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Trans National Corporations are large scale business companies that do their business in various countries in the world. TNC's are playing main role in the global economy. They also called as Multinational Organizations, Global Corporations, and International Corporations. (BBC 2010)
Trans National Corporations are begun in 16th century in Western Europe. Modern TNC's are developed after Second World War. (Pilkington 2010) Some TNC's are in developing countries they have more power than government of that country and also their revenue is over than mid and lower countries GDP. Through mergers and acquisition TNC's are become stronger. Some times TNC's works effect positively or sometimes negatively to the host countries. If it influencing positively to the host country that will enrich the country's economy. If it influence negatively to the host country it cause to destroy their environment. Some TNC's are using their money and power to influence towards privatization to the poor developing countries. (globalpolicy.org 2010)
Features of Trans National Corporations
They are operating in several countries and they are become stronger through mergers and acquisitions and they are mainly focusing on manufacturing and export orient business. Their main company establishes in their mother country and they are doing business in various countries in the world. They are mainly focusing newly industrialized countries. They are coming to various countries because of many reasons. Such as cheap labor, skilled employees, tax releases that receive from those host countries,
Newly Industrialized Countries
Newly industrialized countries are the countries that industrialized within 20th century and growth their economy through manufacturing and exporting their products within last ten years. Mexico, Brazil, turkey, China, India, Malaysia, Hong Kong & South Korea are some examples for newly industrialized countries. Those countries are trying to export their own manufactured products to the developed countries and develop their economy. Most of Trans National Companies coming in to these countries because of their cheap labor, high growth of economy and growing human capital. TNC does can get a service of well educated employees for a lower level of wage in TNC's. Newly Industrialized countries are trying to attract FDI in many ways to develop their country and economy. (Slideshare.net 2010)
NIC's are have some common features such as they have political stable inside their countries, peoples income level is increasing, they are getting many FDI in to their countries. And they are trying more to attract many FDI to their countries. Also they have open-market economy. (Blurwire.com 2010)
Most of the time transnational companies are focusing on the newly industrialized countries because of many reasons such as low labor cost, infrastructure provided by Government, low rules and regulations on TNC's, supportive of governments, well educated employees, So TNC's can generate more profit through reducing their costs. Trans National Companies have positive impacts and also negative impacts to the host country. Positive impacts such as, increase job opportunities, help to Growth of GDP and Develop life standard of people. In 1990 after the liberalization of India they got US$ 70 million of foreign direct investments and it has grown to US$ 56.6 Billion in 1998. That was the rapidly growth of their FDI. (Matthew 1999)
But when TNC's are doing their business processes there may be some negative impacts can arrive such as using child labor, environmental pollution, influences to government are some of them.
Following examples shows the how Trans National Corporations are effected positively and negatively to the Newly Industrialized Countries.
Positive economic and environmental impacts of Trans National Corporations to host countries
From TNC's there are many advantages to the newly industrialized countries, so they are trying to attract foreign direct investments by giving many facilities and offers.
Newly industrialized countries don't have sufficient investments to develop their economy and country. So they are looking for attract more Foreign Direct Investment. The best way to do that is giving opportunity to transnational companies to enter their country.
India has 8% growth of their FDI. Vodafone is the one of leading TNC in India. They are going to invest Rs. 2/- for every Rs.1/- they are earning. There are more than nine million subscribers in India. And also Vodafone has invested millions of rupees in building their mobile towers in India (Domain-b.com 2009)
As an Example The Coca Cola Company have created many job opportunities and helped to increase their income level. In Indonesia they have started micro enterprise development program and that will help to more than 500 low income Indonesian families to increase their income level. They hope to create 5300 - 8400 new jobs and generate up to 520 million US Dollars revenue in next three years. And also they are going to start some emerging programs in china also. Those actions will be effect to increase their GDP and to reduce the poverty of those countries (Thecoca-colacompany.com 2009)
Nokia Company has invested US$ 100 - 150 millions in India 2005. To start new manufacture plants in some states in India. Nokia wanted to expand their business within India. This will directly impact to the growth of the Indian economy. And also this will create many job opportunities to Indian people. (Icmrindia.org 2010)
When TNC's doing their business inside the country they are doing manufacturing and exporting also. So it will effect to increase the export of the country. When export income increases it will help to take countries balance of payment in to good position and also it will help to build countries economy. When TNC's are developing they are expanding their business within the host country so they gave many job opportunities to the people and also sometimes increasing their employees' salaries.
