» » The Experience of transnational corporations 'development in the conditions of world financial crisis


The Experience of transnational corporations 'development in the conditions of world financial crisis

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>Introduction

 

Theactuality of thetopic. >Fifty-one of thelargestone-hundredeconomies in the worldarecorporations.Transnationalcorporations holdninetypercent of alltechnology andproductpatentsworldwide, andareinvolved in 70percent of worldtrade.Theyemploy intheirforeignaffiliatesabout 80millionpeople. The UnitedNationshasjustlydescribedthesecorporationsas theproductivecore of theglobalizing worldeconomy.

>I.A.Karimov, thePresident of theRepublic ofUzbekistan,hadalreadymarked that The XXIstcentury,obviously,willbe thecentury of GLOBALIZATION in theinternational relations.Intheseconditions, theprocess ofintegration, theexpansion ofparticipation ofsovereignstatesat theinternationalinstitutes and theorganizationsare tobeconsiderednotonlyashistoricalinevitability,butalsoas apowerfulfactor ofstability. Nowonder, inanysphere itisimpossiblenot tocomeacross to theinfluence of GLOBALIZATION.

>Itisknown that,currently, the worldstates,almost all ofthem,cantensureanymore astabledevelopment andgrowthbasedonlytheirownforces. Worldgovernmentsperceive that thedeepening of relationsbetweencountries, andalso themoreactive andeffectiveinvolving andintegrating in theglobaleconomiccycleis thekeyfactor ofeconomicprosperity.Unfortunately,not allstatescanactalone on the worldarena,especially thesmallones.Somecountriesneedsupportfromotherstates,moreexperienced,stronger andwithgreaterfinancialstrength.

Theimpact of GLOBALIZATIONcanbeseen inanycountrysnationaleconomy.Itistough todescribenationaleconomies, worldeconomywithout GLOBALIZATION. Thevolume of worldeconomygrowssteadily.According to WorldTradeOrganizationdata, thevolume of worldtradehasbeengrowingmuchfastersince 1950thanever.During 1950-2000, worldtradehasgrown 20times andmanufacture 6times.

>In theprocess ofeconomic GLOBALIZATION, on thearena ofinternationaleconomic relationsappear newactors.One ofthemistransnationalcorporations thatmovetheircapitalfromseveralcountries of the worldunder theinfluence ofdifferentfactors andcreateaneconomicchainthroughwhicharemovingenormousinnovations andfinancialflows.

>Transnationalization ofproduction,itsexpansionoutsidetheirhome state,has asignificantimpact onnationaleconomies,establishingtheirplace in the worldworkdivision.

>However,parallelwith thedevelopment ofexternaleconomic relations,ischanging thestate'srole anditsfunctions. The statestart togain newfunctions,functionsappearingasresult of thestatescompetition in theprocess ofattractingforeigncapitalflows in thenationaleconomy.

>Attractingtransnationalcorporations in thenationaleconomyis today themainobjective of thecompetitionprocessbetweenstates. Worldstates,especiallysmallerones, indevelopment or intransition,beingenticedby thefinancialsources ofTNCs,areinvolved inanincreasinglyfiercebattle toattract thenecessarycapital in thecountry.Paradoxically,buteventuallyalsoTNCsarethosewhichtakeadvantage of it themost.

>Thus,addressing theimpact ofthisprocessneeds tobedonemultilaterally, tofind theoptimumsolution of how toattractforeigncapitalflows in thenationaleconomyat thepresentstage,focusing ontheirefficiency andquality.

>In lastdecades alot ofattentionisgiven totransnationalcorporations. Todaythereisnearlynoconsiderableprocess in worldeconomywhichwouldoccurwithout theparticipation oftransnationalcorporations. Thetransnationalcorporationshaveturned to theubiquitousforceformingmodern andfutureshape of the world.Theyacceptdirect andindirectparticipation in world political andeconomicalprocess.

