Economic Gloalization
Information Sociology
2013052090 Tae-yong Lim
1.
Summary
The purpose of this article is to
understand the nature and importance of multinational corporations in the
process of economic globalization. The author divided the article into five
major issues.
1)
THE SCALE AND GEOGRAPHICAL DISTRIBUTION OF TRANSNATIONAL CORPORATIONS
The initial form of the company operating
outside its home country is represented by the 15th century East India Company
and the Hudson Bay Company. They did world-class activities, but they focused
on trade and exchanges. Later, in 1914, manufacturing companies began to look
abroad. In about 50 years the TNC has increased exponentially. The definition
of modern TNC is 'a firm which has the power to coordinate and control
operations in more than one country, even if it does not own them'. However, it
is impossible to quantify because of the many relationships among multinational
corporations. TNC activity is measured by foreign direct investment. FDI refers
to direct investment that takes place across national boundaries. FDI outpaced
the growth of world trade between 1986 and 2000. This is an indicator of the
growing importance of multinational corporations in the global economy. Most of
the world's multinational corporations are due to developed countries, but the
number of multinational companies originating from developing countries is
increasing. This shows that the diversity of multinational corporations is
increasing.
2)
WHY (AND HOW) FIRMS ‘TRANSNATIONALIZE’
There are many reasons for companies to
expand their business beyond the country. However, it can be divided into
MARKET-ORIENTED INVESTMENT and asset-oriented investment.
Let's look at it from the perspective of
market-oriented investment. Companies that are trying to cross the national
boundaries are likely to have reached saturation in the domestic market.
Therefore, companies try to expand their business beyond their own countries.
From the perspective of asset-oriented investment, the geographic imbalance in
the market is one of the reasons why companies make transnational investments.
There is also an uneven distribution of assets that companies need to produce
and sell. A large number of the initial multinational corporations were in the
energy, industrial, agricultural and natural resources sectors. However, with
the development of transportation and communication technologies, companies
have easy access to unevenly distributed resources. This trend has been particularly
pronounced in the case of human resources and assets, and assets have played an
important role in transnational investment over the last 50 years. Except for
some industries that require cheap labor, the role of high skilled workers is
increasing. This can be seen in emerging economies such as East Asia, Eastern
Europe and India. Companies develop transnational activities through greenfield
investments, mergers and acquisitions. The greenfield investment is to build a
whole new facility. Typical examples are Japanese automakers' factories built
in North America and Europe in the 1980s and 1990s. However, since the risk is
high, companies will prefer mergers and acquisitions. Indeed, the growth of FDI
in recent years has been driven by M & A. Another way to expand the TNC is
to enter into a strategic alliance with other companies. Unlike the past in
business collaboration, this method is at the heart of many transnational
strategies. Many companies form a multi-party alliance network as well as a single
alliance. This is a phenomenon that can easily be seen in the world automobile
market and computer parts market. Companies with strategic alliances are also
competitors. This method greatly increased the complexity and diversity of the
operation of the TNC.
Generally, we have thought that it is the
order to succeed in the domestic market first, then the overseas market. But
the order did not matter. Particularly in the knowledge-intensive industry, TNC
emerged and began to engage in overseas business without taking the domestic
market position. These companies should use the Internet, TNC's network, and so
on. In other words, the TNC network has a significant impact on the development
potential of companies seeking to enter overseas.
3)
GEOGRAPHY MATTERS: THE EMBEDDEDNESS OF TRANSNATIONAL CORPORATIONS
Geography, and place are fundamentally
important to the way the company is produced and to its behavior. The TNC
interacts with the characteristics of the community and produces results.
Studies show that national institutions and unique traditions have an impact on
the characteristics of a company. Electronic companies in Japan and the United
States form regional production networks in different ways. In the Indonesian
apparel industry, East Asian companies establish direct manufacturing plants,
but Western companies tend to operate through networks with local people.
Capitalism has many varieties. Because of the characteristics of society and
the unique social system, economic adjustment and governance forms can not be
easily transferred to other societies. There are obstacles in the convergence
of social systems in the production of various societies. In addition, the
interconnectedness of the modern world economy is transmitted very quickly
across borders. This can be seen through the financial crisis in East Asia
including Korea in late 1990s. Participating more in the global economy is
making it change the practice of the company.
4)
‘WEBS OF ENTERPRISE’:
TRANSNATIONAL PRODUCTION NETWORKS
Every company consists of a very complex
production, distribution and consumption network. Since this network is largely
controlled by transnational corporations, the TNC can be seen as a dense
network at the heart of the relationship. Due to geographical features,
multinational corporations are more difficult to control and more sophisticated
organizations are needed. This organization is very different from one TNC to
another, but usually the headquarters of a multinational corporation stays in
its home country. However, it can be distributed to major cities depending on
the functions in the network. Because the TNC must respond quickly to changes,
the TNC network is always continuous and fluid. Regional strategy is very
important. Multinational production networks organized on a regional scale are
especially present in Europe, North America and East Asia. North America and
Europe are based on political systems such as NAFTA and the EU. East Asia does
not have such a political system, but the division of labor within the region
is divided into four stages. Multinational corporations and multinational
production networks are very complex and dynamic. The power of the TNC lies in
its potential to exploit geographical differences between resources and
government policies, and to transform interregional operations. The elements of
a multinational production network are regulated by the state's political
structure. The TNC is flexible and flexible because it tries to use different
regulations for different countries.
2.
What was interesting?
As I read this article, I found it
difficult to see the first economic terms such as FDI, market-oriented
investment, and asset-oriented investment. The interesting thing was that there
were more companies entering the global market without occupying a certain
position in the domestic market. I wondered whether it was because of the
unique market structure of Korea, or because I do not know enough, or if there
was a case in which Korean companies succeeded in overseas market without
occupying the domestic market. As a result of searching the data, we found that
Korean DB database of foreign companies in Korea 's public data portal and
11,397 companies have entered overseas market. It was interesting that most of
them were manufacturing industries rather than knowledge-intensive ones as in
the text.
3.
Discussion point
As the fourth industrial revolution
approaches, Germany and the United States are returning their manufacturing
plants to their home countries. I think this is a big change in the network of
multinational corporations. I would like to discuss the impact of the return of
the factory to the developing countries, especially the impacts of the developing
countries on multinational companies.
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