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Transnational corporations
1. Transnational corporations (TNCs) operate across national borders through complex internal and external networks of relationships. 2. TNCs internationalize primarily for market access and to obtain resources like natural resources, labor, and knowledge. They enter foreign markets through exports, foreign direct investment, licensing, franchising, and management contracts. 3. As networks within networks, TNCs organize their internal operations and configure their external relationships based on industry forces, their own history and culture, and their home country influences. Their geographical embeddedness impacts how they operate globally.
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Transnational corporations
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- 3. 3 Agendas Why firms transnationalize Howfirms transnationalize TNCs as ‘networks within networks’ Configuring the TNCs’ internal networks TNCs within networks of externalized relationships
- 4. 4 Transnational Corporations A TNCis a firm that has the power to coordinate and control operations in more than one country, even if it does not own them
- 5. 5 Why firms transnationalize Pursuitof profit A firm’s profitability is the key barometer to its business firms may have a variety of motives other than profit, such as increasing their share of a market, becoming the industry leader, or simply making the firm bigger. But, in the long run, none of these is more important than the pursuit of profit itself.
- 6. 6 Although a firm’smotivation for engaging in transnational operations may be highly individual we can classify them into two broad categories Market orientation allows firms to locate inside particular markets and tailor make production - Three attributes of markets are especially important: -Market size (per capita income) - structure of demand(incomes rise ) - Accessibility (transportation)
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- 8. 8 Asset orientation allowsaccess to various assets such as Natural resource ( Oil industry )knowledge of labour (costs, productivity, skills) - Access to knowledge (technologies) - Access to labour ( wages, skill levels, location, gender, union membership )
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- 10. 10 How firms transnationalize Firmmust have strong domestic position to expand geographically - Product cycle How firms start in new market setting up new facility Merging with local firm
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- 12. 12 TNCs as ‘networkswithin networks’ TNCs come in ‘all shapes and sizes’, two basic characteristics apply to all of them - TNCs are networks within networks structured through a myriad of complex relationships, transactions , exchanges and interactions within their own internal corporate network and between that network and those of the other key actors with whom TNCs must interact -
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- 14. 14 TNCs organize andconfigure their networks arises from a number of interrelated influences - The nature and complexity of the industry environment in which the firm operates ,including the nature of competition, technology, regulatory structures etc. - The firm’s specific history and geography, its culture and administrative heritage in the form of accepted practices built up over a period of time, producing a particular ‘strategic predisposition’17 characteristics derived from its home-country embeddedness.
- 15. 15 The geographical embeddedness ofTNCs Home-country influences The rate of globalization is accelerating. Regionalization is taking place, resulting in trading blocs. The participation of countries in world trade is shifting.
- 16. 16 The Composition ofTrade Between the 1960’s and the 1990’s the importance of manufactured goods increased while the role of primary commodities (i.e. rubber or mining) had decreased. More recently, there has been a shift of manufacturing to countries with emerging economies. There has been an increase in the area of services trade in recent years.
- 17. 17 The Current U.S.International Trade Position Exports and Imports of Goods and Services per Capita for Selected Countries Country Exports per Capita Imports per Capita Australia Brazil China Japan Kenya United Kingdom United States $4,296 379 222 4,165 91 4,767 3,472 $4,525 428 199 3,622 125 5,500 4,962
- 18. 18 The Impact ofInternational Business on the United States U.S. international business outflows are important on the macroeconomic level in terms of balancing the trade account. On the microeconomic level, participation in international business can help firms achieve economies of scale that cannot be achieved in domestic markets.
- 19. 19 Average Plant Salaryand Wages (per worker, dollars per hour) 0 5 10 15 20 25 30 All Plants Small Plants Large Plants $perhour Non-Exporters Exporters
- 20. 20 Globalization Because of globalization,for the first time in history, the availability of international products and services can be accessed by individuals in many countries, from diverse economic backgrounds.
- 21. 21 The Structure ofthis Book Part One introduces the importance of international business and its global linkages. Part Two presents the environment of international business, addressing culture, policies, politics, and law. Part Three provides coverage of the theory of international trade and investment and presents balance of payments issues. Part Four discusses markets, financial systems, economic integration, and emerging market concerns.
- 22. 22 The Structure ofthis Book (cont.) Part Five presents the strategy considerations surrounding international business. Part Six targets the operational issues surrounding international business, using an implementation- oriented perspective. Part Seven concludes the book with a focus on the future of the field and the reader’s career.