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Economic World Case Study. Fiat, a TNC in Brazil. What do you need to revise?. What are TNCS? Introduce your TNC; Fiat. Which other TNCs have located in Brazil? Provide some information about Fiat’s Betim plant. Why did Fiat chose to locate in Brazil?

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Economic World Case Study

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Economic World Case Study

Fiat, a TNC in Brazil


What do you need to revise?

  • What are TNCS?

  • Introduce your TNC; Fiat.

  • Which other TNCs have located in Brazil?

  • Provide some information about Fiat’s Betim plant.

  • Why did Fiat chose to locate in Brazil?

  • Why has Fiat expanded its production in Brazil?


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.


Fiat, Brazil

  • One of the world’s largest industrial groups.

  • Operates in 64 countries.

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


Which other TNCs are in Brazil?

  • Many TNCs have located in Brazil. A few of which are:

    • VW of Germany

    • Ford of USA.


Betim Plant.

  • Fiat’s 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.


Tipo & 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 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.


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.


Ducato Vans

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


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].


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