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What are Transnational Corporations (TNCs)? Discuss the challenges faced by TNCs.

What are Transnational Corporations (TNCs)? Discuss the challenges faced by TNCs.

Course: M.Com

1 Answer

Transnational Corporations (TNCs) is an organization that engages in production or service activities through its own affiliates in several countries, maintains control over the policies of those affiliates and manages from a global perspective. Challenge Faced by Transnational Corporations (TNCs): TNCs operate in multiple environments of economic, political, legal, socio-cultural and technical dimensions and try to cope with a number of challenges.

Transnational Corporations (TNCs) face the following challenges while operating in foreign environments:

  • Political System of the Host Country: Political factors operating in the host country affect the working of TNCs. The important factors affecting the operations of TNCs are as under: (a) Political stability, (b) Attitude of the opposition groups, (c) Government’s policy towards foreign capital.
  • International Relations: It is very difficult for Transnational Corporations (TNCs) to operate in a country where there is disharmony between the two governments—host country and home country.
  • Nationalism: There is growing awareness amongst people of developing countries to buy national goods rather than those produced by TNCs. The TNCs are, thus, facing tough competition from the national producers.
  • Technological Environment of the Host Country: Different countries have different levels of technological environment. When a TNC wants to introduce advanced technology in a developing country, it may not be easily accepted by the host country’s government. This may require the concerned Transnational Corporations (TNCs) to change its technological set up or to discontinue its operations in that country.
  • Legal System of the Host Country: Legal framework of a country with respect to laws such as taxation, currency exchange, tariffs and quotas etc. pose a challenge to the Transnational Corporations (TNCs) operations abroad.

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February 8, 2019