What this lesson teaches
I can trace how a TNC's production network moves materials and capital between places.
Syllabus 9173, Topic 1.2, 2. Geography of the Global Economy and Transnational Corporations (TNCs). How do the global production networks of TNCs connect places within the global economy?
Make a guess
A phone is designed in the USA, built from parts made in many countries and assembled in China. Must the designer own the assembly factory?
- Yes, or the phone would not be legal to sell.
- No. It can contract an independent factory.
- No, because the factory is not part of the network.
- Yes. A TNC must own every factory it uses.
Show the answer
No. It can contract an independent factory.
A TNC coordinates a production network but need not own every part. Independent suppliers and assemblers are still part of the network.
A global production network links the firms, workers and places involved in making, moving and using a product.
A transnational corporation (TNC) coordinates or controls activities in more than one country. It may own factories abroad, contract independent suppliers, or both. A global production network (GPN) includes all these links, within and between firms, and the institutions that support them. A TNC does not have to own every factory.
TNCs have different functions. Headquarters make major decisions. Research and development (R&D) centres design and test products. Branch offices handle regional sales or administration. Branch plants do the production. These can be in different places.
A GPN has four stages across the global economy. Sourcing gathers raw materials, parts and services from many places. Transformation turns them into products, sometimes in several countries. Distribution moves products to shops and customers. Consumption is where they are used.
Goods and money flow differently. Investors fund factories, buyers pay suppliers, and wages and taxes are paid where work happens. Some profits return to owners elsewhere. Payments often move in a different direction from the goods, and the final price is not what each place keeps.
A GPN is a web, not a straight line. A lead firm coordinates suppliers, factories and markets, while governments provide rules and infrastructure. Each function picks its location for different reasons: research needs specialised knowledge, production needs suitable workers and infrastructure, and distribution needs access to markets.
- TNC
- Coordinates or controls activity in more than one country.
- GPN
- All the linked firms, workers and places making a product.
- Four stages
- Sourcing, transformation, distribution and consumption.
Step by step
Find the stages
Sourcing, transformation, distribution and consumption.
Add the money
Investment, payments, wages and profits.
Explain control
The lead firm, and owned versus independent suppliers.
Real examples to use
The iPhone
Apple designs iPhones in the USA. Parts come from many countries, and firms such as Foxconn assemble them, mainly in China and increasingly in India.
BYD: an electric car network led from China
BYD began making batteries in Shenzhen in 1995. Unlike Apple, it makes most key parts itself, including its Blade battery and power chips, so it controls more of its network. It sold 4.27 million electric and hybrid cars in 2024 and opened a factory in Rayong, Thailand, in July 2024 to make cars for Southeast Asia.
Cobalt and the battery network
Many electric car batteries use cobalt, and about 73% of the world's mined cobalt came from DR Congo in 2025 (USGS). BYD's Blade battery uses lithium iron phosphate and needs no cobalt. So a lead firm's choice of technology changes which mines and places join its network.
Worked example: A bicycle network
A firm designs bikes in A, buys aluminium from B, gets parts from C and assembles them in D. A logistics firm delivers them to shops in E. Customers' payments support all these places, but each keeps a different share.
Watch out for this
Every supplier in a TNC's network must be owned by the TNC.
Independent suppliers can follow a lead firm's contracts without being owned by it.
Check your understanding
A lead firm contracts an independently owned factory abroad. Which description is accurate?
- The sales revenue stays in the factory's country, where goods are made.
- The factory is part of the GPN, though the lead firm does not own it.
- The factory is outside the GPN because ownership differs.
Show the answer
The factory is part of the GPN, though the lead firm does not own it.
Yes. Contracts link it into the network.
Check your understanding
In the iPhone's production network, why is value shared unevenly between places?
- Each stage keeps an equal share of the phone's price.
- Assembly countries keep most of the profit, as they hire the most workers.
- Design and branding in the USA capture more value than assembly does.
Show the answer
Design and branding in the USA capture more value than assembly does.
The final price is not what each place keeps.