TRANSNATIONAL CORPORATION (TNCs)

Nguyen Thuy An Nguyen Thi Lan Anh

Tran Quoc Vy Ngo Nguyen Minh Hang

Van Thi Ngoc Dung Nguyen Tuong Dat

•TNCs

•TNCs’ Impact

•Compare advantages

•Honda Motor Corporation

Outline

Private firms that have established branch operation in nations foreign to their headquarters’ country

E.g. Wal-Mart, Toyota Motor, Ford Motor …

Transnational Corporation (TNCs)

Serve domestic market only

Export to overseas market(s) through independent channels (e.g. sales agents)

License foreign manufacturer to produce for overseas market(s)

Establish sales outlet in overseas market(s)

(a) By acquiring local firm

(a) By setting up new facility

Establish production facility overseas

(a) By acquiring local firm

(a) By setting up new facility

TNC- development as a sequential process

Different entry modes used by TNCs

Source: UNCTAD survey.

The purchase or construction of factories and other fixed asset by TNCs

Foreign direct investment (FDI)

Distribution of FDI

Source: UNCTAD survey. BRICs dominate the top 5 most attractive economies

for FDI

For market growth, developing and transition economies

E.g. China, India, Brazil, the Russian Federation, Indonesia, Viet Nam, Poland and Thailand.

For market size, the largest economies are favored, either developed ones (E.g. the United States, Germany and Canada) or emerging ones (E.g. China, the Russian Federation and Brazil).

….

Locational Criterion

Source: UNCTAD survey.

Size and growth of market are the major location determinants

TNCs’ Impact

FACT & FIGURE

62 000 TNCs 900 000 foreign affiliates 56 million workers 19 trillion in sales 1/10 of world GDP 1/3 of world export TNCs become ever-more important in the

globalizing world space economy

1. The direct impact of TNCs is limited to relatively few countries and regions

FDI (foreign direct investment): the investment by TNC to other countries

For developing country: <30% (early of 21st century) 42% (2004)

majority: South, Southeast and East Asia, Latin American and Caribbean

For least developed country: 1%(1994) 5%(2004)

The vast majority of FDI still flows not to the poor or developing worlds but to the rich

1. The direct impact of TNCs is limited to relatively few countries and regions

WHY?TNCs actively engaged in Merge and Acquisition in already developed foreign market areas

HOWEVER in 2004, FDI for developed country declined (<50%

of the peak in 2001) FDI in Asia rose by over 6%

2. The worldwide impact of their consolidation is significant

Focus in few industries: computers, electronics, petroleum and mining, motor vehicle, chemical and pharmaceuticals, etc.

In raw materials: few TNC account for 85% of world trade

World pharmaceutical industry:dominated by just 6 firms

Automobiles producer: 15 firms( early 21st ) 5 or 10 (2015)

Most TNCs operate in a few industries (computers, electronics….)

Some dominate the marketing and distribution of basic and specialized commodities

For example: in raw materials, a few TCNs account for 85% or more of world trade in wheat, maize, coffee…

In manufacturing, pharmaceutical industry is dominated by just six firms

The world’s 15 major automobile producers at the start of the 21st century, it has been predicted, will fall to five or 10 by 2015

Comparative advantage of TNC

TNCs actively exploit the principle of comparative advantage

They produce in that country or region where costs of materials, labor, or other production inputs are minimized

Maintaining operational control and declaring taxes in localities where the economic climate is most favorable

Research and development, accounting, and other corporate activities are placed wherever economical and convenient.

Comparative advantage of TNC

HONDA MOTOR Corporation

Honda

Established in 24 September 1948.

Soichiro Honda (1906-1991)

Takeo Fujikawa (1910-1988)

Chairman

CEO

Takanobu Ito

Products

Automobiles Motorcycles Scooters ATVs Electrical Generators Water pumps Lawn and Garden

Equipments

Tillers Outboard motors Robotics Jets Jet Engines Thin-film solar cells

Corporate Profile and Divisions

Honda is headquartered in Minato, Tokyo, Japan.

Their shares trade on the Tokyo Stock Exchange and the New York Stock Exchange, as well as exchanges in Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, London, Paris and Switzerland.

Honda has also created joint ventures around the world:

Honda Siel Cars and Hero Honda Motorcycles in India Guangzhou Honda and Dongfeng Honda in China Honda Atlas in Pakistan

Assembly Plants

50 Factory in 19 countries around the world. 200.000 employees Total Assets of 124.98 billion USD (FY 2009).

HONDA - regional competitive advantages.

IN US Main product: automobiles

Regional competitive advantages

• Market is large because GDP/person is high.

• Traffic infrastructure is qualify.

• Demand of cars is high.

Regional competitive advantages:

Developed industry with high technology level. Skill labors

IN VIETNAM Main product: Motorcycle

HONDA - regional competitive advantages.

Regional competitive advantages

Large population and GDP/person is quite low Demand of motorcycle is high.

The traffic infrastructure is low quality.

VN economy is just centralized develop in some major region, so the short distance does not require cars.

Regional competitive advantages

Developing country low technology and science infrastructure ; unskilled labors

more relevant to produce motorcycle than automobile.

Thank you for your listening