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History of TNCsThe Organizational Structure

The rises of TNCs in the 21st century

Example

A transnational corporation (TNC) is a huge company that does business in several countries.

Examples:

Nestlé

Unilever

Cadbury-Schweppes

BP-Amoco

From the Origins to the Second World War

The search for resources including minerals, petroleum, and foodstuffs.

For example: The US agribusiness giant United Fruit

Company: controlled 90 per cent of US banana imports by 1899.

Royal Dutch/Shell accounted for 20 per cent of Russia's total oil production.

In Japan: Mitsui and Mitsubishi – “financial clique”

Top 100 firms which in 1992 had US$3.4 trillion in global assets.

The top 100 TNCs also account for about one-third of the combined outward foreign direct investment (FDI) of their countries of origin.

Between 1988 and 1993, worldwide FDI stocks: grew from US$1.1 to US$2.1 trillion

This is most important tasks for top managers of any company.

“If everyone in a company is «in place» and knows his duties, if

there are rules of interaction between departments,

company's activities will remind a tuned mechanism which works

with maximum results and minimal costs.”

“Michael Newman”

Organizational structureA scheme consisting of

units and individual officers of the company.

Located by levels of importance and responsibility.

Depending on the stage of company development require different approaches to build the organizational structure.

Subsidiary ModelThe most basic

structural models The subsidiaries are self-

contained units with their own operations, finance and human resource functions.

Allowing them to respond to local competitive conditions and develop locally responsive strategies

Subsidiary ModelThe major disadvantage

The decentralization of strategic decisions that makes it difficult for a unified approach to counter global competitive attacks.

Product DivisionEach product has its

own division that is responsible for the production, marketing, finance and the overall strategy of that particular product globally

Allows the multinational company to weed out product divisions that are not successful

Product DivisionThe major disadvantage

The lack of integral networks that may increase duplication of efforts across countries.

Area DivisionEach geographical

region is responsible for all the products sold within its region.

All the functional units for that particular region namely finance, operations and human resources are under the geographical region responsibility

Allows the company to evaluate the geographical markets that are most profitable.

Area DivisionThe major disadvantage

Communication problems, internal conflicts and duplication of costs

Functional StructureFunctions such as

finance, operations, marketing and human resources determine the structure of the multinational company

All the production personnel globally for a company work under the parameters set by the production department

Functional StructureThe advantage

There is greater specialization within departments and more standardized processes across the global network.

The disadvantages The lack of inter department communication

and networking that contributes to more rigidity within the organization.

Matrix StructureOverlap between the

functional and divisional structures.

Dual reporting relationships in which employees report both to the functional manager and the divisional manager.

Involve cross-functional teams from multiple functions such as finance, operations and marketing

Matrix StructureThe advantage

There is more cross-functional communication that facilitates innovation The decisions are also more localized.

The disadvantage More confusion and power plays because of the

dual line of command

Transnational networkEvolution of the matrix

structure More on horizontal

communication.Information is now

shared centrally This structure is focused

on establishing "knowledge pools" and information networks that allow global integration as well local responsiveness.

In the 1980s and 1990s In 21st CenturyGlobalization was largely

driven by economies of the developed world

United States, Western Europe and Japan

Large multinational companies headquartered in developing countries

China, Brazil and India

This trend is becoming more pronounced which impacted many developed economies.

Exhibit 1: Cross Border Purchases by Developed and Developing Economies

Exhibit 2: Cross Border Purchases by Emerging and Transition Economies

in Developed Economies

Exhibit 1 and 2 show:The share of cross-border buy-side

transactions by developing economies.Asian developing countries being the major

force for this change.

Some major mergers and acquisitions across sectors like oil and gas, mining, automotive and financial servicesE.g.

The Indian conglomerate Tata Sons' acquisition of UK-based Corus Steel and Jaguar Land Rover

China-based Geely Automotive's takeover of Swedish auto giant Volvo

Mexican cement manufacturer CEMEX's acquisition of Australian cement company Rinker Group.

According to the United Nations Conference on Trade and Development (UNCTAD):

There were 80,000 transnational corporations (TNCs) in 2009

During the last few years, while developed countries accounted for the bulk of the TNCs across the globe, a paradigm shift has been occurring.

