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Economics

Study Notes

Transnational businesses and globalisation

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Transnational businesses (TNCs) base their manufacturing, assembly, research and retail operations in a number of countries.

The importance of transnational businesses

Many TNCs have become synonymous with globalisation such as Nike, Apple, Wal-Mart, Uber, Amazon, Google and Samsung.

For example, Google has offices in more than 60 countries

The biggest 500 TNCs together account for nearly 70% of world trade.

TNCs are a key driver of globalisation because they have been re-locating manufacturing to countries with relatively lower unit labour costs in order to increase profits and returns for shareholders.

For example, Volkswagen, Toyota, Nissan and General Motors all have bases in Mexico which has helped this country to build a comparative advantage in manufacturing and then exporting vehicles within the NAFTA free trade area (Mexico, USA and Canada)

Suggested reading:

Guardian articles on the global economy: https://www.theguardian.com/business/global-economy

Fortune 500 Global Companies (2018 edition) http://fortune.com/global500/list/

Transnational businesses from emerging countries

There are many TNCs from emerging/developing countries. TNCs from emerging market countries now account for 30% of the global Fortune 500 (in 2018) compared to only 7% in 2005According to Forbes Magazine, by 2022, emerging market countries will account for over 80% of the global population, and 40% of global GDP.

Here are some examples of major transnational corporations from leading emerging market countries:

  • Sinopec Group - China Petrochemical Corporation is a petroleum and petrochemical company operating in China and abroad.
  • China Mobile is in the top ten consumer brands in the world
  • China National Petroleum was ranked 4th in the Fortune 500 index in 2017
  • Alibaba has expanded to be the biggest global online retailer. It is known as the Amazon of China!
  • The Tata Group conglomerate from India has made significant investments in Western economies e.g. Jaguar Land Rover
  • State Bank of India has 190 foreign offices in over 36 countries that primarily focus on India-related business
  • Infosys from India is one of the world’s biggest information system businesses employing over 160,000 people worldwide
  • Chinese car-maker Geely bought Swedish firm Volvo in 2010 for $1.8bn and took a 49.5% stake in Malaysian car-maker Proton (including the Lotus brand) in 2017
  • China’s Huawei Technologies is a competitor to Samsung & Apple
Huawei's share of smartphone shipments worldwide from 1st quarter 2012 to 4th quarter 2018

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