Have you ever wondered or wondered about ” what is a transnational company ?”. In the following article we will explain everything about the concept, operations and role of this type of company. Please refer to it!
What is a transnational company?
Transnational companies (English: Transational Corporations, abbreviated: TNCs) are companies that have their main branch in a certain country and are registered as a company of that country, but based on popularity or resources and capabilities have overcome barriers and have branches in more than 1 country.
This type of company is a very fundamental part of the global economy, because they are a strong trading power in different regions around the world, as well as they can supply not only products products or services but also provide good capital for the state-owned economy.
What are the characteristics of transnational companies?
Besides wondering about the concept of ” what is a transnational company ?”, many people are still unclear about the specific characteristics of these companies. There are many characteristics that this type of transnational company possesses, but we will mention some of the most important ones:
Transnational companies spread internationally, with branches in many different parts of the world. Proprietor entrepreneurs often bring products or services to practically any territory, opening new branches and even on several continents.
Most of the time, companies use products as commodities, which often have very large economic flows, selling significant quantities globally.
Due to their great success, multinational companies are often companies with extremely large capital to be able to own high-end machinery, products, or even personnel.
Multinational companies often use new technology, industrial organization, and strong marketing and advertising because this can make the company known outside their place of origin.
Are strong investors in research and development for society, because of all the interactions the company has with different types of countries and cultures.
Usually have full knowledge of the structure and functioning of the political regime of the country in which they are established, because if they do not meet this requirement, they will not be able to establish markets in these places beyond their reach.
Transnational companies often grow through mergers and acquisitions.
Types of transnational companies
Below, we will share how to classify multinational companies according to structure and level of hierarchy:
According to structure
Horizontally integrated corporations: The idea of this type of company is a company with product or service standards. And that is governed solely and exclusively by that principle, regardless of where that company is located.
Vertically integrated companies: This type of company is a company with a master branch, which usually has clear standards and where its products are manufactured, and from where they are distributed. to other branches. These affiliated companies primarily produce intermediate goods in certain countries, serving as a source of supply for final production in other countries.
Diversified corporations: These are a combination of the two types mentioned above, with similar functions to both.
According to the level of hierarchy
According to the level of hierarchy, transnational companies are classified as follows:
Ethnocentric: Focuses on operations in the country of origin then only operates basically at branches in other countries.
Polycentric: The transnational company of this type strives not only to have a strict approach but also to maintain its roots, transferring a greater degree of freedom to its subsidiaries, allowing enough freedom to see yourself as different.
Geocentric: This type of company often takes full advantage of freedom, so that each branch has its own business policy, in which each subsidiary is responsible for each of its own decisions, although the person always appears. is currently the main company.
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What is the role of transnational companies?
Through the above information, we have found the answer to the question “what is a transnational company” . Next we will refer to the roles of this type of company below:
Transnational companies have promoted the globalization of production and capital. Furthermore, strongly promote a deeper division of international labor, rely on each other in economic life, and promote rapid development of international trade.
Spreading science, technology and management experience worldwide, creating a large space to learn and develop production forces.
Dominate the global market, export capital and goods on a large scale, earn a lot of foreign currency, develop domestic strength, and strengthen the control of monopoly capital on a global scale.
Creating great opportunities and challenges for developing countries.
Strong impact on the financial and monetary sectors. TNCs manipulate huge international credit capital sources, form large currency markets, become the largest foreign currency traders and the main force promoting capital circulation around the world.
Impact of multinational companies on the Vietnamese economy
Multinational companies are increasingly having a positive impact on the cause of reform and innovation in the Vietnamese economy. As follows:
The presence of transnational companies means providing an important source of capital for the country’s industrialization.
Actively contribute in implementing economic restructuring according to the requirements of industrialization and modernization of the country.
Actively participate in maintaining high and stable growth for the economy, expanding exports and increasing budget revenue.
Create jobs for a large number of workers, and at the same time participate in developing human resources for the country
It is an important factor promoting Vietnam’s transition to an open market economy and international integration.
Types of transnational companies
There are two main ways to classify multinational companies:
According to its structure
Horizontally integrated corporations: The idea of this type of company is a company with product or service standards. And that is governed solely and completely by that principle, no matter where you are.
Vertically integrated companies: The idea of this type of company is that a company has a type of main branch, which usually has a standard and where its products are manufactured, and from there, they are divided distributed to other branches. They mainly produce intermediate goods in certain countries, which serve as a source of supply for final production in other countries.
Diversified corporations: They are a combination of the two types mentioned above, with similar functions to both.
An example of this type of company
McDonald’s, Coca-Cola, Company, BHP Billiton and Mercadona.
Timex, General Motors, Adidas and Nutella.
Alstom; Altria Corporation; Novartis and Samsung.
According to its level of hierarchy
These companies are classified as follows:
Ethnocentric: Focuses operations in its country of origin, then operates essentially only in branches in other countries.
Multicenter: A little different from the previous approach, trying not to have just one strict approach.
However, it has always maintained its roots, transferring a greater degree of freedom to its subsidiaries, allowing it enough freedom to consider itself different, but it is not a product or service. completely different service.
Geocentric: Finally, this type of company takes full advantage of freedom, so that each branch has its own business policy, in which each subsidiary is responsible for each of its decisions, although the person always appears is currently the main company.
The importance of transnational companies
We all know what transnational corporations are, which are amazing examples of how high a company’s ambitions can be to market in different parts of the world and become a market monster.
We all know Mc Donald’s, Nutella, Samsung, iPhone, Toyota, Niisan and every entrepreneur, without a doubt, intends to go as far as them.
Thanks to this type of company, it is possible to expand the marketing and distribution of a product in country “X” and distribute it to another country, so that more users can benefit from it. Form of globalization, so we can access different products without having to move to another place.
Frequently asked questions about transnational companies?
What are the characteristics of branches of transnational companies?
Its affiliates are subject to significant environmental pressures from competitors, customers, suppliers, financial institutions, and the government, both domestically and internationally.
Their affiliates use common resources, which include physical assets, patents, trademarks, information, and human resources.
The branches of TNCs are linked together by a common strategic mission
Current status of global company development
Develop more branches
Enhance international trade activities
Attract and effectively use direct investment, increase foreign direct investment (FDI)
Invest in human resource development and employment
Research, development, and technology transfer
Factors affecting the change of TNCs
Restrictions due to protectionism of some countries
Strong development of science and technology
Financial and economic crises
Competition between TNCs
Above are shares about “what is a transnational company?”, “what is a tnc?” as well as the characteristics, role and impact of this type of company on the economy. Hopefully, through this article from our reputable law firm, you will have basic knowledge about this type of company.