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Impacts of TNCS on Host Economy - Essay Example

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Running head: IMPACTS OF TNCS ON HOST ECONOMY Was the Takeover of Cadbury By Kraft in 2010 Good News for the UK Economy? Insert Name Insert Grade Course Insert 22 March 2012 Was the Takeover of Cadbury by Kraft in 2010 Good News for the UK Economy?…
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Impacts of TNCS on Host Economy
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Download file to see previous pages The current concept of trans-border business operations began to intensify after the Second World War, even though such business operations have been in existence for some centuries (Ietto-Gillies, 2012, p.7). The wide coverage of these organizations cutting across cultures make them have positive and negative impacts on, and become a point of concern for, their employees, the competitors, the domestic customers, the host government, alongside the other international organizations that may operate in the country (Sat, 2009, p.41; Fuller, n.d). The effects realized will be determined by the nature of operations by the TNCs. This paper focuses on the economic impacts that the foreign direct investments established by the transnational corporations have on the economy of the host nations. It examines how the workers, the suppliers, the domestic competing organizations, and the host communities are affected by the operations of a transnational corporation within a given country. Particular attention is given to the effect that acquisition of Cadbury by Kraft had on the economy of the United Kingdom. The Positive Contributions of TNCs to the Host Country’s Economy The operations of transnational corporations have certain positive impacts on the economy of the host nations. One of the benefits of TNC is transfer of technology into the host economy (Berger & Diez, 2008). The transnational corporations often get into a given country through different entry modes such as exporting, joint ventures with the domestic firms, foreign direct investments, or licensing among many others (Rugman, 1996, p.29). They develop various linkages that form the basis for technology spillover (Berger & Diez, 2008). The local employees will get to learn the modern technologies that the TNCs apply in their production operations. The learnt technologies can than be transferred to the domestic companies when these employees move on to take employments with the domestic firms. In this way, the technology shall have been transferred into the economy of the host nation at a relatively lower cost than other methods of acquisition such as buying the technology from the developers or domestic development of the technology. Similarly, the transnational corporations can acquire or enter into joint ventures with domestic firms. The transnational corporations have better responses to organizational changes. The organizations work in different cultural, institutional, and regulatory environments and they are forced to modify their organizational structures continuously (Lowe & Wrigley, 2010, p.382). The management approaches may be copied by local managers (Berger & Diez, 2008, p.1049) who would transfer the techniques to the management of other organizations if their tenure with the TNC comes to a halt. A manager who has worked for a significantly long period for some TNC may develop new ideas (owing to the research and development carried out by the TNCs) to go ahead and establish his or her new investment scheme. The transnational corporations producing goods locally may help reduce the imports to a given country if the domestic customers are attracted to their products in preference to the alternative imports (Fuller, n.d). The goods made locally by the TNCs are likely to be cheaper since other costs like shipment and duties have been reduced considerably. On a similar perspective, the TNCs can help increase the export from a given economy if the TNC exports ...Download file to see next pagesRead More
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