The inevitable growth of globalisation over the past few decades has gradually created the occurrence we now know as the “Trans-national Corporation (TNCs)”. This essay will aim to the highlight and explain the situation in which nation states are continually being reformed by these TNCs.
Globalisation & the Role of Technology
Globalisation is the process of allowing goods, financial and investments markets to operate across national borders due to deregulation, improved communications, infrastructure and technology. Technology is the “heart” of globalisation. The evolution of technology has sped up the gradual increase in globalisation. As companies build better communication channels, more information can be sent around the world to more remote locations allowing corporations to reach wider markets. Newer and faster modes of transport have allowed more goods and services to be exported around the world, again allowing corporations to reach a wider scope of the world. Technology has also increased the mobility of labour as workers can relocate to areas with better employment opportunities; and transnationals can move to areas with better skilled/cheaper labour.
Transnational Corporations & Objectives
A transnational corporation is a firm that has the power to coordinate and control operations of other subsidiaries in more than one country.” [Dicken, (2011)].
Many “international” corporations are becoming globally integrated meaning they are able to source & allocate their resources globally from and to countries which are more efficient in particular processes of the value chain. An example of a transnational corporation using an integrated strategy would be IBM which operates in over 170 countries. They used to have many “mini IBM’s” in all these countries with each having its own functional area; this was when they were using the “international” model. IBM then switched its strategy to the integrated model which involved having a specific functional area in the country/countries which has the absolute advantage. For example, they now have only one supply chain for the entire corporation instead of having many different supply chains in each country it operates in. This brings about efficiency as they can produce the best product at the best prices due to location economies. Palmisano, (2006)
The primary objective of a standard corporation is to maximise profit and shareholder value. This is done by the widening the margin between total revenue and total cost. Total cost can be cut by reducing the cost of materials, labour and capital or by finding better quality forms of these resources. By becoming “globally integrated”, corporations can move their various departments to places which offer these resources at the lowest price/better quality, therefore resulting in a reduction in cost due to cheaper labour or an increase in revenue/reputation due to better quality materials or better quality labour.
The Nation State and its Tools & Objectives
The terms nation, state, country and nation-state are used to refer to political, economic, social and cultural actors in the international system. The modern “nation-state” refers to a single or multiple nationalities joined together in a formal political union. Lauletta, (1996)
Nation states have specific objectives. The main macroeconomic policy objectives are to ensure low & stable inflation, ensure sustainable growth, improvements in productivity, high employment, increasing living standards and last but not least, practical government finances (national budget & balance of payments). Anderton, (2007)
They achieve this by keeping a close eye on the economy/national marketplace and intervening wherever and whenever necessary. The nation state has a few tools which it uses to alter the...