Reading 4: Economic Globalization / Lee Jiyeon

 1)

The huge footsteps of global companies trample borders almost undisturbed and neutralize the autonomy of nation-states. This is a very misleading stereotype. The comparison between multinational corporations and ethnic states is a very misleading comparison because it is based on false statistical claims. Most the world's top 100 multinationals still maintain more than half of their activities in their home countries. What they all have in common is that they operate in different political, social, and cultural environments.

Overall, TNC activity is typically measured using FDI statistics. Over the past 20 years, FDI has grown at a rapid pace. Despite recent developments in TNC activities, most investments remain market-oriented. There are many reasons. Profitability increases depend on whether you can expand your market beyond your home country. It may be desirable for the TNC to appear strongly rooted in the local market for political and cultural reasons.

Geographic heterogeneity in the market is one of the main reasons why companies participate in multinational investments. The second reason stems from the fact that the assets required for a company to produce and sell products and services are geographically unevenly distributed and may need to be utilized in the field. Traditionally, of course, it was the geographical localization of many natural resources that led to the early development of the TNC.

Some types of multinational investment have been and remain highly sensitive to geographical fluctuations in labor costs. But labor is not the only driving force. The availability of highly educated, highly skilled and highly motivated workers, located in the 'quality' community, which has a very strong influence on the TNC, is increasing.

There are two main ways for companies to develop multinational activities. One is through what is known as the Greenfield investment. The other is to engage with other companies through mergers and acquisitions or some form of strategic cooperation.

Another widely used mode of TNC expansion is initiating strategic cooperation with one or more other companies. Many companies form a network of alliances, not a single alliance. Unlike mergers and acquisitions (M&As), where the identity of the merger partner is fully included, strategic alliances typically focus on specific business issues. In all other respects, companies are not only separated, but generally remain competitors.

It has been customary in the international business literature to argue that multinationals develop in a sequential way, starting with achieving a strong position in the domestic market and then moving abroad. This can be achieved through greenfield investments or acquisitions. More importantly, the emergence of a new generation of transnational companies, especially in knowledge-intensive industries, has led to a development process that does not necessarily require companies to take a large or dominant position in the domestic market before starting overseas.

Traditional institutional devices block certain institutional innovations and promote other innovations. However, this is not to argue that the TNC of a particular nationality is the same. The interconnectivity of the modern world economy means that influence is transmitted quickly across boundaries. This inevitably affects the way business organizations are organized and functioning.

Thus, diversity, not uniformity, continues to be the norm, at least in part in relation to the place-specific context in which the company evolves. There is a wide variety of ways in which TNC's internal networks are organized and geographically configured, and how they are connected to external networks of suppliers and customers.

Due to its geographically dispersed nature across diverse political, cultural, and social environments, TNCs are much more difficult to coordinate and control activities than companies limited to a single national space: more sophisticated organizational architectures are needed.

In addition to the problem of TNC's organizational structure, there is a geographical composition problem of related activities, although not identical. Thus, the division of labor within a company is expressed as a unique division of labor outside the company.

However, some generalizations are possible. Characteristically, TNC's headquarters remain unchanged in its home country. While core R&D facilities tend to remain in their home countries, some R&D is increasingly dispersed.

The TNC network is always in continuous flow. TNC relies heavily on other companies for many requirements. The specific relationship between TNC as a customer and other companies as a supplier is currently in flux.

The geographical scope of these multinational production networks is highly variable. Regional strategies provide many efficiency benefits of globalization while responding more effectively to the organizational barriers it entails. The establishment of NAFTA in North America is leading to a restructuring of corporate activities to meet the opportunities and constraints of the new regional system. In Europe, the increasing integration of the EU has resulted in substantial restructuring of existing corporate networks and the establishment of pan-EU systems by existing and new TNCs. East Asian and non-Asian and several other Asian companies also tend to form regional production networks.

Multinational corporations are undoubtedly one of the major formers of the modern world economy and the most important. The TNC is a much more diverse group than is commonly recognized. But not everyone is a 'global' company. It's very few. TNCs come in different shapes and sizes, and there are significant differences between TNCs of different origin.

The organization and geographical location of large TNCs, and the multinational production network, are incredibly complex and dynamic. In all cases, however, companies in certain locations—the locations themselves—are increasingly becoming transnational networks.

The foundation of transnational corporations' power lies in their potential ability to leverage the availability and cost of resources, the geographical differences in national policies, and shift and re-transition work between locations. All multinational production networks are affected and included by multi-scope regulatory systems. As a result, the TNC and the country continue to participate. On the one hand, the TNC attempts to exploit the country-specific differences in regulatory regimes. The situation is particularly complicated because TNC's 'territory' is more fluid and flexible.

In other words, there is a territorial asymmetry between the successive territories of the state and the discontinuous territories of the transnational state, which, contrary to many conventional wisdoms, is interpreted as a complex negotiating process with no clear and completely predictable results.

 

2)

I didn't know much about TNC activities, but I think it's amazing to know something new. I thought there was only a merger for companies to engage in multinational activities, but I could see that the "Greenfield" investment method was also included. In addition to mergers and acquisitions, it was interesting to form strategic alliances in addition to mergers and acquisitions to expand its size in addition to mergers and acquisitions.

 

3)

What are some examples of Asian companies constituting a multinational production network?