>TNCscarry outtheiractivity in worldeconomysystem,buttheirinfluenceextends on worldpolitics thatallows torecognizeTNCsalongwith thenationalstates, theinternationalorganizations.TNCsarenotabsolutely newphenomenon, andrepresent thespecialform ofdisplay ofgenerallaw ofdevelopment ofcapitalism,aspiration of thecapital to theexternaleconomicexpansion in theform ofdirectforeigninvestments. Themanufacturewhichiscarried outabroad,has anumber ofadvantageswhichfollowfromdistinctions of political andeconomicconditionsbetween thecountry -basing of theTNC and ahostcountrywherebranches ofTNCssettledown inthisplan:degree ofsecurity andcost ofextraction andprocessing ofnaturalresources;rates ofwages ofwork; the laborlegislation; thetaxation;exchangerate;ecologicalstandards; a politicalmode; the politicalculture, etc.Thesedistinctionsincreasemaneuverability of themultinationalcorporation on a worldscene.

Thebasic line ofTNCs -globaloperations.HugethingforTNCsis the worldmarket.Therefore theexpansion ofTNCiscarried outinternationally.

>From theverybeginning ofTNCs'existencebecameobject ofrougheconomicdiscussions.Onetheiractivitywasestimatedasdestructive, theemphasizebecame onnegativeconsequences ofindustrialization.Othersattributed arole of themaintool of worldprogress.

>70thyearshavepassedunder thesign ofnegativeestimationsforTNCsas afactor ofanaggravation ofeconomic, political andsocialcontradictions.

>In80thyears,appreciablerole of theTNCswasobserved ineconomicdevelopment and in thepermission of political andsocialproblems.Previously, itcamewith therecognition oftheirenormouspotential, ahugerole indevelopment ofscientific andtechnicalprogress.

>However,economicgrowth ofTNCs on the political andsocialvalueisambiguous.From theeconomicpoint ofview itconducts to thegrowth ofproductivity and laborforce,escalating ofcapacities of thegoods and services,manufacture andnationalincome.On theotherhand,typical line of ">transnationaleconomy"isstrongcontrastbetweenlargeTNC and thecountryas awholewithseriousdifficulties:unstabledevelopment ofmanufacture,inflation,unemployment, etc.From thesocialpoint ofview,economicgrowth of thetransnationalcorporationincreasesvacancyfor theunemployment andcapitalopposition.Theyarrangetoughpolicyconcerningemployment.DuringeconomiccrisesTNCsevenareinclined to thebig reduction of thepersonnel thatconducts to acondition ofsharpconfrontationwithtradeunions.Inothercases - thetransnationalcorporations, on thecontrary,guidesocialintensity in asociety.

Theobject ofmyworkis theactivity oftransnationalcorporations in the worldeconomy.

Thesubject thetendency ofTNCsdevelopmentduring the worldfinancial crisis.

Thepurpose of thegivenwork - toconsider thetendencies ofTNCsdevelopment in theconditions of worldfinancial crisis inmoderninternationaleconomic relations.

>Forthispurpose itisnecessary toallocatefollowing the >maintasks:

1.To open theconcept andessence of thetransnationalcorporation;

2.Todefine therole oftransnationalcorporations in GLOBALIZATION;

3. Theimpact of worldfinancial crisis to theactivity of theactivities oftransnationalcorporations;

4. Thereaction ofTNCs to crisis.


1.THEORETICALBASISOFTRANSNATIONALCORPORATIONS

 

1.1 Theconcept oftransnationalcorporation,history oftheirdevelopment

Theexactstandarddefinition of thetransnationalcorporationdoesnotexisttillnow.Terminologicaldiversity of theconceptboth inEnglish-speaking (orUzbek), and in theforeignliteratureremains.Itcanbeseen invariousvariants ofwordcombinations - acorporation, a company,anenterprise, afirm in acombinationwithadjectives -transnational,multinational,international,global etc.Thisterminologicaldiversity ofnatural,because itreflects theattempt tofindanadequatereflection of the newfeatures thatare in thefield ofinternationaleconomic relationshavegainedthismonopoly.Transnationalcorporationsarebasically >national on thecapital and >international on thefield ofactivity. Thepart ">trans"emphasizesthisquality - thebordercrossing ofgoods andcapitalflows. IwillgiveseveraldefinitionsforTNC:

>Transnationalcorporations (>TNCs)areincorporated orunincorporatedenterprisescomprisingparententerprises andtheirforeignaffiliates. Aparententerpriseisdefinedasanenterprise thatcontrolsassets ofotherentities incountriesotherthanitshomecountry,usuallybyowning acertainequitycapitalstake.Anequitycapitalstake of 10% ormore of theordinaryshares orvoting powerforanincorporatedenterprise, oritsequivalentforanunincorporatedenterprise,isnormallyconsideredas thethresholdfor the control ofassets. (>Insomecountries,anequitystake ofotherthan 10%isstillused.