As example in India Hyundai motor company is the one of leading car manufacturer they have rapidly growth in their business. They have increased more than their 1600 employees' wages in 21% - 24% (India-server.com 2009)
Most of the time Newly Industrialized countries do not have newest technology inside their country. When TNC's enter to the country they are taking the newest technology with them. Because of that NIC's can get advantage from newest technology that TNC's have. They can use it for the increase their productivity and also because of new technology, skills of the employees in host country are improving. Most of the time new quality management systems, technical skills and managerial skills are coming with new technological transfers.
When TNC's manufacturing goods within the host country they should have to find suppliers from the host countries to supply raw materials and other goods they needed. So it will be a good opportunity to small and medium scale business entrepreneurs to join as suppliers to the TNC's. TNC's are providing their technology to suppliers to create high quality materials and also it will help to increase the income of the suppliers.
Newly Industrialized countries can gain many advantages from TNC's. Government of NIC's can get taxes from them it will gain revenue to the Governments. If governments are providing good infrastructures and offer good economic policies to them TNC's are more likely to invest in those countries. So governments of NIC's can get advantages and improve their tax and other income as well. And also development of infrastructures will effect to the development of the country.
Most TNC's are doing safety and health programs to build up people's lives in host countries. Sometimes they are doing it as corporate social responsibility activities. These are their one of positive impact towards the environment and society.
In china Nestle have started a early childhood development program to develop the health and safety in Chinese children and women. It covers the whole country. It is about preventing children from diseases, providing nutritious foods for children and about child care. And also nestle have started several other programs to develop the Chinese people health and safety. For the development of education in Chinese people nestle have donated more than 10,000 books (Chinacsrmap.org 2010)
Most of the times Trans National Corporations have complain about polluting environment. To keep their goodwill they are always trying to conduct environmental programs and protect the environment.
As an example, In China, March 2009 Nestle starts a program on recycling PET bottles. They asked consumers to return the plastics bottles to recycle. They gave souvenirs to the first 1000 people who returned PET bottles. This will help to reduce the damage for environment that will happen from PET bottles. Programs like this help to influence other companies also to protect environment. (Chinacsrmap.org 2010)
Coca Cola Company gets many complaints about wasting and misuse of water in India and many other countries. After getting many complaints people do some protest against them. Now they are trying to use the natural resources responsibility and protect the resources. They have made their packages lighter. They are always trying to use more recycled things in their production process. They are using PET or refillable glass bottles to store their beverages and also they are using minimum fuel and energy in their production process. They are using 100% recyclable ingredients for their bottles. They are using Clear, Green, and Light Blue bottles to deliver beverages because those have highest recycle value. Now Coca Cola Company has invested over 80 million US dollars to build bottle recycling plants all over the world. They own the world's largest bottle recycling plant also.
In India, Coca Cola Company had start new programs with a combination of Government, Schools and Communities to build-up rainwater collecting facilities. Past few years they have build-up many rainwater harvesting plants in many states in India. They are reducing using ground water in their production processes. In 2008 Coca Cola India received award for their water saving activities. (Thecoca-colacompany.com 2009)
Negative economical and environmental impacts on Trans National Corporations to host countries
TNC's are generating higher profits from their business processes but most of TNC's are taking back their profits to their mother countries. Because of that host countries have less profit inside the country. Because of that reason host countries haven't more money inside the country to develop their economic process. Most TNC's are only considering about their profit. They are not thinking about overseas workers and about company much. If there is economic crisis arises in the host country they will turn off their all business processes and return back to their mother country. If there is situation like that government of host countries have to take care of their employees and also government could not get their expected income from TNC's.
NIC's are trying to attract TNC's by providing many facilities including reduction of tax and other policies. Therefore sometimes, because of that thing TNC's are working by own choice. Sometimes it may be effect bad to the society like causing to child labor, violating human rights and polluting environment. When TNC came in to country they want large area or space to build-up their factories and plants. Sometimes after they are chosen a land they clear the land by cut down all the trees. That will directly impact to the environment.
