Transnational Corporations - the Good, Bad and the Ugly Formatted

Michael McKenna

What is a TNC?

TNCs (Trans-National Corporations) ‘are corporations that operate in more than one country or nation at a time.’ In fact, large TNCs like McDonalds, Nike and General Motors Company have become some of the most powerful economic and political entities in the world today. The rise of the brand name, globalisation, mergers and acquisitions have helped to expand the footprint of major TNCs to developing countries and increase the budget of such large TNCs to larger than some of the world’s developing countries. For this reason, it is almost impossible to impose national law on these large TNCs, and they are effectively a law unto themselves. In fact, out of the top hundred economies in the world, 51 are TNCs and only 49 are countries. This leads to all sorts of ethical, social, environmental and labour problems, which cannot be fixed easily and so are usually left alone. This is one of the main reasons why TNCs are sometimes considered evil. TNCs are usually based in the larger countries like America, Japan etc.

(Sources for the above: Fortune.com, 2002 Global 500, and World Bank, World Development Indicators online.)

The Structure of a TNC

The corporate structures of TNCs can be divided into two main sections, but there are infinite variations of a TNC’s structure. The two main sections are horizontal corporate structures and vertical corporate structures,

TNCs have offices and outlets all around the world that produce similar products. This is called a horizontal corporate structure.

TNCs like Adidas have their headquarters in a certain country (or countries in certain cases) that “manage production establishment to produce products that serve as input to its production establishments in other countries.” This is called a vertical corporate structure.

Some TNCs have neither vertical nor horizontal structure, such as Microsoft, and have establishments in different countries that are neither horizontally nor vertically aligned, most often computer TNCs or Engineering TNCs.

It is worth noting that TNCs owe much to the individual back offices in each country they operate that are devoted to information transfer and the IT component of the company. Without Information Technology, many TNCs would lose 30% or more of their profit and virtual companies like Microsoft would lose an astronomical amount of business.

Many major TNCs such as Nike use cheap overseas and sometimes child labour to produce common items like soccer balls and pay less than the minimum wage in that country, which is often sometimes less than a dollar a day.

Their impact on the rest of the world including physical environment, social relations, employment, labour and the economy.

Globalisation and Industrialisation.

It is well known that TNCs are a driving force behind Globalisation and Industrialisation, which contribute to Climate Change, pollution and other environmental damage.

Market Failure

“The major cause of environmental damage is market failure. Market failure is when those who are producing or consuming goods or services do not have to bear the full costs of their actions, such as the cost of pollution.” (Globalisation Guide)

A large percentage of major TNCs are guilty of this type of market failure because it is often impossible to ...