>Transnationalcorporation (>TNC) - amonopolyunion (>concerns ormultinationalcorporations), inwhichmanycompaniesarecombinedwithone ormorebranches of the worldeconomy,whichareengaged inmanufacturing andtradingactivities thattranscendnationalcountries.

>TNC - a company (>financial-industrialgroups),whichowned orcontrolledbycomplexes ofproduction or serviceoutside of thecountry inwhichthesecorporationsarebased,haveanextensivenetwork ofbranches andsubsidiaries indifferentcountries andoccupy aleadingposition inproduction andsales of aproduct.

>Transnationalcorporation - thekind ofform of theinternationalassociation ofcapitalswhen theparent companyhasaffiliates inmanycountries,carrying outcoordination andintegration oftheiractivity.

Thelegalregime ofTNCssuggests businessactivity indifferentcountriesthrough theformation ofbranches andsubsidiaries.Thesecompanieshave arelativelyindependent serviceproduction andmarketing offinishedproducts, research anddevelopment, services toconsumers, etc.Ingeneral,theycomprise alargesingleproductioncomplexownershipover theequityonlyrepresentatives of thecountry'sfounding.At thesametime,branches andsubsidiariescanbemixedenterpriseswith theparticipation ofmainlynationalhomecountry.

>Distinctivelines of thetransnationalcorporationare:

1)annualturnoverisusuallyhigherthan $ 100million;

2)havebranches inmorethan 6countries;

3) on theinternational status of thefirmshowsanindicatorsuchassizepercent ofitssales,itsproductssoldoutside thecountry oforigin of the company;

4)structure ofitsassets, insomeforeignresearches to theinternationalcorporationscarry thecompanieshaving 25 % ofactivesabroad

Thedevelopment oftransnationalcorporationshaspassedhistorically anumber ofstages.In thefirstperiod of theorigin ofTNCs (the end of XIXcentury.),theyhaveundergoneverysignificanttransformation.TNCsfirstgenerationhasbeenlargelyassociatedwith thedevelopment ofrawmaterials offormercolonies,whichgives thebasis todefinethemas thenational-rawtransnationalcorporations.

>According toitsorganizational andeconomicforms andmechanisms offunctioning,therewerecartels,syndicates and thefirsttrusts.Then on the worldstagethereweretrusttypes ofTNCswhichwereassociatedwith theproduction ofmilitary-technicalproducts.Havingstarteditsactivity in theperiodbetween two worldwars,some ofthose secondgenerationTNCsmaintainedtheirposition in theglobaleconomy andafter WorldWar II.Theyproducedweapons andammunition.

>In the60thyears,anincreasinglyprominentrole ofTNCshasbegun toplay thethirdgeneration,whichwaswidelyused toachievescientific andtechnological revolution.Thesetechno-consumercompanies:corporations andconglomerates.

>In the 60 80thyears in theactivity ofTNCsorganicallyincorporated theelements ofnational andforeignproduction:realizations ofgoods,management andorganization ofpersonnel, research ofmarketing andafter-sales service.

Thethirdgeneration oftransnationalcorporationspromoted tospread theachievements ofscientific andtechnological revolution in theperipheralareas of the worldeconomy and,mostimportantly,economicpreconditionsfor theoccurrence ofinternationalproductionwith asinglemarket and the informationspace, theinternationalcapitalmarket and labor,scientific andtechnical services.Theirgoalwas toconquermarkets,sources ofrawmaterials andspheres ofapplication ofcapital.

>In theearly60's theglobaltransnationalcorporations of thefourthgenerationhavegraduallyappeared andhaveaffirmed.Theirdistinguishingfeaturesare:

planetaryvision of themarkets andimplementation ofcompetition on aglobalscale,section of the worldmarketswith afewglobalmultinationalcorporations;

coordinate theactions oftheiraffiliates on thebasis of new informationtechnologies;

flexibleorganization ofeachproductionsite,adaptabilitycorporatestructure,uniformaccounting andauditing;

integration ofitssubsidiaries,factories andjointventuresinto asingleglobalnetworkmanagement,which,isintegratedwithothernetworks ofTNCs;

implementation ofeconomic and politicalinfluence in the state inwhichtheyoperateTNCs.