In Brazil they have faced this problem very much. Brazil has many natural forests inside the country. But because of their development process and expand of new business they have cut down many trees for their various needs. That will cause to huge deforestation of Brazil. Nowadays Brazil lost its forests in higher rate.
Deforestation in Brazil (RHETT A. Butler 2009)
When TNC's are recruiting people for the top management positions in their organization. Mostly they are recruiting people from their mother country. They are recruiting host countries people on most of time for lower level and middle level management. From that they are trying to keep their decision making authority in their own hands.
NIC are expecting that TNC's will bring their latest technology to their countries but sometimes TNC's are not taking their technology to the host countries. They are keeping it inside their originated country. They take only some part of the technology to the host countries.
When Trans National Company enters in to the country there are many positive impacts and negative impacts also. Those negative impacts are effecting to the country in a bad way. But negative environmental impacts are most dangerous they will effect long term and short term to the country.
In India Coca Cola Company established a new 40- acre bottling plant in village called Palakkad. There is a land that nearby bottling plant has harvested 50 sacks of rice and 1500 coconut per year before the bottling plant came. After bottling plant has established he only can harvest 5 sacks of rice and 200 coconuts. The reason for the reduce of harvest is Coca Cola bottling plant is using more than 1.5 million water daily from deep wells. That became a huge environmental problem in India. Most of village farmers are suffered from that. They also committed to suicide. Within past ten years farmers in western and southern states are suicide more than 22,000. (Scienceblogs.com 2010)
Within 2003 to 2006, 33 Trans National corporations are caught by Chinese government because of polluting the environment badly. They were violating Chinese government regulations. There were some world's famous TNC's such as Panasonic, Pepsi, Nestle and 3M also. Most of them were polluting environment and misuse of water. For the main reason for this case is laws and regulation for the TNC's in china are very low. Chinese government only considered about the attract foreign direct investments they have not care about the other negative impacts that will happen because of TNC's. After Chinese government caught those TNC's they have punished them. (LIU Jianqiang 2006)
This example is the one of the best example for careless behaviour of TNC's. In India multinational company called Union carbide Ltd had gas leak in a city called Bopal. It caused to death of 20,000 innocent people in Bopal. And also nearly 120,000 people get side effects such as blindness, cancers and breath problems. Union carbide Ltd paid a little money as damages to the victim of this disaster. The victims of this case they have to live their whole life with those injuries. (Rosenberg Jennifer 2010)
When Trans National Companies entering in to newly industrialized countries there are many impact to those countries. Some are positive and some are negative.
When studying TNC's activities of coca cola Company in India they generated huge income to the Indian government as Taxes and many other ways. it also help to increase job opportunities. But when they are performing their business processes they got many objections about polluting environment and misuse of water. After they got those objections they have successfully overcome those things by reduce polluting environment and protection of water. Finally they awarded to save water in India. They try to reduce their negative impacts to the country so it will be effect positively to the government and people.
Governments are expecting technological transfer to host countries but most of times TNC's are not taking their newest technology with them to host countries. Most of times they are not establish whole production plants in one country they only establish some parts manufacturing plants. So they are not taking their whole technology to the host countries. Because of that host countries could not get the technology to manufacture those products within the country. And also TNC's not giving their company secrets to the host countries. As example the formula of coca cola beverages they never give to other countries. Coca Cola Company only establishes bottling plants in host countries. However because of the technology that TNC's using in their processes the employees of host countries get expertise knowledge and skills.
There is doubt that positive impacts that discussed earlier will effect to the host countries as they think. Because of host countries spend much more to attract TNC's to their countries. The problem is the host countries could get the return on investment as they expected. Because Governments have to spend more on develop their infrastructures and also they are giving tax releases to TNC's. But TNC's are taking more profit to their home countries back and also some companies footloose from the country. So Governments could not be able to get advantages as they expected. Because of the footloose of TNC's Governments have to take care of their employees and they cannot recover their investments.
When TNC's coming in to host countries they are expecting much profit from their investments. They are mainly considering about their profit. So Governments of the host countries have to regulate them in good manner. If Governments do it well they can get good return as they expected and they can develop their economy. If not behavior of TNC's will be badly effect to the host countries.