Among the hundreds of the largest economies in the world, 52 are transnational corporations, and 48 are states. Today, corporations rule the world. The political lobbying and global influence of TNCs on the economies of many states is so great that they establish the rules of the game not only for competitors, but also for entire states.
TNCs are economies comparable to the size of a single country. Some corporations can rightfully be called state-forming, as they create millions of jobs and have incomes that exceed the GDP of many countries of the world.
What is TNC?
TNK is a company with controlled assets in several countries and operating far beyond the borders of its home country. UN experts studying international corporations since the 1960s have identified three characteristics that are characteristic of transnational corporations:
- the corporation makes decisions through one management center, pursues a coherent policy and implements a single strategy;
- it consists of units located in two or more countries, the legal form and field of activity of which can be diverse;
- individual units in the company are interconnected, affect each other's activities, share knowledge, resources and responsibility.
TNCs are 2/3 of foreign trade, almost half of industrial production, up to 80% of technological innovations. It is quite natural that a significant share of goods in the market (25%) is produced by several transnational corporations. For example, Nestle sells L'Oreal cosmetics and Diesel jeans. A wide range of products, from Dove soap to Klondike chocolate, is owned by Unilever.
Up to 1/3 of the products of international corporations refers to the production of foreign structures as part of TNCs, the sales volume of which has already exceeded world exports. American and foreign transnational corporations carry out 50% of export operations in the USA. In UK exports, corporations account for up to 80%, and Singapore exports up to 90%.
The first international companies
The first international organization, a number of researchers consider the Templar Order, founded in the XII century and leading, inter alia, international financial activity. The very first TNCs are the British East India and the Dutch East India Companies, founded in 1600 and 1602, respectively. The Dutch company was also the first joint-stock company. The 17th-century megacorporations already had authority at the state level, waged military operations, minted a coin, created colonies and took part in resolving issues of high politics.
Transnational corporations in a more modern form arose in the second half of the 19th century and mined and sold minerals. In the 20th century, their field of activity expanded significantly, reaching global proportions thanks to the development of cooperation and the general division of labor. Specialization of production contributed to an increase in its volume.
TNCs and MNCs
By nationality, large corporations are usually divided into transnational (TNCs) and multinational firms (MNCs).
- A multinational corporation is a corporation with foreign assets that conducts production and sales activities outside the borders of the "native" country (where their headquarters are located). In the United States, a corporation is most often understood as a joint-stock company, and since many modern multinationals appeared as a result of international American expansion, this term was included in their name. TNCs operate in various countries through branches, subsidiaries and other forms of organizations. The branches have almost independent production and sales divisions, carry out research and development, etc. In general, the branches represent a huge production complex. Company shares, as a rule, belong only to representatives of the parent country.
- MNCs are multinational firms, business associations from different states on a production and scientific-technical basis. Their distinguishing features are: multinational equity and a multinational leadership core. Most modern transnational corporations belong to the first type, as they are managed by representatives of one state. There are not many multinational firms. For example, the Anglo-Dutch oil refining concern Royal Dutch Shell and the chemical concern Unilever.
In a separate group, international cooperative unions and consortia created to solve certain problems can be placed.
Small TNCs (3-4 foreign branches) and large TNCs (tens and hundreds of branches in different countries) are distinguished depending on the scale of activity and annual turnover.
- TNCs with horizontal integration have divisions in several countries and produce mainly the same or similar products (for example, US automobile companies or the fast food system).
- TNCs with vertical integration are united by branches with one owner, which are responsible for all stages of production of the final product delivered to divisions of the same company located in other countries.
- Separate (diversified) TNCs are enterprises that produce a variety of products: from food to cosmetics. They are managed by units located in different countries that are not combined horizontally or vertically.
A special kind of multinational corporation is multinational banks (TNB), lending to business and organizing international monetary settlements. Dominant in state and international financial markets, they can have a serious impact on the mutual parity of national currencies.
Transnational corporations account for half of all industrial production in the world, 70% of world trade, 40% of which is the domestic trade of individual TNCs. Many multinational corporations operate in the field of oil, chemical industry, automotive, electronics. In these areas, creating international production associations is quite easy and profitable. TNCs are monopolies in many industries that take control of global markets:
- 90% of the wheat, corn, coffee, tobacco, forest, iron ore markets;
- 85% of the bauxite and copper mining market;
- 80% of the tea and tin markets;
- 75% of the oil, rubber and banana markets.
TNK is a company that does not always deal only with production, such as Siemens, these are international banks, pension and investment funds, audit and insurance companies.
The ranking of global global giants from 62 countries that set the tone for the global economy was published in the American magazine Forbes. It includes 515 TNCs from the USA, 210 Japanese, 113 Chinese, 56 Indian, 62 Canadian corporations. First place went to the American bank JP Morgan Chase. The remaining places in the top five were divided among themselves by General Electric, Bank of America, Exxon Mobil and ICBC.
The second most important ranking was the ranking from Partnership for a New American Economy. The United States retail chain Wal-Mart Stores topped the list, with consolidated revenue comparable to Germany’s budget. Royal Dutch Shell from Holland and Exxon Mobil got the second and third places. High ranking ranks went to Apple, AT&T, Google, Colgate, Budweiser, eBay, IBM, General Electric and McDonald´s. According to experts, TNCs from this rating created more than 10 million jobs, and their total income is trillions of dollars.
Russia in the ranking of giants
In the Forbes TNC rating, the Russian gas monopolist Gazprom got the 16th place, took the leading position among companies belonging to the oil and gas sector. According to the American magazine, Gazprom’s profit is almost $ 25 billion, and its market value is $ 133.6 billion. Lukoil and Rosneft in the world ranking received only 69th and 77th places among 115 companies from around the world .
The international role of large corporations
Transnational corporations play one of the leading roles in globalization in world-class R&D. The largest corporations account for more than 80% of registered patents and finances for research. Today, more than 70 million people work at TNK enterprises, annually producing products worth almost $ 1 trillion. Thanks to international companies, 150 million people have been provided jobs in related industries.
TNCs and governments
Today, TNCs in many countries of the world affect all spheres of public life, without exception, and have monopoly power. There are many corporations in terms of turnover exceeding the GDP of many countries, top managers of such companies usually deal directly with state governments. Powerful TNCs often shy away from any control, including at the political and economic levels. Experts and analysts have repeatedly expressed concern about the possibility of negative pressure from TNCs on small countries. There are cases when corporate executives sought support from governments, even if the actions of the companies had serious consequences for the people and welfare of the country. For example, in 2003, Halliburton (USA) won the contract for the restoration of infrastructure in Iraq for $ 680 million.
The emergence of large Russian corporations that occupy leading positions in the global market over the past 15 years has been the result of the development of the Russian economy.
In the early 2000s, favorable conditions were formed for several Russian companies to enter the global market. TNK is a corporation whose parent company is owned by the capital of one country, owning foreign assets. The following enterprises are suitable for the criteria of TNCs in the Russian Federation: NLMK, RAO UES of Russia, MTS, Vimpelcom, TNK-BP, Alrosa. TNCs are Rosneft, Lukoil, Evrazholding, Gazprom, Rusal, Severstal, Sual, MMC Norilsk Nickel. All of the above companies have assets abroad and are expanding the global market.
It should be noted and respectable Russian banks that own foreign assets. These include Vneshtorgbank, Sberbank, Alfa Bank, MDM Bank. According to UNCTAD, transport companies, such as Novoship, Primorsk Shipping Company and Far Eastern Shipping Company, can also be classified as Russian TNCs.