1. Summary
a) The
story and geographical distribution of transnational corporations.
The development of companies, located
in outside of mother country, was part and parcel of early growth of an global
economy. A super big scale business empire is created by colonial and merchant
capitalists. A firm has the authority to control operations in many countries,
even if it does not have the company. This operations stand for about one-tenth
of total world gross domestic product and generate one-third of total world
exports. It is called global corporations, the ‘placeless’ giants whose
operations span the globe and which owe no allegiance to any specific country
or community. The common of this company is that they can influence different
political, social, and cultural environments.
Invested by one firm with another
intention of gaining control over that firm’s operations, we call ‘Direct
investment’. Direct investment that take place across national boundaries, we
call this ‘Forign direct investment’. It is a different meaning from ‘portfolio’
investment, which is the situation that firms buy equity in other companies
purely for financial reasons and not to have control. So we can say that
developing countries is growing very fast and it is beyond question.
Why
(and how) firms ‘transnationalize’
Motivations
There are number
of reasons that business firms extend their operations outside their mother
countries. It can be devided into two categories; market oriented investment
and asset-oriented investment.
Market
oriented investment
The reason is simple. When the firms
reached a saturation point in its domestic market, they go abroad to search more
opportunities.
Asset
oriented investment
The geographical unevenness of markets
is the major set of reasons that firms engage in transnational investment. Firms
in the natural resource industries must locate the source of supply. Even if it
is often the case that following processing of the resource occurs elsewhere,
mostly close to the market. labor that was the primary attraction for firms in
certain industries. Also, Firms are go abroad to looking for well educated and
highly skilled workers. Most of them are located in East-Asia and East-Europe,
transnational investments easily disregard the geographical factors.
Modes
There are two major ways that firms develop
transnational activities. One is ‘greenfield’ investment, and the other is
strategic collaboration. Greenfield investment is building new facilities
including administrative office, factory, R&D facility, sales and
distribution center and so on. It adds to the productive stock of both the firm
itself and the country/community. Greenfield investment is totally different
meaning of everseas expansion. It is building a totally new facility.
Strategic
collaboration is getting economic power by merger and acquisition. For example,
Vodafone’s acquisition of the US company AirTouch Communications for $60.3
billion, Daimler-Benz’s acquisition of Chrysler, Wal- Mart’s acquisition of
Asda and Renault’s purchase of a controlling share in Nissan.
Advocates of
strategic alliances says that cooperating can combine their capabilities in
mutually beneficial ways. On the other hand, critics argue that they should
worry about the potential risk of losing key technologies to competitors.
Geography matters: The embeddedness of transnational
corporations.
In this part, they
are explaining about the difference between western companies and east Asian
companies. Considering global economy, place and geography still matter
fundamentally in the ways that firms are produced and in how they behave. Most
globalizers say vision of the firm is ‘placeless’ corporation.
The domestic
structures that a firm initially develops leave a permanent impress on its
strategic behavior. East Asian firms tend to establish direct manufacturing operations
while American and European firms usually operate by networks of local agents
and traders. Societies usually develop unusual ways of organizing their
economies, even within the broad, apparently unitary, ideology of capitalism.
‘Webs
of enterprise’: Transnational production networks.
All business firms
are made up with networks of production, distribution and consumption. Networks
have become increasingly extensive geographically and controlled by
transnational corporations. Therefore general firms can best be considered as
‘a dense network at the center of a web of relationships’.
There is the
question that TNC’s organizational architecture that is the related, though not
identical, issue of the geographical coordination of its activities. When such
patterns show huge variation between different types of TNC or different
industries, the internal division of labour is expressed in a distinctive
external division of labour.
Transnational
firms are exist in many ways. The network Is hard to recognized because the
process is like a spider web. TNCs may powerful but they do not have absolute
power.
2. Interesting point
Since I majored in
journalism and mass communication, all the economic matters feel apart from me.
However, through this assignment, I learned about transnational companies. I
was very impressed about its ‘spider web business model’. Currently, I am
working for a music company and it has a similar structure. Until a singer
makes his or her way up to the stage, many companies bring their heads together
to make the best profit. we collaborated with CJ entertainment to make a better
outcome. Also, after reading this article, I understand why LG is trying to
make a plant in US and South American countries. These ‘placeless’ companies interconnects
the world due to its very nature.
3. Discussion point
Due to a risky
business model, like a spider web business model, unrelated company results in bankruptcy.
So, we could think about “who is to blame for?”
These multilateral
business models have been expanding for the last few decades. For example,
Hyundai has been expanding its business in many different countries. As these
kinds of multilateral business companies are getting bigger, we could consider
of its influence on many areas such as political, social, and economic issues. I
would like to discuss these in the class and hear what students think about
this topic.
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