4.5 Transnational Corporations and Technology
Completion requirements
4.5 Transnational Corporations
One of the most powerful economic forces in the world today is the transnational or multinational corporation.
A transnational is a corporation with headquarters in one country and
operations in several other countries. The corporation almost always has
headquarters in a developed country, and manufacturing or resource
extraction operations in other countries, as well as distribution of
products in numerous countries. Increasingly, transnational corporations
are moving their manufacturing and service operations to the developing
world, where labour is cheaper and fewer rules and regulations must be
met. Transnational corporations are part of our everyday lives. In fact,
they sell and produce most of the things we buy; they control many of
the services we receive. They include companies such as
Walmart,
Microsoft,
McDonald's,
Ikea,
Shell,
Sony,
Safeway,
Gap,
Levi's,
Nike,
Del Monte,
Apple,
Nestlé,
Honda,
Ford,
Disney, and
Pizza Hut.
From this abbreviated list, you probably realize that the clothes you wear, the cars you or your parents drive, the food you eat, the materials for your home, and the beverages you drink are all produced, serviced, or sold by transnational corporations.
Transnational corporations are very powerful. Sixty-seven of the 100 largest economies in the world are corporations. For example, Exxon-Mobil, a petroleum company called Esso in Canada, financially is ranked 21st of all economies in the world—just behind Sweden. That means that these corporations are more powerful than most countries and as a result can and do exert influence over national governments.
From this abbreviated list, you probably realize that the clothes you wear, the cars you or your parents drive, the food you eat, the materials for your home, and the beverages you drink are all produced, serviced, or sold by transnational corporations.
Transnational corporations are very powerful. Sixty-seven of the 100 largest economies in the world are corporations. For example, Exxon-Mobil, a petroleum company called Esso in Canada, financially is ranked 21st of all economies in the world—just behind Sweden. That means that these corporations are more powerful than most countries and as a result can and do exert influence over national governments.
The goal of any corporation is to make money. If a corporation can make a
profit in one country, imagine how much more it can earn if it expands
its operations to other nations. Imagine how much more it can earn if it
can pay workers in those countries less or must meet less restrictive
environmental laws.
The people at McDonald's must have been happy when they were able to open their first restaurant in Russia in 1990. It sold 30 000 hamburgers on the first day! Then, imagine how they felt about opening their first restaurant in China. They sold 40 000 hamburgers on the first day! They gained a foothold in the most populous country in the world with over one billion people—that is one billion potential Big Mac consumers.
The people at McDonald's must have been happy when they were able to open their first restaurant in Russia in 1990. It sold 30 000 hamburgers on the first day! Then, imagine how they felt about opening their first restaurant in China. They sold 40 000 hamburgers on the first day! They gained a foothold in the most populous country in the world with over one billion people—that is one billion potential Big Mac consumers.
Xpacifica/National Geographic Stock
Transnational corporations not only want to be able to do business in
countries all over the world; they also want to be able to specialize in
production. They want to be able to produce their goods in one country
and sell them throughout the world. To do this, they want to be able to
trade between countries without having to pay tariffs, a tax placed on
goods produced outside the country, or import duties, a duty is a tax on
goods leaving the country.
Tariffs are used to encourage consumers to purchase goods made in their own countries. For example, if you purchase a product costing $20 from the United States through Ebay, you have to pay an import duty on it. One customer complained that she had to pay $25 duty on an item costing $150. If the same item costs $170 from a Canadian retailer, it makes more sense to buy it in Canada. That is another reason transnationals want to establish operations in several nations—to make more money by avoiding tariffs and duties. They actively lobby countries for free trade agreements.
Tariffs are used to encourage consumers to purchase goods made in their own countries. For example, if you purchase a product costing $20 from the United States through Ebay, you have to pay an import duty on it. One customer complained that she had to pay $25 duty on an item costing $150. If the same item costs $170 from a Canadian retailer, it makes more sense to buy it in Canada. That is another reason transnationals want to establish operations in several nations—to make more money by avoiding tariffs and duties. They actively lobby countries for free trade agreements.