hk: im gonna do part A the rest you guys do okay :) im done with my part.

kel: i fill up any missing parts yall cannot manage to find (i.e. part B i shld think) ZX: wa damn hard to find data kel: idgi (the inward outward investment thing) A) What is the spatial organizations of the TNCs operations? B) What kind of linkage does the TNC have with the host economy? 1. Look at the TNCs inward investment as well as the outward investment of FDI. 2. What is the extent of these linkages? 3. What role do the government of host economies play in attracting these investments? C) What are the impacts of the TNCs operations on the host economy? 1. Examine the TNCs social, economics and environmental impacts on a specific host economy. 2. Which impacts are the most significant? Evaluate the short term and long term implications of some of these impacts.

A) The Toyota Mortor Co. Ltd was first established in Japan in 1937. By 2012, it is the 10th largest TNC, and the largest automobile manufacturer in the world. In 2012, the company: had 12 plants and 11 subsidiary companies in Japan and 50 manufacturing companies in 26 countries, from USA to India employed over 300,000 people worldwide vehicles are sold in more 170 countries and regions Global Headquarter: Toyota City, Aichi Tokyo Office: Bunkyo, Tokyo Nagoya Office: Nakamura-ku, Nagoya

Toyota had no overseas production facilities for cars before the early 1980s. However, the transnationality of the Japanese producers changed dramatically during the 1980s, mainly due to the need to be inside major markets such as Europe and US. Toyota built its first US production plant in 1988, and the first European production plant in 1992. Toyota in Europe When toyota first decided to set up a plant for its expanding market in Europe, it chose 2 sites in UK: 1 Burnaston, a 600 acre site, flat and easy to develop, 7 miles from Derby with its long tradition of car manufacturing 2 Deeside, 7 miles from Chester on a well-prepared industrial park It chose UK because: excellent skilled and flexible workforce strong tradition of engineering and vehicle manufacturing and favourable work practices large domestic market for Toyota cars reliable industrial transport links to customers and the British and European supply partners

 ease of integration and communication, as English is the 2nd language in Japan first class environment to live and to work supportive positive inward attitude from the government Toyota then shifted its production to developing countries, establishing a production plant in Sichuan in 2000 and Thailand in 2008, as it vastly increased its overseas production share to more than 50% by 2012. It chose Chengdu, Sichuan China because: Chinas Economic and technological development zone abundant chinese labour lower labour cost greater access to raw materials large domestic market

Design and R&D Centres

4 centres in Japan, 2 in USA, 1 in UK, France, Thailand, Australia and China. They focused on different aspects of R&D, such as: Japan: Product planning, Fundamental research, new technology research for engines France: Exterior, Interior and Colour Design Thailand: Vehicle Engineering and Evaluation A Design and R&D centre was built at an economic development zone in Changshu, near Shanghai. Toyota invested a total of $689 million to purchase land, build
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research facilities and a test track. The centre surveys the Chinese auto market, studies quality control at its local assembly plants and develops low-emission vehicles and engines for the local market.

B) What kind of linkage does the TNC have with the host economy? 1. Look at the TNCs inward investment as well as the outward investment of FDI. 2. What is the extent of these linkages? 3. What role do the government of host economies play in attracting these investments? Chosen host economy: France In late 1996, Toyota began to look at the whole of western Europe for a site for its ultra-modern plant. Belgium, the Czech Republic, France, Germany, Poland and the UK all seemed to be the most promising investment recipient, but the list was quickly left a head-to-head battle between Europe's oldest foreign investment rivals - France and the United Kingdom. At first, the UK seemed the obvious choice. Toyota had its only European car assembly plant at Burnaston, in the UK's Midlands, where a skilled workforce and well-established automotive infrastructure and cluster of related firms are available. However, at the end of January, company president Hiroshi Okuda voiced doubts about investing in the UK because of its hesitation to fully participate in the European monetary system. In 1997, Toyota finally announced plans to build a $660 million car plant in Valenciennes, 60 km from Lille, France. The reasons for French government to invite Toyota to invest in France are attributed to the benefits of foreign direct investment (FDI) to France as the host country: a. Resource-transfer effect

