TYPES OF TNCS AND METHODS OF THEIR OPERATING ACTIVITIES AT INTERNATIONAL MARKETS

Курсовая работа на английском языке по международному менеджменту. В работе разобраны типы ТНК и их деятельность на международных рынках.КР была защищена на отлично в ИНЖЭКОНе. ...

CONTENT
INTRODUCTION………………………………………………………………… 3
PART 1. Theoretical aspects of TNCs ………………………………………….... 5
1.1. Definition and essence of TNCs………………............................................... 5
1.2. History of TNCs......................................…………………………................. 9
1.3. Evolution of organizational forms and models of TNCs’ economic activities. 11
1.4 Structure and classification of TNCs…………………………………………. 15
PART 2. TNCs’ activity at international markets………………………………… 18
2.1. Motives for international activities and kinds of TNCs operations...………... 18
2.2. Mergers and Acquisitions ……………………………………………………. 22
2.3. Regulation of the international corporations’ activities……………………… 24
2.4. Consequences of TNCs’ actions …………………………….......................... 25
CONCLUSION ……………………………….…………….................................. 27
REFERENCES………………………. ……….…………….................................. 29

International corporations are an essential element of the global economy, international trade and international economic relations. Their rapid development at last dedicates reflects a sharpening of international competition and deepening international division of labor. One of the most important kinds of international corporations is Transnational Corporations (TNCs).
On the one hand TNCs are the product of the rapidly developing international economic relations and on the other hand they are themselves a powerful mechanism of influence on them. Transnational corporations form the basic relationships established alters their shape actively affecting on international economic relations.
Modern TNCs created international production in addition to the existing international exchange of goo ds and services, corresponding to international services sector and international financial sector, promoted the transformation of mainly local (cross-country ,regional) international economic relations to global TNCs, turned the world economy into the international production, provided NTP development in all its areas: technical level and product quality, production efficiency, improved forms management, enterprise management. Importance of TNCs in the development of the global world economy systematically increases over the past 50 years.
...

TNCs integration occurs.Their strategy was characterized by aggressiveness and innovative dynamism, a departure from the industry-specific structure, the constant improvement of internal corporate structure aimed at gaining key positions in global economic production and sales.EVOLUTION OF ORGANIZATIONAL FORMS AND MODELS OF TNCS’ ECONOMIC ACTIVITIES Organizational and economic forms and models of Transnational Corporations are varied due to the history and a particular economic system of a country. These models of Transnational Corporations replace each other or they exist in different countries at the same time.Let us see how the forms and models of TNCs evolved:In forties-fifties years there were such TNCs as syndicates, cartels and first trusts by its organizational and economic formsand mechanisms of functioning.Cartel – an association of independent industrial enterprises which produce the same types of products and which is organized to achieve monopoly control of a particular market. A Membership is voluntary in cartels and members have an organizational and financial independence in a hole, but they negotiate about a production scale and a pricing policy. There are four main categories by which cartels are classified:Association for establishment of a fixed proportion in a particular area of ​​business;Association for controlling the conditions of sale;Association for distribution of industrial activity, the sales territory and consumers between the cartel members;Association for setting prices.Usually cartels are associations of firms which operate at the same field and enter into an agreement among them that mainly concerns joint commercial activity, i.e. sales regulation. But on practice usually cartels do not only commercial activity but also determine an amount of goods’ production and set range of products.The features of the cartels are:Contractual nature of association. Members of cartel keep proprietary rights ownership on their enterprises. So members of cartel have financial, economic and judicial independence.Joint activity in selling products which spreads on production of these goods albeit to a limited extent. An agreement about a formation of the cartel is not always in a form of a contract. Usually cartels are in oral form “gentlemen's agreements” or are secret articles which complete any official document.In Western European countries there is a special legislation which emphasizes two types of cartels: “harmful” and “desirable”. There are about a hundred official cartels, but also there a lot of cartels which have no registration.In some countries cartels are illegal and prohibited by law. For example, USA has such law. Trade associations or business associations performs functions of cartels there. They realize monopolistic market regulation across the industry.There are no legal provisions which restrict cartelization in international practice. One of the most significant examples of international cartel is OPEC (Organization of Petroleum Exporting Countries).Syndicate - a kind of a cartel agreement, which involves the sale of products of its members through a single marketing body which is established as a limited liability organization or a joint-stock company. The functions of centralized sales of members of syndicate could be also assigned to one of its members. Depending on the terms of the agreement through a single marketing department not all, but only a certain part the production of members of the syndicate may be sold. Members of syndicate keep their commercial and judicial independence. In some cases members can keep their own distribution network, which is closely linked with the syndicate or sales office. Such form of TNC is mostly distributed in industries with such production as