>Theirstrategyischaracterizedbytheirinnovativeaggressiveness,dynamism and awithdrawalfromsingleindustrystructure,constantimprovement ofinternalcorporatestructure,aimingat theconquest of thekeyglobaleconomicposition in theproduction andmarketing.

>Asfor thestructure oftransnationalcorporations, itisfollowing:

Aparent companyisanincorporated orunincorporatedenterprise, or group ofenterprises,whichhas adirectinvestmententerpriseoperating in acountryotherthan that of theparententerprise.Anaffiliateenterpriseisanincorporated orunincorporatedenterprise inwhich aforeigninvestorhasaneffectivevoice inmanagement.Suchanenterprisemaybe asubsidiary,associate orbranch.

Asubsidiary (>anaffiliate)isanincorporatedenterprise in thehostcountry inwhichanotherentitydirectlyownsmorethan ahalf of theshareholder'svoting power, andhas theright toappoint orremove amajority of themembers of theadministrative,management orsupervisorybody.

>Anassociateisanincorporatedenterprise in thehostcountry inwhichaninvestorowns atotal ofatleast 10%,butnotmorethanhalf, of theshareholdersvoting power.

Abranchis awholly orjointlyownedunincorporatedenterprise in thehostcountrywhichisone of thefollowing: apermanentestablishment oroffice of theforeigninvestor;anunincorporatedpartnership orjointventurebetween theforeigndirectinvestor andone ormorethirdparties;land,structures (>exceptstructuresownedbygovernmententities), and /orimmovableequipment andobjectsdirectlyownedby aforeignresident; or mobileequipment (>suchasships,aircraft,gas- oroil-drillingrigs)operatingwithin acountry,otherthan that of theforeigninvestor,foratleastoneyear.

Ajointventureinvolvesshare-holding in a businessentityhaving thefollowingcharacteristics: theentitywasestablishedby acontractualarrangement (>usually inwriting)whereby two ormorepartieshavecontributedresourcestowards the businessundertaking; thepartieshavejoint controloverone ormoreactivitiescarried outaccording to theterms of thearrangements andnone of theindividualinvestorsis in aposition to control theventureunilaterally.

1.2 Theevolution of aTransnational Corporation

>Economistsdidnotactuallycoin thephrase >transnationalcorporationuntil the1960s.Evenbefore thattime,however,studieswerebeingconductedinto thehistory andevolution oftransnationalcorporationorganization.Whenthesestudieswerefinallyexecuted, itwasshown thatTNCshaddifferentinternalorganizationalstructuresbased ongeographiclocationevenattheirearlieststages indevelopment. Thegrowingrole oftransnationalcorporations (>TNCs) in the worldeconomybegan tospeakonly in the secondhalf of XXcentury. Theuncontrolledactivities oftransnationalcorporationsaremainkeyreasonsfor theimbalances in theglobaleconomy.Ingeneral,therearefivestages in theevolution of thetransnationalcorporation.Thesestagesdescribesignificantdifferences in thestrategy,worldview,orientation, andpractice ofcompaniesoperating inmorethanonecountry.One of thekeydifferences incompaniesatthesedifferentstagesis inorientation.

StageOneDomestic

Thestage-one companyis domestic initsfocus,vision, andoperations.Itsorientationisethnocentric.This companyfocusesupon domesticmarkets, domesticsuppliers, and domesticcompetitors. Theenvironmentalscanning of thestage-one companyis limited to the domestic,familiar,home-countryenvironment. Theunconscious motto of astage-one companyis: >Ifitsnothappening in thehomecountry,itsnothappening. Theworldsgraveyard ofdefunctcompaniesislitteredwithstage-onecompanies thatweresunkby theTitanicsyndrome: thebelief,oftenunconsciousbutfrequently aconsciousconviction, thattheywereunsinkable andinvincible ontheirownhometurf.

Thepurestage-one companyisnotconscious ofits domesticorientation. The companyoperatesdomesticallybecause itneverconsiders thealternative ofgoinginternational. Thegrowingstage-one companywill,when itreachesgrowthlimits initsprimarymarket,diversifyinto newmarkets,products, andtechnologiesinstead offocusing onpenetratinginternationalmarkets.

