Reading4 : Economic Globalization / Subin Jung
1. Summary
This article explains economic globalization as follows. Economic globalization itself is a very complex phenomenon. As companies become increasingly globalized, they say there is a misunderstanding about the issue that they say is violating the autonomy of nation-states beyond national boundaries. It then explains the nature and importance of TNC in the process of economic globalization as an approach based on the empirical reality of geography.
TNC refers to 'a company that has the power to coordinate and control operations in more than one country even if it does not own it'. They are also called global companies. Their activities are traditionally measured using foreign direct investment (FDI) statistics. Direct investment refers to investing in another company for the purpose of controlling the operation of another company. Foreign direct investment is simply a direct investment that occurs beyond national boundaries, that is, a direct investment that occurs when a company in one country purchases a dominant investment in another country or when a company establishes a branch or subsidiary in another country. The majority of these world TNCs come from developed countries. FDI occurs in developing countries, and its proportion has increased, but it is still small. Nevertheless, it should be noted that it is undoubtedly growing in both developing and developed countries. The diversity of TNCs is increasing in the global economy.
These TNCs carry out transnational activities in two ways based on 'market-oriented investment and asset-oriented investment'. First, market-oriented investment focuses on whether a company can expand its market beyond its own profitable territory as it has reached saturation in the domestic market. Asset-oriented investment refers to responding to a company's highly sensitive response to geographical changes in labor costs because the assets needed to produce and sell products and services are geographically very unevenly distributed. The transnational activities of companies are first through Greenfield (building a completely new facility, adding to the productive stocks of the company itself and the country/community in which it occurs), and second through participation, mergers and acquisitions, or some form of strategic cooperation. These deployment methods have increased the complexity and diversity of TNC's operations in the global economy.
Geographical is an important fact for the TNC. In particular, the various geographical compositions of TNC production activities are evident, and the first method is to concentrate production in one place. This concentrated production globally creates economies of scale of production, but increases transportation costs and reduces the company's knowledge of distant markets. The second method is to produce specifically for local and national markets. Economies of scale are limited by the size of the market, so they should be targeted more and more broadly. The third way is to create a specialized production structure for the local market. This is because a way to target various geographically located countries needs something specialized in the local market. The fourth method is to subdivide the production process and place each part in different locations. It is a form of transnational vertical integration of production. For the foundation of these methods, TNCs are constantly participating in the process of restructuring, reorganization, and rationalization. Therefore, the geographical scope of the TNC network is very variable and complex.
TNC refers to 'a company that has the power to coordinate and control operations in more than one country even if it does not own it'. They are also called global companies. Their activities are traditionally measured using foreign direct investment (FDI) statistics. Direct investment refers to investing in another company for the purpose of controlling the operation of another company. Foreign direct investment is simply a direct investment that occurs beyond national boundaries, that is, a direct investment that occurs when a company in one country purchases a dominant investment in another country or when a company establishes a branch or subsidiary in another country. The majority of these world TNCs come from developed countries. FDI occurs in developing countries, and its proportion has increased, but it is still small. Nevertheless, it should be noted that it is undoubtedly growing in both developing and developed countries. The diversity of TNCs is increasing in the global economy.
These TNCs carry out transnational activities in two ways based on 'market-oriented investment and asset-oriented investment'. First, market-oriented investment focuses on whether a company can expand its market beyond its own profitable territory as it has reached saturation in the domestic market. Asset-oriented investment refers to responding to a company's highly sensitive response to geographical changes in labor costs because the assets needed to produce and sell products and services are geographically very unevenly distributed. The transnational activities of companies are first through Greenfield (building a completely new facility, adding to the productive stocks of the company itself and the country/community in which it occurs), and second through participation, mergers and acquisitions, or some form of strategic cooperation. These deployment methods have increased the complexity and diversity of TNC's operations in the global economy.
Geographical is an important fact for the TNC. In particular, the various geographical compositions of TNC production activities are evident, and the first method is to concentrate production in one place. This concentrated production globally creates economies of scale of production, but increases transportation costs and reduces the company's knowledge of distant markets. The second method is to produce specifically for local and national markets. Economies of scale are limited by the size of the market, so they should be targeted more and more broadly. The third way is to create a specialized production structure for the local market. This is because a way to target various geographically located countries needs something specialized in the local market. The fourth method is to subdivide the production process and place each part in different locations. It is a form of transnational vertical integration of production. For the foundation of these methods, TNCs are constantly participating in the process of restructuring, reorganization, and rationalization. Therefore, the geographical scope of the TNC network is very variable and complex.
2. Interesting things
What was interesting about this article was that it was said that the organization or the company was in some way 'independent', which was clearly a bounded independent entity. Until now, the organization or company itself may be independent, but since all those who make up it are people, I thought it was more of a structural, systematic, and community-oriented thing than an independent one. However, in order to compete with someone, to monopolize, to succeed, I realized that acting as an independent entity must be the premise. I thought it would be more important for communities such as organizations and companies to be "together" in the global world and the global economy, but it was also true that "independent" could not be ruled out. Therefore, I think that part was interesting.
3. Discussion point
That TNC can be powerful, but it doesn't have absolute power
This article talks about economic globalization and refers to TNC. Geography is important here, where there is a territorial asymmetry between the country's continuous territory and the TNC's discontinuous territory, which, contrary to many conventional wisdom, is interpreted as a complex negotiation process with no clear and completely predictable results. Moreover, the TNC does not always have the power to take its own way. In the complex relationship between the TNC and the state, and the consequences of the negotiation process with other agencies are very accidental. Therefore, while recognizing the unquestionable power and influence of the TNC in the global economy, the simplified view that the TNC is always dominant should be avoided. Conversely, TNCs can be constrained to freedom of action by various conditions. The point of this article is that TNC can be powerful, but it does not have absolute power. It suggests various aspects, takes examples, and explains the TNC, but the key is that it is powerful but not absolute.
This article talks about economic globalization and refers to TNC. Geography is important here, where there is a territorial asymmetry between the country's continuous territory and the TNC's discontinuous territory, which, contrary to many conventional wisdom, is interpreted as a complex negotiation process with no clear and completely predictable results. Moreover, the TNC does not always have the power to take its own way. In the complex relationship between the TNC and the state, and the consequences of the negotiation process with other agencies are very accidental. Therefore, while recognizing the unquestionable power and influence of the TNC in the global economy, the simplified view that the TNC is always dominant should be avoided. Conversely, TNCs can be constrained to freedom of action by various conditions. The point of this article is that TNC can be powerful, but it does not have absolute power. It suggests various aspects, takes examples, and explains the TNC, but the key is that it is powerful but not absolute.
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