mining, metallurgy and chemical. Sales office or sales organizations also often realize a purchase of raw materials for the participants of a syndicate.Trust – a monopoly association where various businesses that previously were owned by different proprietors merge into a single industrial complex, losing its economic and judicial independence. In contrast to syndicate and cartel in trusts all parties of economic activity of enterprise are connected not only one. Also the distinctive feature of trust is that it is characterized by relatively homogeneous production activities therefore trust specializes in one or more similar types of products. Trust is very convenient form for the organization a combined production. All enterprises which are included to the trust obey to one major company that carries a single operational management.There are two ways to combine disparate businesses into trust: direct merger of assets of individual companies with assets of the parent company and the acquisition of parent company equity share of the trust companies. As a result enterprises which are managed by the trust using a system of participation, through its subsidiaries may appear within the trust. Such enterprises are formally independent but in fact are deprived of independence and are managed from a single center. Such center could be holding which holds the most or all of the shares and in fact disposes of industrial, commercial and financial activity of enterprises. Concerns and conglomerates existed in the sixties years and survived to our time.Concern - an union of independent companies linked by a system of participations, agreements on common interests, personal unions, patent licensing agreements, financing, production of close cooperation. Enterprises which are merged to a concern remain legal entities in a form of joint-stock company or other trade partnership. However big business owners control different companies which are included to the concern so the trust fully controls the activities of its member companies.Concerns are usually associations with industrial nature of enterprises in different industries. There are vertical and horizontal concerns. Vertical ones cover enterprises of different industries. Production process is interconnected, for example, mining, metallurgical and engineering. Horizontal associations include enterprises in different industries that are unconnected or which have little connection with each other.Development of industrial holdings became popular. Industrial holdings are not engaged in productive activity themselves. They only realize the control of activity of enterprises which they include by "participatory system". Companies which are included in the holding have juridical and economic independence and conclude foreign trade transactions on their behalf. Conglomerate - mega-union of companies and institutions which are involved in the control of production and circulation in many sectors of the economy worldwide. This group includes technically unrelated enterprises which belong to the same company and release production heterogeneous non-competing goods at one or more stages or operate on market segments that do not intersect. Conglomerates are most widely in the USA and Japan.There are two models of the actions of multinational companies:Traditional model of behavior of TNCs:Traditional model involves the creation of goods in the country of origin and then TNC exports them abroad. This model of Transnational Corporation is more expensive and unsustainable.Modern model of behavior of TNCs:The distribution of production is more rational with the transfer of development in the country with the best conditions for their implementation and application and where the production will be cheaper.STRUCTURE AND CLASSIFICATION OF TNCSTransnational Corporations by an organizational structure usually are diversified concerns. The main company represents an operational headquarters of the corporation. It provides technical and economic policies and control over the activities of foreign companies and branches on the basis of extensive specialization and cooperation.Recently the structure of Transnational Corporations passes significant changes. The most important of which are related to the implementation of an integrated strategy. A Strategy of TNCs is based on a global approach which comprises optimizing the result not for each individual unit but for uniting as a whole. Integrated strategy includes decentralization of a management of an international concern and a significant increase in the role of regional management structures. Such policy became possible because of technical achievements in the field of communication and information and because of the development of national and international data banks and widespread computerization. It allows Transnational Corporations coordinate production and financial activity of foreign subsidiaries. Complex integration within transnational corporations requires complex organizational structure which is expressed in the creation of regional systems of management and organization of production.There are three main types of regional management system:The main regional offices – administrative center. They are responsible for all activities in the respective region. They are endowed with all the rights to coordinate and monitor the work of all branches in the respective region (for example the main regional governance American company «General motors» Coordination of branches in Asia and Oceania is located in Singapore);Regional production management. It coordinates the activities of enterprises through the movement of the product, i.e. appropriate production chain. Such management is responsible for ensuring the effective operation of the enterprises, the smooth functioning of the entire process chain directly subordinated to the main regional management concern. They are aimed at developing efficient production methods, new models and products (such as a corporation «Hewlett-Packard» in the early 90s. Therefore moved their production management for a number of leading products from the USA to Europe );Functional regional offices. They provide specific activities of a concern: distribution, logistics, customer service after the sale of their