Transnational corporations

1. TRANSNATIONAL CORPORATIONS
November, 2020

2. Transnational Corporations (TNS)
TNS– one of the most significant form of non-state actor in the
World economy! (exert large economic and political influence!)

3. Definitionof Transnational Corporations
TNC– for profit companies that conduct business in more than
one country!

4. How do Transnational Corporations work?
production
retail
subsidiaries
acquisition / mergerCountry A
x
National companies – like “x” stay/ operate in their home country
for their entire existence!

5. How do Transnational Corporations work?
production
retail
subsidiaries
acquisition / mergerCountry A
x
TNC– expand their operations abroad by starting a new company (subsidiarity)
or by purchasing and controlling already existed companies (acquisition/merger)
B
C
starting a new company
D
Y
purchase &
control

6. Transnational Corporations statistics
80,000 TNCs in
the world
800,000
subsidiaries
1/3 of world
export
90% of capital
export
90% of IT
transfer

7. Advantages of Transnational Corporations
Positive effectsto the Global economy (generate wealth):
Provide investments to other countries
Create jobsin other countries
Encourage the development of infrastructure-roads, bridges, energy
Can bring new technology to other countries
Create access to world markets

8. Disadvantages of Transnational Corporations
Exploitation of natural resources, rawmaterials, cheap workforce
Create dependence in other countries
Smaller businesscan go out of business
Can create income inequality
Can manipulate taxes and laws to save money and cut costs
More pollution, resource depletion
Decapitalization of other
countries – take profit,
money, resources of
countries and bring them
to the home country

9. Disadvantages of Transnational Corporations
1 Exploitation of natural resources (copper, nickel, cobalt, iron, diamonds) for
new industries’ development (aviation, space programs, nuclear power,
electronics, chemical, petrochemical industry)

10. Disadvantages of Transnational Corporations
1 In Africa, there is a severe struggle between the monopolies of the USA,
Britain,Germany, Italy, France, Japan for the exploitation of natural resources

11. Disadvantages of Transnational Corporations
1 In Africa, there is a
severe struggle between
the monopolies of the
USA, Britain, Germany,
Italy, France, Japan for
the exploitation of
natural resources

12. Methods of Transnational Corporations
1 Methods of Transnational companies to keepdevelopingcountries subordinate

13. Methods of Transnational Corporations
1) Transfer pricing(Export’ underpricing& Import’ overpricing)
Illegal repatriation
of TNCprofits!

14. Methods of Transnational Corporations
2) TNS use manipulation and speculation to “play out” the taxpolicy of host
countries for thepurpose of transferringprofits to their home countries!

15. Methods of Transnational Corporations
3) TNS apply a method of financingaffiliations in developingcountries
withdomestic accumulation!
Every dollar profit made by TNC in Latin America was based on investments that are 83%
funded by local sources, while only 21% of these profits remained in Latin America

16. Methods of Transnational Corporations
4) TNS use “unfairgames”, various illegal actions of bribery and corruptionof
senior politicians for concessions, benefits, tax incentives, permitsfor price
increase!

17. Methods of Transnational Corporations
5) TNS shape the needs of local consumers, accordingto their own interests!
570million people are malnourished
800 million adults are illiterate
270 millionchildren are out of school
1500millionpeople do not have
health care
1030 millionpeoplelive in inadequate
conditions

18. Methods of Transnational Corporations
6) TNCs sell high technology to developingcountries with various restrictions
and prohibitions!

19. Methods of Transnational Corporations
7) Effects on foreign trade – correlation between FDI and Balanceof payments
deficit
30% of US FDI invested in developing countries, and 60% of total repatriated
profit in the US comes from developing countries!

20. Homework

21. Homework
Explain how TNCs use transfer pricing(underpricingof exportsand
overpricing of imports) and manipulate tax-laws of host countriesin orderto
make huge profits!
Elaborateshortly on the historical development of the TNCs!
Find on Internet and elaborate an
exampleof protesting of host
countries against TNCs!
(youcan use the protest against
CocaCola!)