1. Summary
Economic Globalization
Trading companies played an important role
in the early development of the international economy. Particularly, nationally
accredited trading companies played an important role in the evolution of
interconnected world politics and economy. The main goal of the company was
trade, and they have become the source of world trade and service companies
today. But since the 19th century, businesses have changed. Over the last 50
years, the number of multinational corporations has increased tremendously. A
multinational company is defined as a company that, even if it does not
currently own it, has the authority to coordinate and control operations in
many countries. UNCTAD estimates that 61,000 TNCs are present, using
definitions based only on ownership criteria. These TNCs account for one tenth
of the world's gross domestic product.
These companies are called global companies
and operate in different political, social and cultural environments in each
country. TNC activities are generally measured using statistics on foreign
direct investment. Direct investment is an intention to invest in another
company and to control its operation. Foreign investment is the investment of a
company in another country, or a branch or subsidiary in another country.
Portfolio investment refers to situations where you cannot buy and control
shares of another company.
FDI has grown at a rapid pace and it is
clear that the importance of multinational corporations is growing. The vast
majority of multinational corporations come from developed countries. The share
of FDI in developing countries has increased but is still small. Most of FDI
targets developed countries. In fact, most of the FDI consists of investments
among developed countries. Of course, FDI in developing countries is on the
rise, but far less than people think, and is concentrated in a few countries.
Nevertheless, obviously, the number of multinationals is increasing.
There are many reasons why a company is
supranational. There is motivation first. There are two types of investments:
investment for market expansion and investment for asset growth. Investments to
expand the market are investments to increase profitability. It is possible to
identify new markets that can provide efficient service and direct investment.
Considering political and cultural reasons, it is desirable for TNC to
penetrate the local market strongly. Investment for asset growth is related to
the development of production process technologies such as transportation and
communication technologies.
There are two ways for companies to try
transnational activities. The first method is the green field. Greenfield
investment is building a whole new facility. Greenfield investment involves
many risks. For this reason, corporations prefer to establish their positions
as overseas branches through relationships with existing companies. Many
companies in the United Kingdom and the United States wanted to merge or
acquire other companies in order to establish or expand their presence
overseas. Another way is to partner with other companies. Alliances with other
companies have become the core of many companies' transnational strategies.
Many companies form an alliance network that has multilateral relationships.
Strategic alliances typically focus on
specific business issues. A partner is not only a separate company, but also
one of its competitors. There are goals that companies cannot achieve on their
own. It is the contract between companies that can achieve these goals. Those
who approve of strategic alliances argue that through cooperation, companies
can combine in a way that is mutually beneficial. Critics say the risk of
losing core technology to competitors. However, the proliferation of these
partnerships has greatly increased the complexity and diversity of TNC operations.
TNC takes the domestic market first,
develops it, and enters the overseas market in general order. We use our local
sales agent in overseas market to export. Then, as local demand increases, the
company establishes overseas sales agents to control overseas markets.
2. Interesting Point
What I have read and felt about this
economic globalization is that companies are leading the current economic
globalization. Currently, multinational corporations are growing and emerging.
Continue to enter other countries and establish strategic alliances. However,
the country does not seem to have a significant impact on economic
globalization. However, they have signed mutual treaties such as the FTA, and
are making economic associations such as ASEAN and the EU. It is definitely affecting.
But, in the end, it is the enterprise that operates in it. Therefore, companies
are at the core of economic globalization. If companies did not go abroad and
stayed in their markets, there would have been no economic globalization. In
other words, the most important subject in capitalist society and economic
globalization can be regarded as a corporation.
3. Discussion Point
The question is, how long will the economic
globalization last? The current globalization of the economy is well underway.
But multinational corporations are trying to have a wider impact. I wonder how
long and how globalization will proceed. And I was wondering to what extent the
influence of the government would be affected. In fact, the government is
becoming more and more influential, but it still has less impact on economic
globalization than the business. I wondered how big the influence of the
government would be.
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