The transnationalisation of emerging market firms reflects the maturity in their business processes and their increasing appetite for international growth.

The diagram shows the network of the 295 TNCs among the top holders in 21th century

Exhibit 3: Motivations for Investments for Firms from Emerging Markets

To reduce the risks associated with being overdependent on limited market presence

To increase their market presence as well as achieve economies of scale

E.g. In 2006: the China-based TCL Corporation's

acquisition of Thompson and the acquisition of US-based IBM's PC business by China's Lenovo

In 2007, the leading Mexico-based cement manufacturer CEMEX gained a controlling stake in Australian counterpart Rinker Group for USD 14.7 billion => CEMEX also expanded its geographic presence in Australia and the Asia Pacific region

Many enterprises from emerging countries are in search of natural resources across the globe.

They acquire strategic resources worldwide for: oil, minerals and other raw materials => transnational routes also help enterprises internationalize and integrate their production facilities globally.

E.g. In 2006, Brazilian mining giant Vale acquired

Canadian-based Inco, the largest nickel mining and processing company, thus expanding its production facilities in North America.

Indian petrochemical giant Reliance Industries Ltd acquired the shale gas assets of US-based Atlas Energy for almost USD 3.5 billion in early 2010 => Reliance now has the first mover advantage in exploring the

Corporations need to operate more efficiently and to increase productivity by vertically or horizontally integrating their processes.

Many firms from the emerging markets are:Reassessing their internal

operations and their roles in the global value chain.

Investing in the developed economies to achieve efficiencies.

E.g.In 2006, the acquisition of UK-based Corus

Steel by Indian steel manufacturer Tata SteelBrazilian aircraft manufacturer Embraer

acquired aircraft maintenance, repair and operations (MRO) service provider OGMA in Portugal.

Developing markets had a construct to be among the top economies by middle of the 21st century.

In line with their growth ambitions, many of these emerging market firms have expanded their horizons to developed economies and started to take the route of cross-border acquisitions.Be able to leapfrog the maturity curve => to match

the needs of the developed markets in terms of : Technology and management advancements, Quality standards and certification, Most importantly, to overcome the psychological barriers

with respect to brand perception.

3. TRANSNATIONAL HORIZON: AS 3. TRANSNATIONAL HORIZON: AS WE SEE IT (CONT.)WE SEE IT (CONT.)E.g.

The Asian giants (China and India) along with Latam (Brazil) would dominate the cross-border firm creation scene => lead to a changing landscape of global economics, where there would be a gradual shift of corporate appetite for transnational growth from the developed to the developing markets

eSys Information Technologies Pvt. Ltd. is the world-leading information technology company, and business process outsourcing organization that envisioned and pioneered the adoption of the flexible global business practices that today enable companies to operate more efficiently and produce more value. 

Efficiency, reach and adaptability are the core values that define eSys business model for IT distribution. Since its incorporation in Singapore in the year 2000, eSys has set a scorching pace to become a major IT component distribution network in Asia and Europe with 32 in-country subsidiaries and more than 100 points of presence. With the presence in 32 countries and across 100 plus outposts the entire enterprise is run on one simple phrase: “Constant innovation that maximizes efficiencies to deliver enhanced value to our customers.”

eSys PC has already been launched in India, Middle East, Korea, UK and USA.

“Relax,it’s FedEx.”

“We live to deliver.”

Introduction:

Functional StructureThe FedEx Corporation is the parent company

over all the others, which provide support to all of the other companies :FedEx ExpressFedEx GroundFedEx OfficeFedEx FreightFedEx Custom CriticalFedEx Trade NetworksFedEx Supply ChainFedEx Services

Details of Functional Structure Units & Logos

1. Asia Pacific (APAC)2. Canada3. Europe, Middle East, Indian

Subcontinent and Africa (EMEA)4. Latin American and the

Caribbean (LAC)5. United States

FedEx Express:A wholly owned company of FedEx , which is divided into five global regions:

FedEx Ground Area

FedEx Timeline

Values

Business Profit and DevelopmentRevenue US$ 34 billion (2010)

Operating incomeUS$ 2.075 billion (2008)

Net income US$ 1.2 billion (2010)

Total assetsUS$ 25.633 billion (2008)

Total equityUS$ 14.526 billion (2008)

Employees 280,000+ (2009)

Achievements