Toyota can make positive contribution to French economy by supplying capital, technology, and management resources that would otherwise not be available and thus boost Frenchfs economic growth rate. Capital Toyota, as a multinational enterprise (MNE), because of its large size, reputation, and financial strength, has access to financial resources which may not be available

for French local firms like Renault and Peugeot-Citroen. These financial resources can be originated from Toyotas internally-generated cash, or from capital markets. As a reputable and financially strong company, it may be easier for Toyota to have access to such resources than French local companies do. Technology Technology plays important role in economic growth of a country, since it can stimulate economic development and industrialization. Technology can be incorporated into both production process and the product itself. In case of Toyota, the French government may be benefited from its advanced technology which it passed to its French employees, therefore improves the employees skill without additional investment to develop their own indigenous product and process technology. Since Toyota also invests significant amount of capital in R&D in French, this company is not only transferring technology to the country, but it may also upgrade existing technology or creating new technology there. Management Foreign management skills acquired through FDI can produce important benefit for the host country, since it can help improving the efficiency of operation in the host country. Toyota is a well-known company in term of managerial capability; thus French employees working for Toyota may gain benefit from their daily works activity. The benefits may be greater if special trainings are provided for French employees prepared to occupy specific position within the Toyota subsidiary in French (financial, managerial, or technical posts). Superior management skill of Toyota may also influence and stimulate local suppliers to improve their own management skill. b. Employment effect Toyota brought with its investment the need for employment. The establishment of Toyota subsidiary in Valenciennes opened new job opportunities. The plant, opened in 2001, created around 2,000 start-up jobs, with an annual capacity of 100,000 vehicles. A second phase may double the capacity by 2005. c. Balance-of-Payment effect French balance of payment can benefit from Toyotas investment in France in three ways:
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- When Toyota established its subsidiary in France, the capital account of France benefits from the initial capital inflow (however, this is just a one-time-only effect). - If Toyotas cars substitute for imports of other countries cars, the current account of Frenchs balance of payment is increasing. - When Toyota exports the cars to other countries from France, again the French balance of payment will benefit from this export. The points Toyota considered before investing in France are geographical location, good infrastructure, better access to French market, and availability of good-quality labor. a. Geographical location Toyota wanted to be close enough to ship engines over from its UK plant cheaply. Northwest France is a short distance from the UK and was also near Brussels, home to Toyota's European headquarters. The physical location of Valenciennes, the city Toyota finally chose to be the next site of its investment, is almost ideal. Paris is two hours away by road or rail. The Belgian Border is just 6 km from the site. Nearby city, Lille, offers rapid freight and passenger access to the UK through the Channel Tunnel. Connections to the rest of mainland Europe, where the company wants to sell its cars, are good. Another consideration of the advantage of Frances geographical location is transportation cost. It is easier and less costly for Toyota to transport cars from France, which is located in Europe continent, to other European countries. b. Good infrastructure France is the third most important host country for FDI, after US and UK. Backed by good infrastructure and supportive government, France is considered very attractive by many MNE. c. Better access to French market Previously, Toyota has had less success selling there due to a greater degree of nationalism, which tends to drive French consumers to buy French brands cars.

Therefore, by making cars in France, Toyota tries to crack this nationalist sentiment. d. Availability of good quality personnel Northern France and neighboring Belgium have the skills base. The region is home to several car manufacturers that have created a large pool of suitable workers. High unemployment rate also help to avoid wage inflation. The French government is also very generous in inviting Toyota to invest in France. The north-east is a region with 20% unemployment, so Toyota was offered aid for training. A waiving of social security contributions was granted too. The authorities also cut the annual property tax on the site and helped to set up Japanese-French schooling. France's tax breaks enabled Toyota to buy its 100 ha site cheaply. Risks associated with Toyotas investment in France a. Political Risk Political risk is the likelihood that political forces will cause drastic changes in a countrys business environment that adversely affect the profit and other goals of a business enterprise. If, due to a specific case, the political situation in French changes dramatically and negatively influenced the business environment in France, Toyota may find it also harms its investment. b. Economic Risk Economic risk is the likelihood of that economic mismanagement will cause drastic changes in a countrys business environment that adversely affect the profit and other goals of a business enterprise. If the French economy is in turmoil, Toyotas investment in this country will also be affected. c. Legal Risk Legal risk is the likelihood that a trading partner will opportunistically break a contract or expropriate property rights. This may also happen to Toyotas when its trading partner in France infringes contract agreements. Beside those three risks, Toyota also faces the cultural risk since the grules of gameh of doing business in France with French people is different with that in Japan and other countries where Toyota already put its investment. The French
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language and culture can be a problem for Japanese firms used to speaking English when working overseas. Conclusion The decision to build a plant in France is a part of Toyotas global strategy in Europe. The company has already built plants in UK, Belgium, Poland, and Turkey. Supported by other plants in Europe, which supply the manufacturing components, the French plant will strengthen Toyotas position to penetrate European market.

