The important reasons for the growth of transnational corporations:
Expansion of Market Territory: As the operations of a large sized firm expand and its international image builds up, it seeks more and more extension of its activities beyond the physical boundaries of the country in which it is situated.
Market Superiorities: A TNC enjoys a number of marketing superiorities over the national firms:
- A Transnational corporations (TNC) possesses a more reliable and upto date market information system.
- A Transnational corporations (TNC) enjoys market reputation and faces less difficulty in selling the products.
- A Transnational corporations (TNC) adopts more effective advertising and sales promotion techniques.
Financial Superiorities: A Transnational corporations (TNC) enjoys following financial superiorities over the national firms:
- A TNC has huge financial resources with which it can easily turn all circumstances in its favor.
- A TNC maintains a high level of funds utilization by generating funds in one country and using them in another.
- A TNC has easier access to external capital markets.
- A TNC is able to raise more international resources because of its international reputation. Even the investors and banks of the host country are eager to invest in it.
Technological Superiorities: Transnational corporations (TNC) posses technological superiorities as compared to national companies. The host countries regard transfer of technology from TNCs useful on account of following reasons:
- Host countries do not posses sufficient resources to sustain the industrial progress on their own.
- Host countries find themselves unable to exploit local manpower, materials, capital equipment’s etc.
- Transnational corporations (TNCs) bring all essential elements such as raw materials, capital equipment, machinery and technical knowledge which local companies will have to import.
- The host countries have to face stiff competition for selling their products in the international markets. Unless their goods meet international standards and quality specifications they cannot sell. TNCs help them in producing such goods.
Product Innovations: TNCs have huge research and development departments engaged in the task of developing new products and superior designs of existing products. While developing new products and superior designs of existing products, TNCs have an eye on a number of countries. Therefore, their production ,opportunities are far greater as compared to national companies.