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Transnational Corporations - Essay Example

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Transnational Corporations

Three major ways in which TNC's participate in the economic activities of the host country are through international trade, technology transfer and international (foreign direct) investment. These activities, both individually and collectively, have the potential impact host countries in different ways, and these ways depend on several variables. This paper will examine these internationalisation activities and discuss their impact on the economy of the countries involved, especially that of host countries.
With the new advancements in transportation, information, communication and technology, international trade has become more prevalent over the past few decades, and especially this past one. Locally, international trade has changed the activities of the market. It has created the need for countries to produce more for export, and encouraged a greater dependence on imports to fill gaps in local markets. In the past, international trade had been dictated by colonialism, but now things have been changing. New super powers have arisen, and they have given birth to transnational corporations. ...
However, the transnational corporations of developed countries have dominated the global economy. The trade agreements formulated among countries have usually rested heavily in favour of the developed countries. Several reasons have been proposed for this, but two stand out. Even in areas where developing countries have a comparative advantage, participation in the global markets has been limited because of market protection that still exists in both developed and other developing countries. The other reason is that the negotiating powers of developing countries are heavily restricted by tight budgets ("Market Access").
Furthermore, it has been noted by the United Nations Conference on Trade and Development (UNCTAD) that many of the larger TNC's have assets that amount to greater wealth than the entire economies of most developing countries. It cites Exxon Mobil as an example, which has (value added) wealth greater than the economies of Pakistan and Chile. Another example is Daimler-Chrysler, whose foreign sales are 40 percent higher than the total exports of Africa as a whole (UNCTAD, 2004, p. 3). It is clear that international trade has indeed been steadily growing, and this trend seems favourable for the future. International trade has "increased by 3 per cent in 2002 and 5 percent in 2003 [and] developing countries made a significant contribution with a robust 9 per cent growth" (UNCTAD, 2005 p. iv). It is certainly the case that the market is ripe for growth for all countries, and developed countries' TNC's are in a prime position to take advantage of the situation. However, they are also in a very good position to help developing countries in their fight ...Show more

Summary

A transnational corporation (TNC) is an enterprise that operates or has branches in more than one country. This business entity may operate in any sphere of the economy, and offer goods or services of any type. The branches of transnational corporations must fall under a common heading, such as ownership or franchise, and through which they operate "under a system of decision-making, permitting coherent policies and a common strategy through one or more decision-making centres" (UNCTAD, 1990)…
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Transnational Corporations Essay essay example
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