Economic Globalization

Economic Globalization: Corporation

 

Summary

We live in the world that global corporations are increasing. Global corporations have created vast business as a world scale. We can define a modern TNC(transnational corporation) as ‘a firm which has the power to coordinate and control operations in more than one country, even if it does not own them’. What TNCs all have in common is that they operate in different political, social and cultural environments. The vast majority of the world’s TNCs originate from the developed economies. Moreover, a much smaller number of very large TNCs are carrying out most international productions.

 

Although there are complex reasons why business firms extend their operations outside their home countries, we can pay attention two broad categories: market-oriented investment and asset-oriented investment. In the point of market-oriented investment view : Because much of investment continues to be market-oriented, increasing profitability may well depend on possibility to expand its market beyond its original(home) territory. Both for political and cultural reasons, TNC may be desirable to stay in a local market: such as transportation costs, political regulatory structures and so on. In the point of asset-oriented investment view : There are 2 reasons for transnational investment. First, geographical unevenness is that. Second, the assets needed to produce and sell products and services are also geographically very unevenly distributed. Also, TNCs can shift their activities and operations boundaries according to changes of labour costs.

 

There are two major ways how firms develop transnational activities. one is ‘greenfield’ investment: building totally new facilities. It’s risky. The other is the engagement with other firms, through either M&A or other forms of strategic collaboration. Recently, most of the growth in world FDI(foreign direct investment) has been driven by M&A. Moreover, both developments in transportation and communications technologies, as well as in production process technologies, have increased the ability to access other unevenly distributed assets on increasingly wide geographical scales.

 

Unlike M&A, strategic alliances are usually used when solving specific business problems. Nevertheless, the proliferation of such alliances has greatly increased the complexity and variety of TNC operations in the world economy.

 

Place and geography still matter fundamentally in the ways firms are made and in how they behave.

The TNC’s origin place has the dominant influence. Empirical research represents how Japanese and US electronics firms have distinctively different ways of organizing their regional production networks, differences that clearly reflect their different home characteristics. On the contrary, interconnectedness in the contemporary global economy means that influences are rapidly transmitted across boundaries. It will also affect the way business organizations are configured and behave. For that, involvement in the global economy is forcing firms to modify several their practices.

Also, it is reinforced by regional political structures such as EU or NAFTA.

 

Transnational production networks are complex and dynamic. It creates tensions between TNCs and states, local communities, labour, consumers, civil society organizations. We can notice TNCs’ powerful influences in the global economy, but we should know that they don’t always prevail and have absolute power.

 

 

 

New, Interesting items learned

 

Due to globalization in economy, corporations can handle matters with more possible choices from the ‘make or buy’ decision that means the firm’s decision on what to produce for itself and what to externalize to independent suppliers to any other numerous problems. Moreover, TNCs usually develop distinctive spatial patterns for each corporations’ functions. Corporations can choose from more detailed variations. It’s interesting and I think management of corporations is increasingly complex.

 

Finally, I have studied globalization in 4 dimensions during completing blogging. After that, I can’t convince some situations and matters because I know I can see them in many various view but I can certainly recognize that matters in globalization are affected by interactions between internal and external things. I think tensions between them are critical points to study globalization.

 

 

 

Discussion point

 

I studied some regulations related to FTA when I took the international trade class. I also studied M&A, strategic alliances and other methods when taking management class. So, this article is more interesting for me because I can extend my knowledge. As I mentioned above, I think the tension is most important thing when studying and understanding globalization. For that reason, I wonder the balance between protective trades and free trades with other countries in economy. Is it possible that we can balance between them? Or, we can think that what is better. In the case of Korea, agricultural products are more preserve than any other thing when we trade. I studied that one of reasons for that is about national security in terms of food. Although It’s rational, other countries feel anger for our seal. I also know that we can’t remain restrictions in that way. Anyway, I want to share other thoughts about this matter and study more deeply.