StageTwoInternational

Thestage-two companyextendsmarketing,manufacturing, andotheractivityoutside thehomecountry.When a companydecides topursueopportunitiesoutside thehomecountry, ithasevolvedinto thestage-twocategory.Inspite ofitspursuit offoreign businessopportunities, thestage-two companyremainsethnocentric, orhomecountryoriented, initsbasicorientation. Thehallmark of thestage-two companyis thebelief that thehome-countryways ofdoing business,people,practices,values, andproductsaresuperior tothosefoundelsewhere in the world. Thefocus of thestage-two companyis on thehome-countrymarket.

>Becausetherearefew,ifany,people in thestage-two companywithinternationalexperience, ittypicallyrelies onaninternationaldivisionstructurewherepeoplewithinternationalinterest andexperiencecanbegrouped tofocus oninternationalopportunities. Themarketingstrategy of thestage-two companyisextension; thatis,products, advertising, promotion,pricing, and businesspracticesdevelopedfor thehome-countrymarketare >extendedintomarketsaround the world.

>Almostevery companybeginsitsglobaldevelopmentas astage-twointernational company. Stage twois anaturalprogression.Given limitedresources andexperience,companiesmustfocus onwhattheydo best.When a companydecides togointernational, itmakessenseat thebeginning toextendasmuch of the business andmarketingmix (>product,price, promotion, andplace orchannels ofdistribution)aspossibleso thatlearningcanfocus on how todo business inforeigncountries.

Afundamentalstrategicmaximis that itis amistake toattempt tosimultaneouslydiversifyinto newcustomer andnew-product/technologymarkets.

Theinternationalstrategistobservesthismaximbyholding themarketingmixconstantwhileadding newgeographic orcountrymarkets. Thefocus of theinternational companyis onextending thehome-countrymarketingmix and businessmodel.

StageThreeMultinational

>Intime, thestage-two companydiscovers thatdifferences inmarketsaround the worlddemandanadaptation ofitsmarketingmix inorder tosucceed. Toyota,forexample,discovered theformerwhen itentered theU.S.market in 1957withitsToyopet. TheToyopetwasnot abighit:Criticssaidtheywere >overpriced,underpowered, andbuiltliketanks. Thecarwassounsuitedfor theU.S.market thatunsoldmodelswereshippedback to Japan. Themarketrejection of theToyopetwaschalked upby Toyotaas alearningexperience and asource ofinvaluableintelligenceaboutmarketpreferences.Note that Toyotadidnotdefine theexperienceas afailure.Thereis,for theemergingglobal company,nosuchthingasfailure:onlylearningexperiences andsuccesses in theconstantlyevolvingstrategy andexperience of the company.

>When a companydecides torespond tomarketdifferences, itevolvesinto astage-threemultinational thatpursues amulti-domesticstrategy. Thefocus of thestage-three companyismultinational or instrategicterms,multi- domestic. (>Thatis,this companyformulates auniquestrategyforeachcountry inwhich itconducts business.) Theorientation ofthis companyshiftsfromethnocentric topolycentric.

Apolycentricorientationis theassumption thatmarkets andways ofdoing businessaround the worldaresounique that theonlyway tosucceedinternationallyis toadapt to thedifferentaspects ofeachnationalmarket.Like thestage-twointernational, thestage-threemultinational,polycentric companyisalsopredictable.Instage-threecompanies,eachforeignsubsidiaryismanagedasif itwereanindependentcity-state. Thesubsidiariesarepart ofanareastructure inwhicheachcountryispart of aregionalorganization thatreports to worldheadquarters. Thestage-threemarketingstrategyisanadaptation of the domesticmarketingmix tomeetforeignpreferences andpractices.

Philips anditsJapanesecompetitionwasdramatic. Matsushita,forexample,adopted aglobalstrategy thatfocuseditsresources onserving a worldmarketforhome entertainmentproducts.

StageFourGlobal

Thestage-four companymakes amajorstrategicdeparturefrom thestage-threemultinational. Theglobal companywillhaveeither aglobalmarketingstrategy or aglobalsourcingstrategy,butnotboth.Itwilleitherfocus onglobalmarkets andsourcefrom thehome or asinglecountry tosupplythesemarkets, or itwillfocus on the domesticmarket andsourcefrom the world tosupplyits domesticchannels.Examples of thestage-fourglobal companyareHarleyDavidson and the Gap.Harleyisanexample of aglobalmarketing company.Harleydesigns andmanufacturessuperheavyweightmotorcycles in the United States andtargets worldmarkets. Thekeyengineering andmanufacturingassetsare alllocated in thehomecountry (the United States). TheonlyHarleyinvestmentoutside thehomecountryis inmarketing. The Gapisanexample of aglobalsourcing company. The Gapsourcesworldwideforproduct tosupplyitsU.S.retailorganization.Each ofthesecompaniesisoperatingglobally,butneither ofthemisseeking toglobalize all of thekeyorganizationfunctions.

