1.
Summary
The boundaries of the nation are being
broken through transnational companies and the nation's autonomy is being
violated. But this is a stereotype that makes a misunderstanding.
The chartersd trading companies such as
East India Company and Hudson Bay Company were increasingly interconnected and
played an important role in economic development. As a civilian and merchant
capitalist, they created a huge corporate empire on a global scale. The main
purpose was trade and exchange, and they are the ancestors of today's world
trade and service companies. However, it was not until the late 19th century
that the first company to engage in manufacturing and production abroad
emerged. Until the eve of World War I in 1914, a number of U.S., British, and
European continental manufacturers were gradually becoming transnational. Over
the past 50 years, the number of TNCs in the global economy has increased
exponentially.
The most comprehensive definition of a
modern TNC is 'an entity with the power to coordinate and control operations in
more than one country even if it does not own them'. It is impossible to
quantify and define in comprehensive terms because it contains many qualitative
attributes related to complex relationships between companies operating across
national boundaries. TNC is approximately one tenth of the world's total gross
domestic product the world and generate one-third of total exports. The
majority of the world's top 100 TNCs still maintain more than half of their
activities in their home countries. TNCs come in many forms and sizes, from
so-called global companies operating in several countries to TNCs operating
outside of their home country only in one or two countries. What they all have
in common is that they operate in different political, social, and cultural
environments. The reasons why businesses expand their businesses abroad, and
how they do so, are complex and highly dependent on specific situations.
However, while there may be various reasons for TNC activities, we can
summarize this into two broad categories: market-oriented investment and
asset-oriented investment. Both size and specific characteristics of the market
of Firm Relocation in the TNC to continue affecting. Specific market
specificities may require direct presence to understand and respond to specific
situations. The geographical imbalance in the market is one of the main reasons
why companies participate in transnational investment. The second reason is
that the assets that an entity needs to produce and sell products and services
are also geographically very unevenly distributed. There are two main ways for
companies to develop transnational activities. One is a 'greenfield'
investment, the other through mergers and acquisitions with other companies, or
through some form of strategic cooperation. Greenfield investment is simply the
construction of a whole new facility. Add to the productive inventory of the
enterprise itself and the countries and communities in which it occurs.
Therefore, it is generally the most favored type of investment by the host
countries. However, greenfield investment is hardly the most common way to
expand abroad. It is dangerous to build a completely new facility, especially
one on a considerable scale. That is why an entity may prefer to enter a
foreign country through collaboration with an existing firm.
The general TNC development sequence is as
follows. First, it is serviced overseas by direct exports by utilizing
independent domestic sales agents. Second, as domestic demand increases, TNC
exercises close control over overseas markets by establishing its own overseas
sales outlets. Can be carried out by establishing entirely new facilities or by
taking over local companies.
Places and geography are still
fundamentally important in the way companies are produced and how they behave. All
business companies, including geographically broad TNCs, are 'produced' through
complex embedding processes in which cognitive, cultural, social, political and
economic characteristics of the national home base play a dominant role. The
TNC is therefore the 'owner' of these characteristics, which interacts with the
location-specific characteristics of national and local communities to achieve
unique results.
So, like most companies, TNCs can be
regarded as dense networks at the heart of the network. There is a wide variety
of ways that TNC's internal networks are organized and geographically
configured, and how they connect to vendors and customers' external networks. Diversity
is affected by some of the industry environments in which the company operates,
including specific history of the enterprise, cultural and administrative
legacy in the form of accepted practices built over a period of time,
competition in character and complexity, technology, and regulatory structure. Depending
on the nature of geographical distribution dispersed in different political,
cultural and social environments, TNCs are much more difficult to coordinate
and control than companies with activities limited to a single national space:
require more sophisticated organizational structures. The TNC has many
geographical options for production activities. One is to focus production in a
single location. While globally focused production creates economies of scale,
it increases transportation costs and reduces corporate knowledge of distant
markets. Secondly, specifically to produce for local and national markets. The
economies of scale are limited by the size of the market. The third is to
create a professional production structure for the local market. Finally, the
production process is subdivided and each part is placed in a different
location. It's a transnational vertical production integration.
Transnational corporations are undoubtedly
the most important factor in the modern world economy. There is no doubt that
their importance is increasing. More companies are becoming transnational in
the early stages of development. Both the TNC and the organizational and
geographic areas of the transnational production network are very complex and
dynamic.
International regulatory agencies such as
the WTO have a huge impact on the geographic impact of transnational production
networks. Similarly, international institutions that establish technical
standards play an important role. In some cases, they help operate
transnational networks by introducing coding standards.
2.
Interesting point
It was interesting how companies expanded
their reach across the transnationals. One was the Greenfield investment and
the way to take over or merge existing companies. Depending on the situation
and purpose of each country trying to advance, the two methods had their own
advantages and disadvantages.
3.
Discussion point
What way should transnational companies
want to enter Korea? Why is the method effective?
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