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Transnational Corporations - Essay Example

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In the complex arena of international business, transnational corporations or TNCs are the world's largest economic institutions. Approximately 300 prime TNCs control and maintain at least one-quarter of the whole world's productive assets, worth about US$5 trillion (The Economist 1993)…
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Transnational Corporations
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"Transnational Corporations"

Download file to see previous pages Basically, TNCs' aggregate yearly sales would correspond to or are greater than the annual gross domestic product (GDP) of most countries. A classic example would be Itochu Corporation's sales which exceed the gross domestic product of Austria, while those of Royal Dutch/Shell run parallel with Iran's GDP. Together, the sales of Mitsui and General Motors are greater than the GDPs of Denmark, Portugal, and Turkey combined, and US$50 billion more than all the GDPs of the countries in sub-Saharan Africa (UNCTAD 1994).
Because of their considerable size, TNCs are likely to control and dictate in industries where output and markets are oligopolistic, or converged in the hands of a comparatively small number of firms. The top five car and truck manufacturers are responsible for nearly 60% of motor vehicles' global revenues. The five leading oil companies account for over 40% of the industry's world market share (The Economist 1993).
TNCs' operations cover the whole world; however, they are based for the most part in Western Europe, North America, and Japan. The Swiss electrical engineering giant ABB has facilities in 140 nations, while Royal Dutch/Shell digs up for oil in 50 countries, conducts refining activities in 34 homelands, and markets its products in 100 nation states. Offices of the US food processing firm H.J. Heinz cover six continents and Cargill, the US's largest grain company operates in 54 countries. Britain's major chemical firm ICI has manufacturing operations in 40 nations and sales affiliates in 150 countries (Hoover 1993).
The term transnational corporation means a "for-profit enterprise" which is explicitly identified by two salient features -- 1) engages in enough business activities -- including sales, distribution, extraction, manufacturing, and research and development -- outside the country of origin so that it is dependent financially on operations in two or more countries; 2) management decisions are made based on regional or global alternatives (Hadari 1973). In essence, transnational corporations are recognised as prime components of capitalism and a most important conduit of globalisation.

Globalisation, TNCs and Host Governments
In this age of frenetic globalisation, the transnational corporation is indisputably the free markets' first-class and "untouchable" agent. Economically, these corporate giants dwarf the resources of many developing countries and evidently such status can be attributed to its extraordinary capacity and swift faculty to create wealth. Dubious however, is its reputation as an economic distributor, as a democratic contributor, and as a supporter of human rights in general (Letnes and Westveld 2004). These issues are specifically debatable in developing countries where some view the transnational corporation as a vehicle of development while others see it as nothing but a neo-colonial tool of exploitation.

Interaction is Motive-Dependent In the face of contradictory motivations and intentions and the fact that TNCs overshadow many of the smaller economies in bargaining power (Evans 1985, 216-21; Walters and Blake 1992, 124), TNCs engage in positive dialogues with host countries economic and social conditions (especially in the sphere of human rights) -- out of either a genuine sense of social responsibility or out of respect for the market force of the spotlight phenomenon ...Download file to see next pagesRead More
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