Thestage-fourglobal companystrategyis awinningstrategyif a companycancreatecompetitiveadvantagebylimitingits GLOBALIZATION of thevaluechain.HarleyDavidsongainscompetitiveadvantagebecause itis Americandesigned andmade,justas BMW and Mercedeshavetraded ontheirGermandesign andmanufacture. The Gapunderstands theU.S.consumer andiscreatingcompetitiveadvantagebyfocusing onmarketexpansion in the United Stateswhileat thesametimetakingadvantage ofitsability tosourcegloballyforproductsuppliers.

StageFiveTransnational

Thestage-five companyisgeocentric initsorientation:Itrecognizessimilarities anddifferences andadopts aworldview.Thisis the company thatthinksglobally andactslocally.Itadopts aglobalstrategyallowing it tominimizeadaptation incountries to thatwhichwillactuallyaddvalue to thecountrycustomer.This companydoesnotadaptfor thesake ofadaptation.Itonlyadapts toaddvalue toitsoffer. >It >shouldbenotedstrengthening thetransnationalnature of theconsolidation,accompaniedby thegrowth ofglobalmultinationals.

Thekeyassets of thetransnationalaredispersed,interdependent, andspecialized.Take R&D,forexample. R&D in thetransnationalisdispersed tomorethanonecountry. The R&Dactivities ineachcountryarespecialized andintegrated in aglobal R&Dplan. Thesameistrue ofmanufacturing.Keyassetsaredispersed,interdependent, andspecialized.Caterpillaris agoodexample.Catmanufactures inmanycountries andassembles inmanycountries.Componentsfromspecializedproductionfacilities indifferentcountriesareshipped toassemblylocationsforassembly andthenshipped tocustomers in worldmarkets.

>Shortly, theconcept ofTNChasgraduallymovedfrominternationalmentality to amultinational,then to theglobal andfinallytransnationalmentality.

 

1.3Classification ofTNCs

Avariety ofTNCswhichoperate in the worldcanbeclassifiedinto anumber ofsigns. Thecoresfromthem: thecountry oforigin,industryfocus,size, thelevel oftransnationalization.

Thepracticalsignificance of theclassification ofTNCsis that itallowsformoreobjectivelyestimating theadvantages anddisadvantages ofplacingspecificcorporations in ahostcountry.

>Country ofOrigin >Country oforiginisdeterminedby thenationality ofTNCs in thecapital ofitscontrollingstakeassets.Usually, itcoincideswith thenationality of thecountry-basedhead company of thecorporation.In thedevelopedcountriesTNCsareconsideredas a privatecapital.However in thedevelopingcountries, thecapitalstructure ofsome (>sometimeslarge)part ofTNCsmaybelong to the state.Thisisdue to thefact thattheywerecreated on thebasis of thenationalizedforeign-owned orstate-ownedenterprises.Theirgoalwasnotinto theeconomies ofothercountries,buttheirmainpurposewas toliftnationaleconomy.

>Commodity Focus Theglobalproductisoneapproach toTNCorganization.Thisisassignedworldwideresponsibilityforspecificproducts orproductgroups inorder toseparateoperatingdivisionswithin afirm.Itmeans,what toproducefortransnationalcorporationsisreallycrucial.Commodity FocusTNCisdefinedby thebasicsphere ofitsactivity.Onthisbasis, itisdistinguishedwithTNCswhichareadaptedforrawmaterials, thecorporationswhichareengaged inbasic andsecondarymanufacturingindustries andindustrialconglomerates.Currently,multinationalcorporationsmaintaintheirposition in thebasicbranches ofmining andmanufacturingindustries.Theseare theareas ofactivity thatrequiresubstantialinvestment.In the lastyears,morethan 250from the list of 500largesttransnationalcorporations in the worldareoperating insuchareasaselectronics,computers,communicationsequipment, food,beverages andtobacco,pharmaceutical andcosmeticproducts,aswellas in the service ofcommercial services,including on the Internet.