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C) China: Environmental: +ve: Toyota is committed not only to sustainable motoring, but sustainable manufacturing and living as well. Toyota has planned environmentally friendly manufacturing processes in China. The Yundong Plan aims to bring advanced technology to the local market which will streamline the manufacturing processes and make it cleaner Toyota's manufacturing plant at Altona Victoria is an example of clean manufacturing processes. Through the award winning Toyota Environmental Management System, Toyota Australia has achieved significant reductions in carbon emissions: since 2006/07, manufacturing emissions have decreased 28% and per vehicle emissions have decreased 23%. Toyota has also reduced water use by 8% and recycles 95% of manufacturing solid waste. extra info Toyota Australias Environment Management System (TEMS) is used to manage the companys environmental risks, ensure legal compliance and promote continuous improvement. At both production and non-production sites TEMS has been certified to the international environmental management standard ISO 14001. In 2010 Toyota won the SAI Global Systems Excellence Award at the Australian Business Excellence Awards for TEMS. The 2010 roll-out of TEMS has so far resulted in:

Reduced water use by 28% at the manufacturing plant in Altona, Victoria. Investment of more than $2 million on environmental protection processes at the Altona plant. Implementation of a building retrofit program at the corporate headquarters in Port Melbourne, aiming for a 40 % reduction in building energy use and minimum four star rating of the National Australian Built Environment Rating System (NABERS).

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-ve: The Toyota Prius has been harmful to the environment, as the production of electric motors, inverters and nickel-metal hydride batteries release non-methane hydrocarbons and particulate matter, which can permanently scar the lungs of those who breathe them in Social: -ve: Low pay at Toyota factories with respect to rising cost of living has led to social unrest within areas surrounding the factories, and a key contributor to strikes such as the 2010 Chinese Labour Unrest. The minimum wage in these areas has been raised from 660RMB to 1000RMB in lieu of the strikes, but many of the migrant workers have been unable to save any money as their salary barely covers their basic expenses. +ve: The introduction of Toyota manufacturing plants in Mississipi has led to an increase of the number of middle class citizens. The trickle down effect of the Japanese automaker, including the need for more teachers, health care professionals, construction workers and government employees, could add up to 17,000 new jobs for northeast Mississippi over the next decades. With that, education levels are set to rise as a wider middle class begins to emerge.

Economical +ve: Toyota has multiple plants in China, and the total automobile exports of the country amount to around 50,000 per month. High export revenue which contributes to the GDP of the host country. These revenue can be diverted into social welfare spendings, such as healthcare and housing services. The multiple plants creates employment opportunities for locals. However, there is a contrast in availability of jobs, in terms of the type and wage of the jobs. High
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paying managerial positions are usually reserved for foreign expats while locals are offered low paying labour intensive jobs. -ve: Toyota has been blamed for the decline in local automobile industries, especially in the US. The decline is determined in terms of workers jobs, pay and conditions. Toyotas announced that the company has a headcount surplus at its Derbyshire plant in the UK. Up to 750 jobs may be lost. (2009) Toyota slashed more than 6,000 jobs at its Japanese plants since the onset of the global economic crisis. This has led to a chain reaction, as the production wind-back has resulted in tens of thousands of jobs being lost in the auto parts sector that supplies its production lines. The companys headquarters town near Nagoya, were also not spared, as it saw mass unemployment during 2008 for the first time ever.

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