Transcript TRANSNATIONAL CORPORATION (TNCs)

TRANSNATIONAL
CORPORATION (TNCs)
Nguyen Thuy An
Nguyen Thi Lan Anh
Tran Quoc Vy
Ngo Nguyen Minh Hang
Van Thi Ngoc Dung
Nguyen Tuong Dat
Outline
•TNCs
•TNCs’ Impact
•Compare advantages
•Honda Motor Corporation
Transnational Corporation (TNCs)
Private firms that have established branch operation in
nations foreign to their headquarters’ country
E.g. Wal-Mart, Toyota Motor, Ford Motor …
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.
Foreign direct investment (FDI)
The purchase or construction of factories and other
fixed asset by TNCs
Distribution of FDI
Source: UNCTAD survey.
BRICs dominate the top 5 most attractive economies for FDI
Locational Criterion
 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).
 ….
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)
Comparative advantage of TNC
 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.
HONDA MOTOR
Corporation
Honda
 Established in 24
September 1948.
 Soichiro Honda
(1906-1991)
 Takeo Fujikawa
(1910-1988)
Chairman
CEO
Takanobu Ito
Products
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Automobiles
Motorcycles
Scooters
ATVs
Electrical Generators
Water pumps
Lawn and Garden
Equipments

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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
HONDA - regional competitive
advantages.
IN VIETNAM
 Main product: Motorcycle
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