>Transnationalcorporationscarry outvariouskinds ofoverseas research anddevelopmentwork:adaptive,rangingfrombasicsupportprocesses andendingwith themodification andimprovement ofimportedtechnologies,innovationassociatedwith thedevelopment of newproducts orprocessesforlocal,regional andglobalmarkets andothers.

Thechoice of thetype of R & D (Research andDevelopment) andindustryspecializationdepend onwhatregion, onwhatlevel ofdevelopmentthereis ahostcountry.Forexample, inSoutheastAsiaisdominatedwithinnovative R & Dassociatedwithcomputers andelectronics, inIndia -with thesector of services (>especially software), inBrazil andMexico -with theproduction ofchemicals andtransportequipment.

>Fortransnationalcorporations,conglomeratictypewith aview ofdefinition oftheirspecializationiscalledbranch A,which theUNdescribesashaving aconsiderableamount offoreignassets, thegreatestquantity offoreignsales and thelargestnumber ofworkersabroad. Thelargestpart ofcorporationsinvestmentgoes tothisbranch, andproportionally, itgives thegreatestprofitforcorporation.


Thesize oftransnationalcorporations 

>Symptomclassification,whichisusuallydeterminedby themethod of UNCTAD,isdefinedby thesize oftheirforeignassets.Thisparameterisespeciallyusedfor thediversification of thelargestTNCs,large,medium andsmall.Inorder toget thenamelargeone,assets oftransnationalcorporationshouldexceed 10billiondollars.

Thevastmajority of thetotalnumber ofTNCs (90%)belongs tomedium andsmallcorporations.According to theUNclassificationtheseincludecompanieswithfewerthan 500employees in thecountry ofresidence.Inpracticetherearemultinationalcorporationswithtotal ofemployeeslessthan 50persons. Theadvantage ofsmallTNCsistheirabilitywhichadaptsmorequickly tochangingmarketconditions.


2.THEROLEOFTRANSNATIONALCORPORATIONS INMODERNECONOMICRELATIONS

 

2.1TNCparticipation ininternationalproduction

Theeconomic andfinancial crisishassignificantlyaffectedTNCsoperationsabroad. Foreignaffiliatesales andvalue-addeddeclinedby 4-6percent in 2008 and 2009.Sincethiscontractionwasslowerthan thedecline of worldeconomicactivity,however, theshare offoreignaffiliatesvalue-added (>grossproduct)reached a newhistoric high of 11percent of world domesticproduct (GDP).BesidesGreenfieldinvestments,anyexpansion of theforeignoperations ofTNCs in 2009canlargelybeattributed to theorganicgrowth ofexistingforeignaffiliates.

The worldmarketisbecomingmore andmoreintegrated.Within lasttenyears worldtradedevelopedmuchfasterthan worldproductiongrew. Foreignemploymentremainedpracticallyunchanged in 2009 (+1.1percent).Thisrelativeresiliencemightbeexplainedby thefact thatforeignsalesstarted topick upagain in thelatterhalf of 2009.Inaddition,manyTNCsarethought tohaveslowedtheirdownsizingprogrammesaseconomicactivityrebounded especially indevelopingAsia.Inspite of thesetback in 2008 and 2009,anestimated 80millionworkerswereemployed inTNCsforeignaffiliates in 2009,accountingforabout 4percent of theglobalworkforce.

Dynamicsvaryacrosscountries andsectors,butemployment inforeignaffiliateshasbeenshiftingfromdeveloped todevelopingcountriesover thepastfewyears; themajority offoreignaffiliatesemploymentisnowlocated indevelopingeconomies. Thelargestnumber offoreign-affiliateemployeesisnow in China (>with 16millionworkers in 2008,accountingforsome 20percent of theworldstotalemployees inforeignaffiliates).Employment inforeignaffiliates in the United States, on theotherhand,shrankbyhalf amillionbetween 2001 and 2008.

>Inaddition, theshare offoreignaffiliatesemployment inmanufacturinghasdeclined infavor of services.Indevelopedcountries,employment inforeignaffiliates in themanufacturingsectordroppedsharplybetween 1999 and 2007,while in services itgainedimportanceas aresult ofstructuralchanges in theeconomies.

