are mainly located near its HQ in Munich, with a few in other locations, such as California, Singapore, and Tokyo, due to their high expertise and comparative advantages in knowledge-based functions. Many of its manufacturing units are located near their consumer markets to cater to customer’s specific needs, for in stance, the US plant in Spartanburg, South Carolina, serves the North Americans and the plant in Bavaria, Germany, manufactures cars to serve the European Union’s consumer markets. In order to achieve spatial fix and maximize profits, BMW relocates manufacturing plants to other countries to carry out production processes, thus bringing them both positive and negative impacts. Economically, BMW brings in positive impacts to South Carolina. By opening up manufacturing plants in the region, 23050 jobs were created which provided workers with a total wage of $1.2 billion in 2007 alone. These jobs accounted for significant employment for the people, with 1.2% of total employment and 2.2% of the manufacturing sector’s employment within the state. As such, BMW has led to cycles of cumulative causation in a multiplier effect for South Carolina. BMW also spent a total of $750 million on the construction of the production plants to upgrade and enhance the facilities in the factories from 2007 to 2010, which further supported 5000 jobs as part of the construction process directly and indirectly, adding $200 million to the labour income in 2008. As a result of these series of multiplier effect, South Carolina was plugged into the global economy significantly, with 60 to 65% of their manufactured goods being exported to other countries. Local Small Medium Enterprises (SMEs) involved in BMW’s direct or indirect activities were also engaged economically, resulting in their growth locally and internationally. As seen, BMW has also contributed to other economic sectors and companies in South Carolina around the growth pole of their own manufacturing plant via backward and forward linkages. However, BMW does bring in negative economic impacts to South Carolina, resulting in the failures of local car companies due to increasing competition from BMW’s influence on the local market. For instance, in 2008, companies such as GM, Chrysler, and Ford had to ask the state for a $50 billion bailout so as to avoid bankruptcy. With the incre ment of BMW’s activities locally, consumers are more attracted to buy BMW cars manufactured locally in South Carolina due to their cheaper prices, thus in turn being detrimental to other car companies’ local sales. Furthermore, there is a widening development gap seen in the country, with a large gap between lagging regions, such as Detriot, in the Rust Belt and the leading regions, such as South Carolina with BMW’s economic positive impacts, in the Sun Belt. Thus, all in all, BMW brings in positive economic impacts to South Carolina via cumulative causations,  but also in turn lead to the suffering of other car companies the state and the widening of economic development within the entire country as a result of the positive influence of BMW in South Carolina. Environmentally, there is a positive interaction and agreement between the host in South Carolina and the BMW TNC, thus leading to a series of positive environmental impacts brought to the state itself. Furthermore, the TNC’s regional and global outlook needs to portray a positive image and as part of their corporate social responsibility in terms of positive environmental impacts while involved in manufacturing processes in the region to garner profits. For instance, BMW is a reputable global leader as a sustainable enterprise as it has been a member of the Dow Jones Sustainability Index since its establishment in 1999. It was also one of the first few to be awarded the ISO 14001 environmental certification, proving that BMW has far exceeded international environmental standards. As part of their green movements in South Carolina, BMW recycles up to 75% of their production waste to keep the state clean, and it also engages itself in a Landfill Gas-to-Energy Project to reduce on their carbon footprint by recycling landfill gas to usable clean energy. In their manufacturing processes, hydrogen-powered engines and carbon-fibre reinforced plastics were also used as parts for the produced cars. As seen, BMW has been actively involved in sustainable environmenta l practices in their manufacturing processes in South Carolina and also in the state’s environment in general. Lastly, BMW also has brought social impacts to South Carolina. BMW is actively involved in corporate social responsibility events, while ensuring safety and comfort of workers in their production plants by improving the working conditions. For instance, air-conditioners and insulated ventilation systems were installed in the Spartanburg plant floor. Furthermore, a total of $23.2 million were donated to local charities by BMW since 1996. Such charity events include the Charity Pro-Am golf tournament held every spring that helped raise a total of $6.6 million since 2001 to South and North Carolina charities. BMW is also a strong promoter and advocate for education within the state, as they donated robots to local vocational schools and financially supported the Mentors Instructing Students Towards Effective Role Models (MISTER) program which aimed to increase the pool of teachers from diverse backgrounds for the students in local schools. However, in the midst of such positive social impacts, BMW has nevertheless brought negative impacts to the workers socially, and such positive impacts are just seemingly sugarcoated very well as part of their positive outlook and image to international partners and their consumers. For instance, workers working in South Carolina’s BMW production chains are highly vulnerable to the locational shifts of the company. Shifts can led to the adjustment of workforce, thus causing workers to lose their jobs almost anytime, leading to high job insecurity when working under such a large TNC that is oriented towards profit maximization and achieving spatial fix. For instance, South Carolina workers’ wages are significantly lower than the workers in Munich Germany because they are economically exploited for a cheap labour so as to maximize profits. This is carried out exactly because of South Carolina’s comparative advantage of having a cheap and exploitable labour compared to Muni ch workers. As such, these positive social impacts which seem to be brought to South Carolina workers by BMW are just part of the whole truths which BMW has not fully disclosed to the public. In conclusion, BMW has contributed positively to South Carolina, in terms of its economy through series of cumulative causation, social impacts through corporate social responsibilities and improvement of working conditions, as well as its environment through active sustainable production processes involved. However, there are definitely negative impacts brought to the state  too, such as the sugarcoated and hidden job insecurity and lower comparative wages for the workers as well as the failing local car industries and widening development gap within the country due to BMW’s economic processes in South Carolina. Clearly, the overall impact of BMW on South Carolina and USA as a whole is actually a set of negotiated outcomes between South Carolina and BMW. The overall impact is actually highly dependent on the level of development in the country, especially its ability for law enforcements environmentally and in terms of the social welfare of their workers. For this case, South Carolina, being a developed state in an economically developed country USA, is actually very fortunate, and as such, positive impacts often override the negatives due to the strong governmental legislation. However, in order to achieve spatial fix, it is inevitable for BMW to exploit the cheaper labour in South Carolina so as to gain maximum benefits from locating their production units in South Carolina in the very first place. Cai Peng Fei 5C35
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