TNCs in the economy. TNK is

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Among the world's 100 largest economies, 52 are multinational corporations and 48 are states. Today, corporations rule the world. The political lobbying and global influence of TNCs on the economies of many states is so great that they set the rules of the game not only for competitors, but also for entire states.

TNC is an economy comparable to the size of a single country. Some corporations can rightly be called state-forming, as they create millions of jobs and have incomes exceeding the GDP of many countries in the world.

What is a TNC?

TNC is a firm with assets under control in several countries and operating far beyond the borders of its home country. UN experts who have studied international corporations since the 1960s have identified three characteristics of multinational corporations:

• corporation makes decisions through one commanding center, pursues a coherent policy and implements a single strategy;
• it has units located in two or more countries, the legal form and field of activity of which may be diverse;
• individual units in the company are interconnected, affecteach other's activities, share knowledge, resources and responsibilities.

Global corporations

TNCs account for 2/3 of foreign trade, almost half of industrial production, up to 80% of technological innovations. It is quite natural that a significant share of goods on the market (25%) is produced by several transnational corporations. For example, Nestle sells L'Oreal cosmetics and Diesel jeans. A wide range of products, from Dove soap to Klondike chocolate, is owned by Unilever.

Up to 1/3 of the products of international corporations relates to the production of foreign structures as part of TNCs, the volume of sales of which has already exceeded world exports. American and foreign TNCs carry out 50% of export operations in the United States. Corporations account for up to 80% of UK exports and up to 90% of Singaporean exports.

First international companies

The first international organization, a number of researchers consider the Order of the Templars, founded in the XII century and leading, among other things, international financial activities. The earliest TNCs are the British East India Company and the Dutch East India Company, founded in 1600 and 1602 respectively. The Dutch company was also the first joint-stock company. The megacorporations of the 17th century already had powers at the state level, conducted military operations, minted coins, created colonies and took part in resolving issues of high politics.

Transnationalcorporations in a more modern form arose in the second half of the 19th century and carried out the extraction and sale of minerals. In the 20th century, their sphere of activity expanded significantly, reaching global proportions thanks to the development of cooperation and the general division of labor. The specialization of production contributed to the increase in its volumes.

TNCs and MNCs

By nationality, large corporations are usually divided into transnational firms (TNCs) and multinational firms (MNCs).

• TNK is a corporation with foreign assets that conducts production and sales activities outside the borders of its "native" country (where their headquarters is located). In the United States, a corporation is most often understood as a joint-stock company, and since many modern TNCs appeared as a result of international American expansion, this term has become part of their name. TNCs operate in various countries through branches, subsidiaries and other forms of organizations. Branches have practically independent production and sales divisions, carry out research and development, etc. In general, branches represent a huge production complex. Company shares are usually held only by representatives of the founding country.
• MNCs are multinational firms, associations of businesses from different countries on an industrial, scientific and technical basis. Their distinguishing features are: a multinational share capital and a multinational management core. Most modern TNCs belong to the first type,since they are controlled by representatives of one state. There are not many multinational firms. For example, the Anglo-Dutch oil refinery Royal Dutch Shell and the chemical concern Unilever.

International cooperative unions, consortiums created to solve certain problems can be placed in a separate group.

Classification of corporations

Depending on the scale of activity and annual turnover, small TNCs (3-4 foreign branches) and large TNCs (tens and hundreds of branches in different countries) are distinguished.

• Horizontal-integrated TNCs have subsidiaries in several countries and produce mostly the same or similar products (e.g. US auto companies or the fast food system).
• TNCs with vertical integration unite subsidiaries with one owner, responsible for all stages of production of the final product supplied to the divisions of the same company located in other countries.
• Separate (diversified) TNCs are enterprises that produce a variety of products: from food to cosmetics. They are managed by divisions located in different countries, not united horizontally or vertically.

