Trends of Transnational Companies

In our today’s world transnational companies (TNCs) play a crucial role in global economy as they are one of the biggest economic institutions. In this essay, I will give an explanation of what transnational company actually is, describe the main trends of TNCs activity and express my own opinion about transnational companies’ future and compare it with the view of other views.

To begin with, let me define the term of “transnational company”. It is important to give a correct definition of word, because there are different categories of companies, doing business in another country, such as multinational and international companies. So, TNC is a commercial enterprise with a very complex organization, that operates huge facilities, has a business more than in one country and whose external assets cover from 25 to 30 or even more percent of all volume of a company. There are more ways to explain the meaning of this term, but we will stop on this one. The history of transnational companies begins in 1118, when the Order of Knights Templars was founded. It was not actually TNC, but some kind of financial centre. In the year of 1135 they started to develop banking industry all over other countries. Officially, East India company is regarded as the very first transnational company, which was established in 1600.

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Now let’s move on to identifying the main trends and role of transnational companies in our contemporary world. They act as a driving force of key processes of modern global economy. TNCs determine structure, dynamics, level of marketability of goods and services, controlling international capital flows and direct foreign investments. Because of its productive and financial possibilities, transnational companies maintain hold of high-tech industries, advancing technological growth of this sphere. They are becoming a significant force in a world economy, as their wide range of functions, starting from industrial processes and ending up to operations in investment, financial and trade policy, allows them to play a role of international regulator of production and distributor of goods and services. The biggest TNCs have even established supremacy over world trade market and in leading fields of economy. Moreover, transnational companies transform world economy into an international manufacturing, providing boost of technological advance in all directions – quality of goods, efficiency of production, improvement of forms of management and directing enterprises. Number of TNCs is rapidly growing: in 1970 there were about 7300 TNCs, whole turn-round was $626 million a year. At the beginning of 1990s, their amount grew to 37000 with turn-round of $7 billion a year. Finally, in 2012 there are 82000 transnational companies with $30 trillion turn-round.[1] Such a growth can be explained by bunch of reasons. For example, competition between companies, forcing to decrease charges and at the same time increasing scales of producing and introducing new technologies, searching for a cheap labour power and new markets. Importance of TNCs in international meaning is increasing. Core of global economic system consists of about 100 transnational companies, which are controlling almost unlimited economic power and capturing two-thirds of international capital flows. Practically all the biggest TNCs, if they will be divided by national implement apply for so called “ternary” – three economic centers of our planet – USA, EU and Japan. But for a last few years there is a tendency of less developed countries to develop their own transnational companies all over the world. Sectorial division of TNCs is very diverse: 60% of companies specialise in manufacturing sphere, 37% – in tertiary sector and only 3% in extractive industry and agriculture. Also, there are 77 million employed people involved in TNCs sphere worldwide.  

In my opinion, transnational companies encourage growth of industry, change structure of national economy and improve position of states in international division of labour and global economic relations. There is misbelief, that as a result of international operations of TNCs, one country will gain a profit and other will lose. In real life it is possible, but there is a huge chance that both countries will be the winners of situation. One more advantage of transnational companies is that they speed-up research and development sphere, that is why TNCs have an immense financial resources. Moreover, they mainly control export of manufactured goods, which is usually concentrated by a few large TNCs. Such an export scheme is typical of household and electronic industry, pharmaceutic and chemical goods.

However, there are a lot of opponents of transnational companies’ rule: anti-globalists, alter-globalists and ecologic organizations. Anti-globalists, despite of their unfriendliness to globalization, assume that TNCs monopolize national market and destroy state sovereignty. They label actions of transnational companies to occupy local markets as economic war against citizens. In many countries, such as Russia, China and Canada there is a law, restricting actions of TNCs. Alter-globalists are actually not against economic globalization and transnational companies as well, but until they reach a power, which can be compared with power of states. Finally, last but not the least, economic organizations. I can provide you with example: Greenpeace. TNCs have so huge productive assets, that they can endanger local ecologic situation. That is why a lot of producing units are being transported to Third World countries.

Drawing up a conclusion, transnational companies showed their ability to break isolation of national economies, involving them into single process with world economic society. They serve as a source of transferring new technologies, spreading information about new products and as a result, change of social preferences occurs.

References:

1. https://www.globalpolicy.org/empire/47068-a-brief-history-of-transnational-corporations.html “A Brief History of Transnational corporations”
2. http://moluch.ru/archive/56/7687/
3. http://www.economist.com/blogs/graphicdetail/2012/07/focus-1

[1] http://moluch.ru/archive/56/7687/