[Reading 4] Economic globalization

 Summary

There is no doubt that the transnational corporations (TNC) are currently central to the global economy. Previously, TNC were mainly based in Western Europe and the United States, but now TNC in major developing countries are also increasing. This reveals that the diversity of the TNC is increasing. 

TNC are basically market oriented. This is because TNC are pushing beyond regional limits to other countries to expand their markets. On the other hand, there are asset-oriented investments. Typical example is that it has moved to other countries for the supply of natural resources. In addition, TNC also settles in other countries for human resources. Mainly, enterprises in developed countries take the way they use cheap labor in developing countries. 

There are several ways that TNC takes when it makes inroads abroad. First of all, there is a new way to build factories, research facilities, etc. called Greenfield Investment. However, it is universally preferred to merge or acquire a company. Another universal method is strategic collaboration. Corporate cooperation can combine their capabilities in a mutually beneficial way. The proliferation of alliances has greatly increased the complexity and diversity of TNC operations in the global economy. 

TNC are basically more complex in coordination and control than companies established in a country. In addition, TNC are more exposed to the regulatory methods each country has because they are engaged in economic activities in various countries. Thus, TNC can be constrained by freedom of action. TNC can be powerful, but it has no absolute power.

Interesting point

As can be seen from the beginning of TNC, which has been a trading company in Europe since the 15th century, such as the East India Company and Hudson Bay Company, it reminds me of the West's use of markets and cheap labor in developing countries. In addition, since I saw news that South Korean companies are building factories in Southeast Asia to use cheap labor, TNC's use of human resources reminds me of a consumer goods industry that anyone can easily make without knowledge. However, recently, the availability of highly educated, highly skilled and highly motivated workers has gradually increased.

A typical example is India or Indonesia. India is already the center of the IT industry, as everyone knows. Recently, Indonesia is emerging as a base for the next-generation global technology industry. This year, four U.S. tech firms -- Google, Microsoft, Facebook and PayPal -- invested in private technology companies worth more than $1 billion in Indonesia. This is because it is the best market (190 million people) in itself and a stepping stone for the Southeast Asian market. In addition, when combined with relatively low costs, this attraction is much enhanced. 

Discussion

Cases like India and Indonesia appear to be positive examples of TNC on the surface. However, in practice, it can be seen as a huge capital encroaching on a market. I wonder what other people think about this. What are the ways to save the positive side of TNC and reduce the negative?