Transnational Corporations (TNCs)

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Transnational Corporations (TNCs)

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• Nguy?n Phuong Th?o BABAIU10217

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OUTLINE

• History of TNCs
• The Organizational Structure
• The rises of TNCs in the 21st century
• Example

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Transnational corporation

• A transnational corporation (TNC) is a huge
  company that does business in several countries.

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Examples

• Cadbury-Schweppes
• BP-Amoco

• Nestlé
• Unilever

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From the Origins to the Second World War
Brief history of TNCs
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During the 19th and early 20th centuries

• The search for resources including minerals,
  petroleum, and foodstuffs.
• For example
• The US agribusiness giant United Fruit Company
  controlled 90 per cent of US banana imports by
  1899.
• Royal Dutch/Shell accounted for 20 per cent of
  Russia's total oil production.
• In Japan Mitsui and Mitsubishi financial
  clique

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1945 to the Present
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Proliferation of TNCs
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The wealth of TNCs

• Top 100 firms which in 1992 had US3.4 trillion
  in global assets.
• The top 100 TNCs also account for about one-third
  of the combined outward foreign direct investment
  (FDI) of their countries of origin.
• Between 1988 and 1993, worldwide FDI stocks grew
  from US1.1 to US2.1 trillion

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TNCs investment in the less-industrialized world
in the mid-1980s
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Foreign investment into less-industrialized
nations
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The Organizational Structure of a Multinational
Company

• This is most important tasks for top managers of
  any company.
• If everyone in a company is in place and knows
  his duties, if there are rules of interaction
  between departments, company's activities will
  remind a tuned mechanism which works with maximum
  results and minimal costs.
• Michael Newman

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Organizational structure

• A scheme consisting of units and individual
  officers of the company.
• Located by levels of importance and
  responsibility.
• Depending on the stage of company development
  require different approaches to build the
  organizational structure.

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Subsidiary Model

• The most basic structural models
• The subsidiaries are self-contained units with
  their own operations, finance and human resource
  functions.
• Allowing them to respond to local competitive
  conditions and develop locally responsive
  strategies

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Subsidiary Model

• The major disadvantage
• The decentralization of strategic decisions that
  makes it difficult for a unified approach to
  counter global competitive attacks.

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Product Division

• Each product has its own division that is
  responsible for the production, marketing,
  finance and the overall strategy of that
  particular product globally
• Allows the multinational company to weed out
  product divisions that are not successful

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Product Division

• The major disadvantage
• The lack of integral networks that may increase
  duplication of efforts across countries.

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Area Division

• Each geographical region is responsible for all
  the products sold within its region.
• All the functional units for that particular
  region namely finance, operations and human
  resources are under the geographical region
  responsibility
• Allows the company to evaluate the geographical
  markets that are most profitable.

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Area Division

• The major disadvantage
• Communication problems, internal conflicts and
  duplication of costs

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Functional Structure

• Functions such as finance, operations, marketing
  and human resources determine the structure of
  the multinational company
• All the production personnel globally for a
  company work under the parameters set by the
  production department

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Functional Structure

• The advantage
• There is greater specialization within
  departments and more standardized processes
  across the global network.
• The disadvantages
• The lack of inter department communication and
  networking that contributes to more rigidity
  within the organization.

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Matrix Structure

• Overlap between the functional and divisional
  structures.
• Dual reporting relationships in which employees
  report both to the functional manager and the
  divisional manager.
• Involve cross-functional teams from multiple
  functions such as finance, operations and
  marketing

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Matrix Structure

• The advantage
• There is more cross-functional communication that
  facilitates innovation ? The decisions are also
  more localized.
• The disadvantage
• More confusion and power plays because of the
  dual line of command

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Transnational network

• Evolution of the matrix structure
• More on horizontal communication.
• Information is now shared centrally
• This structure is focused on establishing
  "knowledge pools" and information networks that
  allow global integration as well local
  responsiveness.

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The rises of TNCs in the 21st Century
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1.General view of the Rises of TNCs in the 21st
Century

• In the 1980s and 1990s

• In 21st Century

• Globalization was largely driven by economies of
  the developed world
• United States, Western Europe and Japan

• Large multinational companies headquartered in
  developing countries
• China, Brazil and India
• This trend is becoming more pronounced which
  impacted many developed economies.

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• Exhibit 1 Cross Border Purchases by Developed
  and Developing Economies

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• Exhibit 2 Cross Border Purchases by Emerging and
  Transition Economies in Developed Economies

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• Exhibit 1 and 2 show
• The share of cross-border buy-side transactions
  by developing economies.
• Asian developing countries being the major force
  for this change.

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• Some major mergers and acquisitions across
  sectors like oil and gas, mining, automotive and
  financial services
• E.g.
• The Indian conglomerate Tata Sons' acquisition of
  UK-based Corus Steel and Jaguar Land Rover
• China-based Geely Automotive's takeover of
  Swedish auto giant Volvo
• Mexican cement manufacturer CEMEX's acquisition
  of Australian cement company Rinker Group.