Foreignaffiliatesassetsgrewat arate of 7,5percent in 2009. Theincreaseislargelyattributable to the 15percentrise ininwardFDIstockdue to asignificantrebound on theglobalstockmarkets.

Theregionalshift ininternationalproductionisalsoreflected in theTNClandscape.Although thecomposition of theworldstop 100TNCsconfirms thatsharehasbeenslowlydecreasingover theyears.Developing andtransition-economyTNCsnowoccupysevenpositionsamong thetop 100.Andwhilemorethan 90percent of allTNCswereheadquartered indevelopedcountries in theearly1990s,parentTNCsfromdevelopingtransitioneconomiesaccountedformorethan aquarter of the 82,000TNCs (28percent)worldwide in 2008(2.1-table), ashare thatwasstill twopercentagepointshigherthan that in 2006, theyearbefore the crisis.As aresult,TNCsheadquartered indeveloping andtransitioneconomiesnowaccountfornearlyonetenth of theforeignsales andforeignassets of thetop 5,000TNCs in the world,compared toonly 1-2percent in1995(2.1-picture).

>Picture 2.1 -Number ofTNCsfromdevelopedcountries andfromdeveloping andtransitioneconomies, 1992, 2000 and 2008

Othersourcespoint toanevenlargerpresence offirmsfromdeveloping andtransitioneconomiesamong thetopglobalTNCs. The Financial Times,forinstance,includes 124companiesfromdeveloping andtransitioneconomies in thetop 500largestfirms in the world, and 18 in thetop 100. Fortune >ranks 85companiesfromdeveloping andtransitioneconomies in thetop 500largestglobalcorporations, and 15 in thetop 100.

 

>Table 2.1 - Foreignactivities of thetop 5,000TNCs,byhomeregion/country, 1995 and 2008

>Over thepast 20years,TNCsfrombothdeveloped anddevelopingcountrieshaveexpandedtheiractivitiesabroadat afasterthanathome.Thishasbeensustainedby newcountries andindustries opening up toFDI,greatereconomiccooperation,privatizations,improvements intransport andtelecommunicationsinfrastructure, and thegrowingavailability offinancialresourcesforFDI,especiallyforcross-borderM&As.

Theinternationalization of thelargestTNCsworldwide,asmeasuredby thetransnationalityindex,actuallygrewduring the crisis,risingby 1.0percentagepoints to 63,ascompared to 2007. Thetransnationalityindex of thetop 100non-financialTNCsfromdeveloping andtransitioneconomies,however,dropped in 2008.Thisisdue to thefact that inspite of therapidgrowth oftheirforeignactivities,theyexperiencedevenfastergrowth intheirhomecountries.Amongbothgroups,thisindexvariesbyregion:TNCsbased in the EU,Africa, andSouthAsiaareamong themosttransnationalized.


2.2TNCsrole inmobilizingfinancialresources and theimpact oninvestment

>Globalizingisshrinkingdeeplydaybydaybecause ofsomereasons.Asanexamplewecanrefer toforeigndirectinvestment. Foreigndirectinvestmentinflowsgloballycontinued toriseby 30% in 2007:at ,833billion,theyreached a newrecordlevel.Itmustbementioned, thatpreviousall-time highsetwasreached in 2000.Itisalsosaid, that thefinancial andcredit crisis,whichbegan toaffectseveraleconomies inlate 2007,didnothave asignificantimpact on thevolume ofFDIinflows thatyear,but ithasadded newuncertainties andrisks to the worldeconomy.Therefore,thismighthave adampeningeffect onglobalFDI in 2008-2009.Followingtableshows thetendency offoreigndirectinvestment.Undoubtedly, theimpact oftransnationalcorporationsincreases in the worldeconomyrespectivelywithforeigndirectinvestment.

Directinvestmentsvolumeisbecominghigheryearbyyear.(2.2-table)Aswe knowtransnationalcorporationsaremainsource ofdirectinvestment.Thatswhy,weareable tosay that therole andimpact ofTNCs in the worldeconomytend togrow infuture.

 

>Table 2.2 -Possiblegrowthdirectinvestmentsvolume

>Level >1990-year >2000-year >2005-year >2010-year >2015-year >2020-year
>Minimum - - - 1070 1540 2055
>Average 258,0 1200,8 778,7 1125 1626 2350
>Maximum - - -
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