Transnational or Borderless Corporations

Multinational Corporations

        It is estimated that the top 300 largest Multinational Corporations, otherwise known as Transnational or Borderless Corporations, own at least 1/4th of the world's assets equating to roughly $5 trillion  US. These corporations tend to dominate markets that are condensed to just a small amount of firms and are found worldwide but commonly base their head of operations in North America, Western Europe, or Japan. There are many different types of TNCs though the more popularly known corporations include car manufacturers, oil companies, and food processing firms. The goal of this analysis is to define a multinational corporation, identify common TNCs seen around the world today, and get a look at their structure as well as how they operate and what they do in order to continue staying on top.

        The earliest source of a TNC can be traced back to the 16th century when the British East Trading Company began to promote trade and industry in their newly acquired territories - India, Africa, and the Americas. While this was an extremely primitive organization, it marked the beginning of worldwide commerce. It reemerged later in the 19th century with the introduction of the industrial revolution allowing for the development of bigger factories, better manufacturing plants, and faster shipping where it continued to spread throughout the known world. Companies began to expand, buy out the competition, and make alliances in order to grow and increase profits like never before. When Europe entered its first two world wars and corporate investments slowed to a crawl, US TNCs continued expanding and dominating foreign investments (Greer, 2000).

        As many have come to understand, a TNC is the next logical step in firm evolution following a large-sized corporation. From the creation of a smaller firm, a larger corporation, to even a multiconglomerate, a corporation can continue expanding internationally but not necessarily in that order. No matter what product a company is supplying, if there is a demand for it on an international scale, a business can fill it with the help of a subsidiary. This subsidiary is a business that is controlled by another company, its parent, that owns at least 50% of its voting stock. The parent company is usually found in its headquarter state. Together they come to fit the definition of a multinational corporation so long as sales made outside of its headquarters state equate to 25% or more of its total sales. Corporations are free to purchase other businesses and aren't limited to expansion alone. For instance, the Fiat group owns the majority of shares in Chrysler and has since made it its subsidiary (Cromwell, 2014).

        Transnational Corporations with subsidiaries in different countries have many different advantages such as gaining access to larger markets and being able to take advantage of productive costs. Additionally, countries with a higher GDP have more expensive labor therefore as a company spreads, it gains access to cheaper labor at a lower wage. Continually, many other different divisions can be established such as marketing and R&D in countries that are better suited for these types of employees thus contributing to greater company efficiency. Finally, trade barriers of some nations that set boundaries for foreign goods can be avoided (Cromwell, 2014).

        Unfortunately, there has been some criticism of multinational corporations. While it is the next logic step in corporation evolution, it has been severely hurting individuals and global wages. By expanding to other countries, jobs in the original country may decrease as multinationals are primarily interested in lower wages. Moreover, as multinationals employ a lot of individuals, they have to deal with unions and other government agencies. If negotiations with unions were too demanding for the corporation in question, the corporation could merely move to another country and start all over from the beginning. This completely defeats the purpose of a union altogether giving the multinational a severe advantage in what they deem fair over working conditions and wages. To put things bluntly, the company could potentially gain more power than the government (Cromwell, 2014).