TRANSNATIONAL

CORPORATION (TNCs)
Nguyen Thuy An
Nguyen Thi Lan Anh
Tran Quoc Vy
Ngo Nguyen Minh Hang
Van Thi Ngoc Dung
Nguyen Tuong Dat
TNCs
TNCs Impact
Compare advantages
Honda Motor Corporation
Outline
Private firms that have established branch operation in
nations foreign to their headquarters country

E.g. Wal-Mart, Toyota Motor, Ford Motor

Transnational Corporation (TNCs)
Serve domestic market only

Export to overseas
market(s) through
independent channels
(e.g. sales agents)
License foreign
manufacturer to
produce for overseas
market(s)
Establish sales outlet in overseas
market(s)


(a) By acquiring
local firm
(a) By setting
up new facility
Establish production facility
overseas
(a) By acquiring
local firm
(a) By setting
up new facility
TNC- development as a
sequential process
Different entry modes used by TNCs
Source: UNCTAD survey.

The purchase or construction of factories and other
fixed asset by TNCs
Foreign direct investment (FDI)
Distribution of FDI
Source: UNCTAD survey.
BRICs dominate the top 5 most attractive economies for FDI
For market growth, developing and transition economies
E.g. China, India, Brazil, the Russian Federation, Indonesia,
Viet Nam, Poland and Thailand.

For market size, the largest economies are favored, either
developed ones (E.g. the United States, Germany and
Canada) or emerging ones (E.g. China, the Russian
Federation and Brazil).
.
Locational Criterion
Source: UNCTAD survey.
Size and growth of market are the major location determinants
TNCs Impact
FACT & FIGURE
62 000 TNCs
900 000 foreign affiliates
56 million workers
19 trillion in sales
1/10 of world GDP
1/3 of world export
TNCs become ever-more important in the globalizing
world space economy

1. The direct impact of TNCs is limited
to relatively few countries and regions
FDI (foreign direct investment): the investment by TNC to
other countries
For developing country: <30% (early of 21
st

century) 42% (2004)
majority: South, Southeast and East Asia, Latin
American and Caribbean
For least developed country: 1%(1994) 5%(2004)
The vast majority of FDI still flows not to the poor or
developing worlds but to the rich
1. The direct impact of TNCs is limited
to relatively few countries and regions
WHY?
TNCs actively engaged in Merge and Acquisition in already
developed foreign market areas
HOWEVER
in 2004, FDI for developed country declined (<50% of the peak
in 2001)
FDI in Asia rose by over 6%

2. The worldwide impact of their
consolidation is significant
Focus in few industries: computers, electronics, petroleum
and mining, motor vehicle, chemical and pharmaceuticals,
etc.
In raw materials:
few TNC account for 85% of world trade
World pharmaceutical industry:
dominated by just 6 firms
Automobiles producer:
15 firms( early 21
st
) 5 or 10 (2015)
Most TNCs operate in a few industries (computers,
electronics.)
Some dominate the marketing and distribution of basic and
specialized commodities
For example: in raw materials, a few TCNs account for 85% or
more of world trade in wheat, maize, coffee
In manufacturing, pharmaceutical industry is dominated by just
six firms
The worlds 15 major automobile producers at the start of the
21
st
century, it has been predicted, will fall to five or 10 by 2015


Comparative advantage of TNC
TNCs actively exploit the principle of comparative
advantage
They produce in that country or region where costs of
materials, labor, or other production inputs are
minimized
Maintaining operational control and declaring taxes in
localities where the economic climate is most favorable
Research and development, accounting, and other
corporate activities are placed wherever economical
and convenient.
Comparative advantage of TNC
HONDA MOTOR
Corporation
Honda
Established in 24
September 1948.
Soichiro Honda
(1906-1991)


Takeo Fujikawa
(1910-1988)
Chairman
CEO
Takanobu Ito
Products
Automobiles
Motorcycles
Scooters
ATVs
Electrical Generators
Water pumps
Lawn and Garden
Equipments

Tillers
Outboard motors
Robotics
Jets
Jet Engines
Thin-film solar cells
Corporate Profile and Divisions
Honda is headquartered in Minato, Tokyo, Japan.
Their shares trade on the Tokyo Stock Exchange
and the New York Stock Exchange, as well as
exchanges in Osaka, Nagoya, Sapporo, Kyoto,
Fukuoka, London, Paris and Switzerland.
Honda has also created joint ventures around the
world:
Honda Siel Cars and Hero Honda Motorcycles in India
Guangzhou Honda and Dongfeng Honda in China
Honda Atlas in Pakistan
Assembly Plants
50 Factory in 19 countries around the world.
200.000 employees
Total Assets of 124.98 billion USD (FY 2009).



HONDA - regional competitive
advantages.
IN US
Main product: automobiles
Regional competitive advantages
Market is large because
GDP/person is high.
Traffic infrastructure is
qualify.
Demand of cars is high.
Regional competitive advantages:

Developed industry with high technology level.
Skill labors

IN VIETNAM
Main product: Motorcycle
HONDA - regional competitive
advantages.
Regional competitive advantages

Large population and
GDP/person is quite low
Demand of motorcycle is
high.
The traffic infrastructure is
low quality.
VN economy is just
centralized develop in some
major region, so the short
distance does not require
cars.

Regional competitive advantages
Developing country low technology and
science infrastructure ; unskilled labors
more relevant to produce motorcycle than
automobile.

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