What are Transnational Corporations?

Introduction – Definition and Scale of TNCs

Transnational Corporations are businesses that operate across international borders,

though most of them have their headquarters in the USA, Europe and Japan.

There were about 7000 TNCs operating in 1970, but the charity Christian Aid
estimates that this figure has now increased to about 63, 000 with about 690, 000
subsidiaries which operate in almost every sector of the economy and almost every
country in the world today.

The key characteristics of TNCs are:

• They seek competitive advantaged and maximization of profits by constantly

searching for the cheapest and most efficient production locations across the
world
• They have geographical flexibility – they can shift resources and operations to
any location in the world
• A substantial part of their workforce is located in the developing world, but
often employed indirectly through subsidiaries.
• TNC assets are distributed worldwide rather than focused in one or two
countries – for example, 17 of the top 100 TNCs have 90% of their assets in a
different country from their head office.

TNCs are economically very wealthy and thus potentially more powerful than many of
the world’s nation states.

According to Forbes magazine, in 2013, 37 of the 100 largest economies in the world
were run by TNCs rather than countries. For example, BP is bigger than Finland, while
Chevron is bigger than Ireland, and the combined annual revenue of the 200 largest
TNCs exceeded those of the GDP of the 182 nation states containing 80% of the world’s
population.

Critics remind us that GDP and annual revenue measure different things, so these
figures may not show actual differences in economic power, but this aside, the relative
economic power of TNCs has grown in relation to nation states over the last few
decades, and today TNCs wield much more economic power than they did in the past.

Fobel et al (1980) note that from the 1970s TNCs set about investing significantly in
the developing world because of high labour costs and high levels of industrial conflict
in the West, which reduced profits. The investment was greatly helped by developing
countries, which actively sought TNC investment by setting up special areas called
Export Processing Zones, or Free-Trade Zones, in which TNCs were encouraged to
build factories for export to the West.

Free Trade Zones offered incentives such as infrastructure provided by the government
(transport links), few planning controls on building, and low taxation. There are now
over 5000 free or export processing zones in the world today which employ over 43
million workers, the majority of which are based in China’s territories.

Sources

Chapman et al (2016) – A Level Sociology Student Book Two [Fourth Edition] Collins.

What are Transnational Corporations? (https_revisesociology.com)

Indian Transnational Corporations (TNC):

Meaning and Characteristics
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Read this article to learn about the meaning and characteristics of Indian
Transnational Corporations (TNC).

Meaning of Indian Transnational Corporations (TNC):

An Indian transnational corporation (TNC) is one that belongs to India i.e. having
headquarters in India and having business operations in the form of subsidiary /
affiliate, in at least one foreign country.

The latest policy of the government has been encouraging foreign investment by Indian
companies, in tune with the philosophy and policy of globalisation.

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Birla’s have headed the group of Indian investors abroad; controlling one-fourth share
of Indian joint ventures abroad. Next to Birla’s are the Thapar group, Kirloskar group
and Tata group.
Characteristics of Indian Transnational Corporations (TNCs):

Following are the chief characteristics of Indian Transnational Corporations:

(i) Smaller Size but with Growth Orientation:

Indian transnational are smaller in size as compared with foreign transnational; as

Indian transnational are rather new entrants to international business field. However,
Indian TNCs are growing through acquisitions. For example, Asian Paints acquired
Delmerge Forsyth and Co. of Sri Lanka and four others from Australia, Egypt,
Singapore and Fiji.

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(ii) Increasing Geographical Spread:

Indian transnational are mainly located in developing countries like Malaysia,

Indonesia, Thailand, Singapore Sri Lanka, Nigeria, Kenya, UAE etc. However, they have
made some inroads into developed countries like the USA, UK, and Germany etc.

Ranbaxy directly manages operations in 34 countries and has manufacturing facilities

in seven. Dr. Reddy’s Labs, has offices in 8 countries; research facilities in the USA and
manufacturing facilities in India, UK and China. ONGC is engaged in the exploration,
development and production of crude oil and natural gas in eight foreign countries,
including Russia, as one of those eight.

(iii) Low Cost/Product Differentiation Strategy:

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Indian TNCs use low cost and / or product differentiation strategy to meet severe
competition from foreign MNCs.

(iv) Global Workforce:

Indian TNCs are increasingly employing local workforce of host country to have a
better and realistic view of local culture, habits and values. For example, Infosys has
600 employees from 33 nations, other than India.

(v) Wider Product-Mix:

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Indian TNCs are redefining their product-mix. For example, Mr. Kumara Mangalam
has taken the Birla groups into apparel, software, cellular services, financial services
and insurance.

(vi) Adoption of Modern Management Techniques with Orientation towards

Research and Development:
Indian TNCs are constantly applying latest management techniques to achieve desired
results. They are spending huge sums on research and development to develop the art
and skills for remaining competitive in global markets characterized by intense
competition.

(vii) High Mortality Rate:

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Many Indian TNCs have failed due to unclear objectives and poor understanding of
foreign culture and foreign markets.

Point of Comment:

Despite the best efforts by Indian TNCs to provide world-class quality products, the
global customers have a psychology to regard the Indian brands as being of inferior
quality. Why? One possibly does not know precisely about it.

Indian Transnational Corporations (TNC): Meaning and Characteristics (yourarticlelibrary.com)