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• According to the United Nations Conference on
  Trade and Development (UNCTAD)
• There were 80,000 transnational corporations
  (TNCs) in 2009
• During the last few years, while developed
  countries accounted for the bulk of the TNCs
  across the globe, a paradigm shift has been
  occurring.
• The transnationalisation of emerging market firms
  reflects the maturity in their business processes
  and their increasing appetite for international
  growth.

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The diagram shows the network of the 295 TNCs
among the top holders in 21th century
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2.Factors driving the rise of TNCs in the
emerging markets

• Exhibit 3 Motivations for Investments for Firms
  from Emerging Markets

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Market Seeking

• To reduce the risks associated with being
  overdependent on limited market presence
• To increase their market presence as well as
  achieve economies of scale

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Market Seeking (cont.)

• E.g.
• In 2006 the China-based TCL Corporation's
  acquisition of Thompson and the acquisition of
  US-based IBM's PC business by China's Lenovo
• In 2007, the leading Mexico-based cement
  manufacturer CEMEX gained a controlling stake in
  Australian counterpart Rinker Group for USD 14.7
  billion gt CEMEX also expanded its geographic
  presence in Australia and the Asia Pacific region

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Resource Seeking

• Many enterprises from emerging countries are in
  search of natural resources across the globe.
• They acquire strategic resources worldwide for
  oil, minerals and other raw materials gt
  transnational routes also help enterprises
  internationalize and integrate their production
  facilities globally.

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Resource Seeking (cont.)

• E.g.
• In 2006, Brazilian mining giant Vale acquired
  Canadian-based Inco, the largest nickel mining
  and processing company, thus expanding its
  production facilities in North America.
• Indian petrochemical giant Reliance Industries
  Ltd acquired the shale gas assets of US-based
  Atlas Energy for almost USD 3.5 billion in early
  2010 gt Reliance now has the first mover
  advantage in exploring the

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Efficiency Seeking

• Corporations need to operate more efficiently and
  to increase productivity by vertically or
  horizontally integrating their processes.
• Many firms from the emerging markets are
• Reassessing their internal operations and their
  roles in the global value chain.
• Investing in the developed economies to achieve
  efficiencies.

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Efficiency Seeking (cont.)

• E.g.
• In 2006, the acquisition of UK-based Corus Steel
  by Indian steel manufacturer Tata Steel
• Brazilian aircraft manufacturer Embraer acquired
  aircraft maintenance, repair and operations (MRO)
  service provider OGMA in Portugal.

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Transnational horizon As we see it

• Developing markets had a construct to be among
  the top economies by middle of the 21st century.
• In line with their growth ambitions, many of
  these emerging market firms have expanded their
  horizons to developed economies and started to
  take the route of cross-border acquisitions.
• Be able to leapfrog the maturity curve gt to
  match the needs of the developed markets in terms
  of
• Technology and management advancements,
• Quality standards and certification,
• Most importantly, to overcome the psychological
  barriers with respect to brand perception.

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3. Transnational horizon As we see it (cont.)

• E.g.
• The Asian giants (China and India) along with
  Latam (Brazil) would dominate the cross-border
  firm creation scene gt lead to a changing
  landscape of global economics, where there would
  be a gradual shift of corporate appetite for
  transnational growth from the developed to the
  developing markets

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eSys Information Technologies Pvt. Ltd. 

• eSys Information Technologies Pvt. Ltd. is
  the world-leading information technology company,
  and business process outsourcing organization
  that envisioned and pioneered the adoption of the
  flexible global business practices that today
  enable companies to operate more efficiently and
  produce more value. Efficiency, reach and adapta
  bility are the core values that
  define eSys business model for IT distribution.
  Since its incorporation in Singapore in the year
  2000, eSys has set a scorching pace to become a
  major IT component distribution network in Asia
  and Europe with 32 in-country subsidiaries and
  more than 100 points of presence. With the
  presence in 32 countries and across 100 plus
  outposts the entire enterprise is run on one
  simple phrase Constant innovation that
  maximizes efficiencies to deliver enhanced value
  to our customers.eSys PC has already been
  launched in India, Middle East, Korea, UK and USA.

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Relax,its FedEx.

• We live to deliver.

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Introduction
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Functional Structure

• The FedEx Corporation is the parent company over
  all the others, which provide support to all of
  the other companies
• FedEx Express
• FedEx Ground
• FedEx Office
• FedEx Freight
• FedEx Custom Critical
• FedEx Trade Networks
• FedEx Supply Chain
• FedEx Services

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Details of Functional Structure Units Logos
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Area Structure
FedEx Express A wholly owned company of FedEx ,
which is divided into five global regions

• Asia Pacific (APAC)
• Canada
• Europe, Middle East, Indian Subcontinent and
  Africa (EMEA)
• Latin American and the Caribbean (LAC)
• United States

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FedEx Ground Area
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FedEx Timeline
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Values
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Strategy
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Business Profit and Development
Revenue US 34 billion (2010)
Operating income US 2.075 billion (2008)
Net income US 1.2 billion (2010)
Total assets US 25.633 billion (2008)
Total equity US 14.526 billion (2008)
Employees 280,000 (2009)
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Achievements
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The World On Time.