What is the relationship between the economy and globalization?

 

Summary

This article explores the role of transnational corporations (TNCs) in economic globalization.

The Scale and Distribution of TNCs

The first section highlights the growth and diversity of TNCs, which can range from large multinational corporations to smaller companies operating in just a few countries. TNCs are primarily based in developed countries, though the number originating from developing nations is steadily rising.

Why and How Companies Expand Across Borders

The second part discusses two main reasons for TNCs to engage in transnational activities:

Market-Oriented Investments – Expanding to new markets due to low demand in the home country.

Asset-Oriented Investments – Accessing natural resources or labor located outside their home region.

TNCs expand either through greenfield investments (establishing new facilities) or by forming partnerships such as mergers, acquisitions, or alliances. Since greenfield investments are risky, many companies opt for collaborative approaches.

Geographical Influence on TNCs

The local environment where a TNC operates continues to shape its activities. Even in a globalized economy, TNCs are still impacted by the culture, politics, and society of their home or host countries.

TNCs as Complex Networks

The article explains that TNCs function through interconnected networks across multiple countries, requiring specialized organizational strategies. Functions are distributed strategically, such as keeping headquarters in the home country while relocating marketing and sales to key markets abroad. This flexibility allows TNCs to adapt to changing global dynamics.

Power Dynamics in the Global Economy

TNCs sometimes exploit their global presence to bypass regulations or laws. However, international institutions and regulatory bodies can counteract this by enforcing global standards. While some argue that TNCs have more power than states, the article refutes this, emphasizing the balancing role of governance structures.

Interesting Points

As a result of the globalization of the economy, new technologies from American multinationals can be quickly marketed in other countries, and these countries will benefit as well. One of the most obvious examples of technology is the development of smartphones, such as the Apple brand. once multinational companies have passed the test of the US market and achieved success, they can soon occupy the markets of other countries and regions. This is the phenomenon of uneven economic development in economic globalization.

Discussion Angle

Why do some people perceive TNCs as being so powerful that they seem untouchable or even above the law? Is it due to their global reach, financial resources, or something else entirely?

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