4th Blog Assignment: Economic Globalization
4th Blog Assignment
Economic Globalization
What is the relation between economy and globalization?
(by Peter Dicken)
1) Summary of content
The essay "Economic Globalization", written by Peter Dicken, discusses the nature of transnational corporations and questions the stereotype that they act as the main factor of globalization.
First paragraph (Introduction):
In the introduction, the author wants to disprove the popular notion that transnational companies (short: TNCs) are the main factor influencing the world economy and threatening nation-state sovereignty. Dicken attempts to provide a more complex explanation of TNCs in the context of economic globalization. He aims to provide a more realistic picture of their role by examining their size, distribution, motivations, geographic ties, production networks, and power dynamics within the global economy.
Second paragraph (The Scale and Geographical Distribution of Transnational Corporations):
International Trade was first established in the 15th century by trading firms such as the East India Company and it later (19th century) experienced a global expansion of manufacturing businesses, which rose significantlay prior to World War I.
Transnational Corporations are modern business entities that coordinate operations across boundaries. There are over 61,000 TNCs working in over 900,000 foreign affiliates, and they make significant contributions to exports and the global GDP.
A tiny percentage (the Top 100 TNCs) dominates in terms of assets, employment, and sales. They function in a range of settings and come in different sizes. Furthermore, the activity is measured by foreign direct investment (FDI), which is primarily from developed nations and is expanding faster than global commerce. FDI is concentrated in some regions, such as East Asia and parts of Latin America. Their impact varies throughout businesses and geographical areas.
Third paragraph (Why (and How) firms 'Transnationalize'):
The motivation of TNC's can be divided into two categories: market-oriented investment and asset-oriented investment.
Fourth paragraph (Market-Oriented Investment):
Dicken states that TNC's prioritize market-oriented investment when presented with market saturation in their domestic market.
Moreover, it is essential to enter new markets in order to maintain profitability and growth. Identifying new markets that require a direct presence for effective service, managing governmental constraints, overcoming prohibitive shipping costs for exports, and adjusting to distinct market peculiarities are some of the elements driving this expansion. The size of the market and certain characteristics have a big impact on TNCs' investment choices.
Fifth paragraph (Asset-Oriented Investment):
Due to diverse market environments and the unequal distribution of vital resources required for production and sales, businesses engage in transnational investment.
In the past, the abundance of natural resources supported the early rise of TNCs. Technological developments increased access to a wide range of resources, most notably qualified human capital. Employers now give priority to highly skilled, motivated people in excellent areas instead of just inexpensive labor as they once did. This combination strengthens the appeal of transnational investment, particularly in areas like East Asia and Eastern Europe.
Businesses grow internationally by 'greenfield' investment or by working together with other businesses through mergers, acquisitions, or strategic alliances. Building new facilities abroad increases a company's and the host nation's assets but is less common and potentially dangerous. Large cross-border mergers in the late 1990s demonstrated that mergers and acquisitions (M&A) account for the majority of global growth.
Complicating TNC operations are strategic cooperation, when rivals band together for certain objectives like R&D or market access. These alliances have grown immensely.
Sixth paragraph (Geography matters: the Embeddedness of Transnational Corporations):
Large TNC's are formed by geography, resulting in a significant impact on how they behave in different parts of the world. Research shows that people behave differently depending on where they are from, and that organizational forms are still varied despite changes in the world.
The unique economic structure of each society remains over time and opposes convergence with others. Due to their inherent characteristics, different social production systems are resistant to blending. Despite coming from different backgrounds, TNCs continue to have unique corporate cultures.
Seventh paragraph ('Webs of Enterprise: Transnational Production Networks):
The complex connections between transnational corporation and global networks are examined in the last paragraph of Dicken's essay. The various geographical and structural configurations of TNCs are a result of industry landscapes, regional strategies, and historical legacies.
They strike a balance between distributed production, localized R&D, and headquarters in home countries. Ongoing restructuring, however, increases conflicts with key players like labor and governments. TNCs are able to negotiate through multi-scale regulatory frameworks by taking advantage of state policies and geographic differences. Given the ongoing dynamics among powerful entities in the global economy, they are faced with limitations in negotiations with states and institutions, despite their influence.
2) Interesting aspect
I liked the fourth and final blog assignment about economic globalization the most, as I learned a lot about transnational corporations and how they affect globalization. It is also astonishing that there are around 61,000 TNCs, but only 100 of them dominate the market or have the greatest influence on other companies, the government and globalization in general.
I was wondering which TNCs I know of, immediately thinking of the fast food chain McDonald's and searched the internet for more information. In the next part, I would like to talk about this transnational corporation into more detail and particularly focus on the negative effects of such a corporation.
3) Discussion
McDonald's is one of the best examples when it comes to transnational corporations. The franchise has around 33,500 stores in 119 countries, adapting its products to different cultural differences while maintaining its core brand identity.
The corporation has often been criticized in the past: debates, protests and legal action have been triggered by a wide variety of aspects and show that TNCs have to master these challenges in order to assert themselves in the global market.
On Wikipedia I found an interesting article about the popular case "McLibel" (McLibel case - Wikipedia) and it illustrates that these corporations are particularly vulnerable to activists and the public opinion in general.
Do you know of any other TNCs that have a big impact on globalization? How have they changed the world in the past, or how will they do it in the future?
As you point out, McDonald's is an iconic multinational corporation and has given rise to the sociological theory of "McDonaldization". It's not just McDonald's, but also Starbucks, Amazon, and others that are becoming more influential.
ReplyDeleteThese multinationals have contributed to a form of fast turnaround by finding the best way to get things done, and by providing standardized services, consumers have become predictable about the level of service they will receive or purchase.
However, the impact of these multinationals is not all positive. In the case of McDonald's, it can also mean that they are denying basic human rights to the people who work there or receive their services. Along with the problem of irrational organization of these rational systems, I believe that multinational companies that are famous and consumed more in the economic market than other companies have great power and can lead to monopolies or multinational companies invading the territory of local companies.