goods, research and development activities, etc. These departments are responsible for the results of all relevant actors in the regional or global level.Nowadays there are such types of Transnational Corporations as:Vertically integrated corporations that are united under one owner and under common control in the most important areas of production of the final product. In particular in the oil industry the production of crude oil is often carried out in one country, refining - in another and the sale of finished petroleum products - in third countries;Horizontally integrated corporations with companies which produce most of the products. They control units which are located in different countries producing the same or similar products;Diversified Transnational Corporations. They include national enterprises with vertical and horizontal integration. A typical example of this type of corporation is a Swedish corporation Nestle which has 95% of its production abroad and busy restaurant business, food production, sales of cosmetics, wines, etc. The number of such companies in recent years is growing rapidly.PART 2. TNCS’ ACTIVITY AT INTERNATIONAL MARKETS2.1. MOTIVES FOR INTERNATIONAL ACTIVITIES AND KINDS OF TNCS OPERATIONSTransnational Corporations conduct such production and trade policy that provides high production planning and sales of goods with a strong financial base. Planning is realizes within the main company and applies to subsidiaries. The basis of competitive advantage of foreign TNCs is their strategy of internationalization activities which provides expansion of companies.Transnational Corporations perform dynamic investment policy and research work at continental international scale. TNCs penetrate the high-tech, knowledge-intensive industries which require large amount of investments and highly skilled personnel. So the tendency to monopolize these industries of TNCs occurs. Also there is a tendency of increasing investments in high-tech industries and in service sector. And their share reduces in an agriculture, mining, and resource-intensive production.Factors of the international activities are:Searching markets. This applies to public Transnational Corporations generally engaged in mining;Need for access to the natural resources of other countries. This may be dictated by productive or commercial interests of the corporation or it can be also formulated by government where the main company is located as a task for the strategic needs of the country for example in the field of energy;Desire to win the competition. To reach this goal TNCs buy patents on the latest technical developments and know-how and merge with former competitors for building barriers for potential rivals and for implementing their global interests;Commitment to improving the efficiency of their operations. TNCs operate at cross-country differences in production costs. Various conditions such as differences in the cost of transporting products are taken into valuation;Transnational Corporations use various forms of development of the world market to extend its expansion. These forms can largely base on a contractual relationship and not be associated with participation in share capital of other firms.TNCs typically include such forms of economy:Licensing;Management contracts;Franchising;Provision of technical and marketing services;Time-limited agreements for establishing joint ventures and arrangements for the implementation of specific operations;Delivery companies "turnkey"In practice some forms of TNCs activity often are not differentiated and are often intertwined. They are not differentiated and are often intertwined. Often they are not alternatives to traditional foreign investing but they complement it.Licensing agreements (legal contracts on which the licensor grants certain rights to the licensee for a while and for a fee) get a special widespread. Transfer of licenses can be realized by intercompany agreements contracts of TNCs and by external channels for technology transfer.Special kind of license agreement is franchising (franchise). Franchising is license agreement that is designed for long time. A franchisor provides certain rights to firm- client. These rights include the usage of a trademark or trade name. The rights also include service in technical assistance, service in improving workforce skills and service in trade and management for a fee.Since the late eighties such form of Transnational Corporations expansion as providing management and marketing services became popular. Contract for the provision of management services is an agreement where the operational control of the company or of the phase of its activities is provided to other firm for a special compensation. The functions which are performed by enterprises under the contract can include production management including responsibility for the technical and engineering aspects of production, human resources management including the appointment and dismissal of foreigners and training the local workforce, purchase of equipment and raw materials, marketing and financial management.TNCs perform technical services related to any specific aspect of the activities of the firm by contracts for technical assistance. Usually such contracts are related to repairing and maintenance of machinery and equipment, to advices about how to use know-how, to elimination of accidents and the control over the quality.Contracts for delivery of plants "turnkey" became popular. In this case Transnational Corporation takes the responsibility for the implementation all or most of all activities which are necessary for planning or construction of a particular object. In general the trend towards the usage of multiple forms of international economic relations TNCs is developing. The process of internationalization of capital and production demonstrating new forms and approaches is developing too.The newest form of conquest international markets by Transnational Corporations is the creation of special investment companies. The goals of these structures are investments to companies-partners and to subsidiaries to stimulate promotion of their products on regional markets. This approach is used by the major international companies selling soft drink such as "Pepsi-Cola" and "Coca-Cola".