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 companys products manufactured. BMWs
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 customers specific needs, for instance, the US plant in
Spartanburg, South Carolina, serves the North Americans and the plant in Bavaria, Germany,
manufactures cars to serve the European Unions 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 sectors 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 BMWs 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 BMWs 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 increment of BMWs 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 BMWs 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 TNCs 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-toEnergy 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
environmental practices in their manufacturing processes in South Carolina and also in the states
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 Carolinas 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
Carolinas comparative advantage of having a cheap and exploitable labour compared to Munich
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 BMWs 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

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