2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Trade originated in ancient times. With the development of mankind, practically nothing has changed, except, of course, the market for goods and services itself. If earlier production was based on a certain territory, now buying land from other countries for the construction of their own plants and factories is quite an ordinary phenomenon. This is being done (and quite actively) not only by European countries, but also by the Russian Federation. Actually, about which country the largest TNCs in the world will be discussed.
What is a multinational corporation?
TNK is originally a company with production units in several countries. The role of such corporations in the process of globalization is undoubtedly enormous. TNCs can act not only as manufacturing companies, but also as telecommunications, insurance and audit companies. In addition, this includes transnational banks and pension funds.
The budget that some of the largest TNCs in the world have is so large that it exceeds the financial condition of some countries. So, for example, the net annual profit of General Electric Corporation is just over $13 billion, which is almost 34 times more than the annual budget of Andorra with a population of 85.4 thousand people, or slightly less than Iceland's 2015 GDP. Corporations also play a big role in science, TNCs account for about 80% of the financial supply of research and development work and about the same number of registered patents.
Multinational corporations: why internationality?
The emergence of transnational corporations, firstly, is built on the possibility of obtaining super profits. This explains the creation of international production. Due to the presence of factories and plants in the territory of another country, you can save significantly:
- on the cost of natural resources (if the country that owns the transnational corporation is not sufficiently provided with a certain type of raw material, then building a subsidiary on foreign territory can solve this problem);
- in the tax area (due to differences in economic terms, it is sometimes cheaper to conduct production as if "out of home");
- on wages for workers (if, for example, Germans and Americans value their work quite highly, then the same natives of Mexico agree to work for relatively small remuneration).
There are plenty of reasons for corporations to be international. It is on these principles that the largest TNCs in the world are based.
Types of transnational corporations
There are three types of TNCs: international, multinational and global company.
The first type is a corporation that creates its branches in other countries, but these structural elements are isolated. That is, they have their own production and scientific developments. However, it is the parent company that has absolute priority.
The second type acts as a link among national companies around the world. Actually, this idea explains to a greater extent what a TNC is. Each company that is part of the MNC has independence in conducting any operations.
The third type is presented as a characteristic of the largest TNCs in the world. When following this option, the corporation either provides a patented design for production in conjunction with other countries, or produces elements of the product, and other plants are already involved in the assembly. Since the 80s this species has been flourishing. The largest TNCs in the world still follow this order.
TNC Governance Mechanism
The main trends in corporate governance are two opposite options: centralization and decentralization.
The first option represents the desire of TNCs to create a single leading center. It must be located in the country to which the corporation belongs. Other departments leadits activities only with the permission of the parent company.
The second option allows you to make your own decisions. Leading centers are created in each branch. Subsidiaries are generally fairly independent of other corporate divisions.
Sources of effective multinational corporations
Comparative characteristics of the largest TNCs in the world, the practical benefits of which are undeniable, says the following: the use of raw materials from other countries, as well as its financial capabilities, allows you to expand, capture or retain the sales market. In addition, efficient operation is due to the proximity of foreign consumers. Awareness of the conduct of research trials, as well as their results, has a very good effect on the development of transnational corporations.
In addition to these principles, the comparative characteristics of the largest TNCs in the world makes it clear that activities in several countries at the same time help to strengthen competitiveness and improve relations with partner countries.
Statistics on the value of foreign assets
The main areas of activity of today's corporations are electronics, automotive, oil production and refining. The largest TNCs in the world often invest in non-core assets in order to be sustainable in the global market. In the list by the value of foreign assets, the first places are given to the following corporations:
- General Electric. Country - USA, type of activity -electronics. The share of foreign assets is 30%.
- "Royal Dutch-Shell". Country - the Netherlands - Great Britain, occupation - oil industry. The share of foreign assets is 66%.
- "Ford". Country - USA, occupation - automotive industry. The share of foreign assets is 30%.
In addition to the listed companies, there are also a lot of TNCs using this development method to achieve sustainability.
List of corporations
An important indicator of the company's success in the international market is the amount of sales realized in other countries. The largest TNCs in the world, the list of which is presented below, was analyzed according to this principle. Also, in addition to the type of activity and the owner country, the revenue of corporations is also included in the points:
- Walmart (retail sector, USA) – 482, 130.
- State Grid Corporation of China (power industry, China) – 329, 601.
- China National Petroleum (oil and gas sector, China) – 299, 271.
- Sinopec Groupe (petrochemical industry, China) – 294, 344.
- Royal Dutch Shell (oil and gas sector, Netherlands - UK) - 272, 156.
Not all TNCs are listed here. But as of 2016, these companies make up the top five.
TNK in Russia
Ever since the end of the 19th century, Russia has been trying to get involved in the activities of the world's transnational corporations. But the constant inhibition due to revolutions and political reshuffles did not allow this process to be carried out fully. It is for this reason that the services and products of foreign companies have dominated in the country to this day. Only relatively recently has Russia started creating its own financial-industrial groups (FIGs), which are very similar to TNCs.
Comparative characteristics of the largest TNCs in the world only at the end of the 20th century were supplemented by a Russian representative, namely: in 1996, the rating published by the Financial Times was presented by Gazprom.
At the moment, the development of Russian corporations is slower than in other countries. For more successful advancement on the world market, Russia needs to combine efforts to improve its own financial-industrial groups together with friendly states.
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