A special kind of TNCs are transnational banks (TNBs), lending to businesses and organizing international cash payments. Dominating the state and international financial markets, they can have a serious impact on the mutual parity of national currencies.

Markets

Transnational corporations account for half of all industrial production in the world, 70% of world trade, 40% of which is the internal trade of individual TNCs. Many transnational corporations operate in the oil, chemical, automotive, and electronic industries. In these areas, creating international production associations is quite easy and profitable. TNCs are monopolies in many industries that take control of world markets:

• 90% wheat, corn, coffee, tobacco, timber, iron ore market;
• 85% bauxite and copper market share;
• 80% tea market and tin market;
• 75% - oil, rubber and banana market.

TNK is an enterprise that is not always engaged only in production, like Siemens, for example, these are international banks, pension and investment funds, audit and insurance companies.

TNK ratings

The rating of global giants from 62 countries that set the tone for the global economy was published in the American Forbes magazine. It included 515 TNCs from the USA, 210 Japanese, 113 Chinese, 56 Indian, 62 Canadian corporations. The first place was taken by the American bank JP Morgan Chase. The remaining places in the top five were shared between General Electric, Bank of America, Exxon Mobil and ICBC.

The second most important ranking was from the Partnership for a New American Economy. The list was topped by the retail chain Wal-Mart Stores from the United States, whose consolidated revenuecomparable to the German budget. Second and third places went to Royal Dutch Shell from the Netherlands and Exxon Mobil. Apple, AT&T, Google, Colgate, Budweiser, eBay, IBM, General Electric and McDonald´s got high ranking lines. According to experts, TNCs from this rating have created more than 10 million jobs, and their total income is trillions of dollars.

Russia in the ranking of giants

In the Forbes rating of TNKs, the Russian gas monopoly Gazprom was ranked 16th, taking the leading position among companies related to the oil and gas sector. According to the American magazine, Gazprom's profit is almost $25 billion, and its market value is $133.6 billion. Lukoil and Rosneft received only 69th and 77th places among 115 companies from all over the world in the world ranking.

The international role of large corporations

Transnational corporations play one of the leading roles in globalization in world-class R&D. The largest corporations account for more than 80% of registered patents and research finance. More than 70 million people work at TNK enterprises today, annually producing products worth almost $1 trillion. In related industries, thanks to international companies, 150 million people are provided with jobs.

TNCs and state governments

Today, TNCs in many countries of the world influence all spheres of public life without exception and have monopoly power. There are quite a fewcorporations, in terms of turnover exceeding the GDP of many countries, top managers of such companies usually do business directly with governments of states. Powerful TNCs often evade any control, including at the political and economic levels. Experts and analysts have repeatedly expressed concerns about the possibility of negative pressure from TNCs on small countries. There have been cases where corporate leaders sought support from governments, even if the actions of the companies had serious consequences for the people and the well-being of the country. For example, in 2003, Halliburton (USA) won a $680 million contract to rebuild infrastructure in Iraq.

Russian TNCs

The emergence of large Russian corporations that occupy leading positions in the world market over the past 15 years was the result of the development of the Russian economy.

In the early 2000s, favorable conditions emerged for several Russian companies to enter the global market. A TNC is a corporation whose parent company is owned by the capital of one country, owning foreign assets. The following enterprises meet the criteria of TNK in the Russian Federation: NLMK, RAO UES of Russia, MTS, VimpelCom, TNK-BP, Alrosa. TNK is Rosneft, Lukoil, Evrazholding, Gazprom, Rusal, Severstal, Sual, MMC Norilsk Nickel. All of the above companies have assets abroad and are expanding the global market.

It is impossible not to note the solid Russian banks that own foreign assets. These include Vneshtorgbank, Sberbank,Alfa-bank, MDM-bank. According to UNCTAD, transport companies such as Novoship, Primorskoye Shipping Company and Far Eastern Shipping Company can also be classified as Russian TNCs.