What is the relation between economy and globalization? / Sangmin Choe

1)

It is well known that business co-operation is the central actor in the discord of globalization. Expanding the base of economic activity unobstructed is recognized as national autonomy, but this is a wrong approach. It will approach economic globalization with five themes.

THE SCALE AND GEOGRAPHICAL DISTRIBUTION OF TRANSNATIONAL CORPORATIONS

Like Hudson's Bay Company and East India Company, the development of profits and corporate activities generated overseas in the past was a part of the early international economy. As essentially colonial and merchant capitalists, they created vast business empires at a world scale. They are ancestors of today’s global trading and service companies. The TNC, which has soared since World War I, presupposes the meaning of 'a firm which has the power to coordinate and control operations in more than one country, even if it does not own them. Most global economic activities are directed to a small number of global companies. TNC is the allegedly ‘placeless’ giants whose operations span the globe and which owe no allegiance to any particular country or community. Very few of even the 100 leading global economy. TNCs can be regarded as ‘global’ corporations in terms of their geographical extent. What they all have in common is that they operate in different political, social and cultural environments. 

WHY (AND HOW) FIRMS ‘TRANSNATIONALIZE’

The reasons for the transnationalization of enterprises can be divided into market-oriented investments and aggregate-orrelated investments. Much of their investment continues to be market-oriented. Market oriented investment is to expand from the domestic market to overseas markets in order to generate profits when the domestic market reaches saturation point. The second set of reasons derives from the fact that the assets that firms need to produce and sell their products and services are also geographically very unevenly distributed and, therefore, may need to be exploited in situ. This is most notably the situation in the case of human resources or assets: In the past, the focus was on physical labor due to differences in manpower costs, but now the focus is on human ability to create additional value. 

There are two major ways in which firms develop transnational activities: one is through what is known as ‘greenfield’ investment; the other is through engagement with other firms, through either merger and acquisition or some form of strategic collaboration. A sequence of TNC development is conducted, there could be exceptions.

GEOGRAPHY MATTERS: THE EMBEDDEDNESS OF TRANSNATIONAL CORPORATIONS

Place and geography still matter fundamentally in the ways in which firms are produced and in how they behave. All businesses, including extensive TNCs, are bound to be affected by the cognitive, cultural, social and political influence of the national home base. Durable national institutions and distinctive ideological traditions still seem to shape and channel crucial corporate decisions. Each country has its own corporate characteristics, divided by continent. It interacts locally with countries that carry out business with identity based on home base  Hence, despite the unquestioned geographical transformations of the world economy, driven at least in part by the expansionary activities of transnational corporations, we are not witnessing the convergence of business-organizational forms towards a single ‘placeless’ type. This is because, over time, and under specific circumstances, societies have tended to develop distinctive ways of organizing their economies, even within the broad, apparently unitary, ideology of capitalism. So There are inherent obstacles to convergence among social systems of production of different societies, this is not to claim that TNCs from a particular national origin are identical.

‘WEBS OF ENTERPRISE’: TRANSNATIONAL PRODUCTION NETWORKS

 

Corporations should be viewed in a complex network, not in a clearly bounded entity. Such networks are being broadened and controlled worldwide. TNCs, therefore, like firms in general, can best be considered as a dense network at the centre of a web of relationships. It has a complex network, internally or externally. Because TNCs are spread around the world, they require sophisticated special networks because they are more difficult to coordinate and control than ordinary companies. Advances in communications and transportation have enabled the TNC to carry out its work in a task-specific, geographical space.TNCs are constantly engaged in processes of restructuring, reorganization and rationalization on complex situations. TNC networks are always in a continuous state of flux. The specific relationships between TNCs as customers and other firms (including other TNCs) as suppliers – both organizationally and geographically – are currently in a state of flux. TNCs are highly dependent on other firms for many of their needs. Some TNCs are globally – or at least regionally – extensive, others are more restricted geographically. In all cases, however, firms in specific places – and, therefore, the places themselves – are increasingly connected into transnational networks. Because regional strategy has many advantages. This is why economic cooperation based in regions such as NAFTA and the EU has emerged.

The power relationships between TNCs and other actors in the global economy.

The basis of TNCs’ power lies in their potential ability to take advantage of geographical differences in the availability and cost of resources and in state policies and to switch and re-switch operations between locations. But TNCs always don't have the advantage. Transnational products are affected in various areas, such as various countries or the WTO. States still have significant power on TNCs, for example to control access to their territories and to define rules of operation. International institutions plays very important role, In some cases they make the operation of transnational networks more feasible through their introduction of codifiable standards. In other cases, they create problems of conformity to an international standard in specific places. TNCs do not always possess the power to get their own way.

2)

What's interesting is that there are only a few companies that can truly be seen as global companies in the midst of economic globalization. This is because it is based on the region to form an economic union or to create a manufacturing chain. These days, I became interested in local contents. This is because many global companies that present attractive lifestyles are based locally. In Seattle, where cafe culture is a lifestyle, Starbucks and in Portland, where diversity and hipster culture were prevalent, Nike was born. This seems to be in line with the text of the TNC's interaction based on its home base and its business. Come to think of it, Japanese companies have their own feeling, American companies have their own feeling, and California companies have their own feeling. This can be seen as local-based DNA being expressed within the company and passed on to consumers.

Also, the fact that only a small number of TNCs monopolize most of the revenue seems to be getting more polarized in the world we live in. I recently read an article that region that make for 50% of the world's GDP only account for 3.5% of the world. Companies are no longer simply selling their products, but forming platforms, which seems to make polarization of money worse. Recently EPIC Games raised the issue of  Apple's platform's app store fees taking 30% of profits. The role of a platform business agent is likely to become more powerful in the future.

3)

Do you think TNCs like Google, Amazon, Facebook, and Apple are anti-trust? There was also a recent hearing in the United States on the issue. 

What do you think about the fee issue that Epic Games raised to Apple? Is this justified? Is 30% percentage reasonable?