Transnational Corporations (TNCs)

1. Transnational Corporations (TNCs) Phạm Thị Huỳnh Như BABAIU10103 Lê Thị Như Thuỷ BABAIU10026 Nguyễn Bá Hải Bằng BABAWE10531 Hồ Việt Dũng BABAIU10013 Lê Chung Thanh Thảo BAIU09495 Lê Hoàng Anh Thư BABAIU10170 Lâm Cẩm Ngọc BABAIU10184 Hoàng Trần Đức Hồng BABANS10657 Trần Ngọc Hiền BABAIU10209 Nguyễn Phương Thảo BABAIU10217

2. OUTLINE • History of TNCs • The Organizational Structure • The rises of TNCs in the 21st century • Example

3. Transnational corporation A transnational corporation (TNC) is a huge company that does business in several countries.

4. Examples: • Nestlé • Unilever • Cadbury-Schweppes • BP-Amoco

5. Brief history of TNCs From the Origins to the Second World War

6. During the 19th and early 20th centuries • The search for resources including minerals, petroleum, and foodstuffs. For example: • The US agribusiness giant United Fruit Company: controlled 90 per cent of US banana imports by 1899. • Royal Dutch/Shell accounted for 20 per cent of Russia's total oil production. • In Japan: Mitsui and Mitsubishi – “financial clique”

7. 1945 to the Present

8. Proliferation of TNCs

9. The wealth of TNCs • Top 100 firms which in 1992 had US$3.4 trillion in global assets. • The top 100 TNCs also account for about one-third of the combined outward foreign direct investment (FDI) of their countries of origin. • Between 1988 and 1993, worldwide FDI stocks: grew from US$1.1 to US$2.1 trillion

10. TNCs’ investment in the less-industrialized world in the mid-1980s

11. Foreign investment into less-industrialized nations

12. The Organizational Structure of a Multinational Company This is most important tasks for top managers of any company. “If everyone in a company is «in place» and knows his duties, if there are rules of interaction between departments, company's activities will remind a tuned mechanism which works with maximum results and minimal costs.” “Michael Newman”

13. Organizational structure • A scheme consisting of units and individual officers of the company. • Located by levels of importance and responsibility. • Depending on the stage of company development require different approaches to build the organizational structure.

14. Subsidiary Model • The most basic structural models • The subsidiaries are self-contained units with their own operations, finance and human resource functions. • Allowing them to respond to local competitive conditions and develop locally responsive strategies

15. Subsidiary Model • The major disadvantage • The decentralization of strategic decisions that makes it difficult for a unified approach to counter global competitive attacks.

16. Product Division • Each product has its own division that is responsible for the production, marketing, finance and the overall strategy of that particular product globally • Allows the multinational company to weed out product divisions that are not successful

17. Product Division • The major disadvantage • The lack of integral networks that may increase duplication of efforts across countries.

18. Area Division • Each geographical region is responsible for all the products sold within its region. • All the functional units for that particular region namely finance, operations and human resources are under the geographical region responsibility • Allows the company to evaluate the geographical markets that are most profitable.

19. Area Division • The major disadvantage • Communication problems, internal conflicts and duplication of costs

20. Functional Structure • Functions such as finance, operations, marketing and human resources determine the structure of the multinational company • All the production personnel globally for a company work under the parameters set by the production department

21. Functional Structure • The advantage • There is greater specialization within departments and more standardized processes across the global network. • The disadvantages • The lack of inter department communication and networking that contributes to more rigidity within the organization.

22. Matrix Structure • Overlap between the functional and divisional structures. • Dual reporting relationships in which employees report both to the functional manager and the divisional manager. • Involve cross-functional teams from multiple functions such as finance, operations and marketing

23. Matrix Structure • The advantage • There is more cross-functional communication that facilitates innovation  The decisions are also more localized. • The disadvantage • More confusion and power plays because of the dual line of command

24. Transnational network • Evolution of the matrix structure • More on horizontal communication. • Information is now shared centrally • This structure is focused on establishing "knowledge pools" and information networks that allow global integration as well local responsiveness.

25. The rises of TNCs in the 21st Century

26. 1.General view of the Rises of TNCs in the 21st Century: In the 1980s and 1990s In 21st Century • Globalization was largely driven by economies of the developed world • United States, Western Europe and Japan • Large multinational companies headquartered in developing countries • China, Brazil and India • This trend is becoming more pronounced which impacted many developed economies.

