Economic World Case Economic World Case StudyStudy

Fiat, a TNC in BrazilFiat, a TNC in Brazil

What do you need to revise?What do you need to revise?

What are TNCS?What are TNCS?

Introduce your TNC; Fiat.Introduce your TNC; Fiat.

Which other TNCs have located in Brazil?Which other TNCs have located in Brazil?

Provide some information about Fiat’s Provide some information about Fiat’s Betim plant.Betim plant.

Why did Fiat chose to locate in Brazil?Why did Fiat chose to locate in Brazil?

Why has Fiat expanded its production in Why has Fiat expanded its production in Brazil?Brazil?

What is a TNC?What is a TNC?

A Transnational company.A Transnational company.

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

Fiat, BrazilFiat, Brazil

One of the world’s largest industrial One of the world’s largest industrial groups.groups.

Operates in 64 countries.Operates in 64 countries.

Revenue over 48 billion euros, 39% of Revenue over 48 billion euros, 39% of which is made outside of Italy.which is made outside of Italy.

Which other TNCs are in Brazil?Which other TNCs are in Brazil?

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

Betim Plant.Betim Plant.

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

Tipo & Palio carsTipo & Palio cars

Source:www.hotelsturkey.co.uk/misc/rentacar2.htm Source: www.edirectory.co.uk/pf/pages/moreinfoa.asp?p...

Why did Fiat choose to locate in Why did Fiat choose to locate in Brazil?Brazil?

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

Why has Fiat expanded in Brazil?Why has Fiat expanded in Brazil?

State of Minas Gerais gave Fiat $135m towards State of Minas Gerais gave Fiat $135m towards opening of a new factory at Sete Lagaos (over opening of a new factory at Sete Lagaos (over half the cost). This was a joint venture to make half the cost). This was a joint venture to make Ducato vans to help increase share of the light Ducato vans to help increase share of the light van market from 9% to 15%.van market from 9% to 15%.

Also Fiat are expecting a huge increase in Also Fiat are expecting a huge increase in demand. If they are in the country they save demand. If they are in the country they save costs of import duties and transportation to other costs of import duties and transportation to other South American countries.South American countries.

Ducato VansDucato Vans

Source: : uk.cars.yahoo.com/car-reviews/car-and-driving...

Possible Exam Questions:Possible Exam Questions:

What is meant by the term ‘TNC’?What is meant by the term ‘TNC’?

With reference to your chosen case study, With reference to your chosen case study, explain the factors associated with a TNCs explain the factors associated with a TNCs decision of where to locate. [6]decision of where to locate. [6]

With reference to your chosen case study, With reference to your chosen case study, explain why a TNC may often chose to locate in explain why a TNC may often chose to locate in an LEDC for its production while its an LEDC for its production while its headquarters remain in its MEDC of origin [6].headquarters remain in its MEDC of origin [6].