Economic World Case Study

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Economic World Case Study

• Fiat, a TNC in Brazil

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(No Transcript)
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What do you need to revise?

• What are TNCS?
• Introduce your TNC Fiat.
• Which other TNCs have located in Brazil?
• Provide some information about Fiats Betim
  plant.
• Why did Fiat chose to locate in Brazil?
• Why has Fiat expanded its production in Brazil?

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What is a TNC?

• A Transnational company.
• A company that operates globally and tends to
  have headquarters in their country of origin
  (often an MEDC) and branches or production lines
  all over the world.

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Fiat, Brazil

• One of the worlds largest industrial groups.
• Operates in 64 countries.
• Revenue over 48 billion euros, 39 of which is
  made outside of Italy.

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Which other TNCs are in Brazil?

• Many TNCs have located in Brazil. A few of which
  are
• VW of Germany
• Ford of USA.

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Betim Plant.

• Fiats first plant was in Betim in 1976
  employing over 10,000 workers and producing
  130,000 cars pa.
• Betim is part of the industrial belt of Belo
  Horizonte (capital of Minas Gerais- a wealthy
  state in SE Brazil).
• 1990s Fiat invested a further 1.5 billion to
  update the plant develop the Palio Tipo cars.
• Now employs 12,000 workers and produces 650,000
  cars pa.

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Tipo Palio cars
Sourcewww.hotelsturkey.co.uk/misc/rentacar2.htm
Source www.edirectory.co.uk/pf/pages/moreinfoa.as
p?p...
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Why did Fiat choose to locate in Brazil?

• The Brazilian Government wanted a car industry
  (long-term employment) and offered large
  incentives to TNCs.
• Fiat located in Minas Gerais as the state gave
  50 of the start up costs.
• Fiat would have a guaranteed market and could
  cope with demand ( 1970- 255,000, 2000 2,800,000
  cars produced and sold).
• Cheap labour 7/hr (in UK 18/hr).
• Strikes unlikely (military government good work
  ethic with 4 people waiting for a job for every
  person hired) so no production time lost.

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Why has Fiat expanded in Brazil?

• State of Minas Gerais gave Fiat 135m towards
  opening of a new factory at Sete Lagaos (over
  half the cost). This was a joint venture to make
  Ducato vans to help increase share of the light
  van market from 9 to 15.
• Also Fiat are expecting a huge increase in
  demand. If they are in the country they save
  costs of import duties and transportation to
  other South American countries.

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Ducato Vans
Source uk.cars.yahoo.com/car-reviews/car-and-dr
iving...
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Possible Exam Questions

• What is meant by the term TNC?
• With reference to your chosen case study, explain
  the factors associated with a TNCs decision of
  where to locate. 6
• With reference to your chosen case study, explain
  why a TNC may often chose to locate in an LEDC
  for its production while its headquarters remain
  in its MEDC of origin 6.