27. Exhibit 1: Cross Border Purchases by Developed and Developing Economies

28. Exhibit 2: Cross Border Purchases by Emerging and Transition Economies in Developed Economies

29. Exhibit 1 and 2 show: • The share of cross-border buy-side transactionsby developing economies. • Asian developing countriesbeing the major force for this change.

30. Some major mergers and acquisitions across sectors like oil and gas, mining, automotive and financial services E.g. • The Indian conglomerate Tata Sons' acquisition of UK-based Corus Steel and Jaguar Land Rover • China-based Geely Automotive's takeover of Swedish auto giant Volvo • Mexican cement manufacturer CEMEX's acquisition of Australian cement company Rinker Group.

31. According to the United Nations Conference on Trade and Development (UNCTAD): • There were 80,000 transnational corporations (TNCs) in 2009 • During the last few years, while developed countries accounted for the bulk of the TNCs across the globe, a paradigm shift has been occurring. • The transnationalisation of emerging market firms reflects the maturity in their business processes and their increasing appetite for international growth.

33. The diagram shows the network of the 295 TNCs among the top holders in 21th century

34. 2.Factors driving the rise of TNCs in the emerging markets Exhibit 3: Motivations for Investments for Firms from Emerging Markets

35. Market Seeking • To reduce the risks associated with being overdependent on limited market presence • To increase their market presence as well as achieve economies of scale

36. Market Seeking (cont.) E.g. • In 2006: the China-based TCL Corporation's acquisition of Thompson and the acquisition of US-based IBM's PC business by China's Lenovo • In 2007, the leading Mexico-based cement manufacturer CEMEX gained a controlling stake in Australian counterpart Rinker Group for USD 14.7 billion => CEMEX also expanded its geographic presence in Australia and the Asia Pacific region

37. Resource Seeking • Many enterprises from emerging countries are in search of natural resources across the globe. • They acquire strategic resources worldwide for: oil, minerals and other raw materials => transnational routes also help enterprises internationalize and integrate their production facilities globally.

38. Resource Seeking (cont.) E.g. • In 2006, Brazilian mining giant Vale acquired Canadian-based Inco, the largest nickel mining and processing company, thus expanding its production facilities in North America. • Indian petrochemical giant Reliance Industries Ltd acquired the shale gas assets of US-based Atlas Energy for almost USD 3.5 billion in early 2010 => Reliance now has the first mover advantage in exploring the

39. Efficiency Seeking • Corporations need to operate more efficiently and to increase productivity by vertically or horizontally integrating their processes. • Many firms from the emerging markets are: • Reassessing their internal operations and their roles in the global value chain. • Investing in the developed economies to achieve efficiencies.

40. Efficiency Seeking (cont.) E.g. • In 2006, the acquisition of UK-based Corus Steel by Indian steel manufacturer Tata Steel • Brazilian aircraft manufacturer Embraer acquired aircraft maintenance, repair and operations (MRO) service provider OGMA in Portugal.

41. Transnational horizon: As we see it • Developing markets had a construct to be among the top economies by middle of the 21st century. • In line with their growth ambitions, many of these emerging market firms have expanded their horizons to developed economies and started to take the route of cross-border acquisitions. • Be able to leapfrog the maturity curve => to match the needs of the developed markets in terms of : • Technology and management advancements, • Quality standards and certification, • Most importantly, to overcome the psychological barriers with respect to brand perception.

42. 3. Transnational horizon: As we see it (cont.) E.g. The Asian giants (China and India) along with Latam (Brazil) would dominate the cross-border firm creation scene => lead to a changing landscape of global economics, where there would be a gradual shift of corporate appetite for transnational growth from the developed to the developing markets

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45. Introduction:

46. Functional Structure • The FedEx Corporation is the parent company over all the others, which provide support to all of the other companies : • FedEx Express • FedEx Ground • FedEx Office • FedEx Freight • FedEx Custom Critical • FedEx Trade Networks • FedEx Supply Chain • FedEx Services

47. Details of Functional Structure Units & Logos

50. Area Structure FedEx Express: A wholly owned company of FedEx , which is divided into five global regions: • Asia Pacific (APAC) • Canada • Europe, Middle East, Indian Subcontinent and Africa (EMEA) • Latin American and the Caribbean (LAC) • United States