A transnational corporation defined as a multi-product company which has subsidiaries and affiliates in a large number of countries with a central control and with an objective of global profit maximization. UNCTAD defines transnational corporation as incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates.
Following are the popular forms of Transnational corporation TNCs:
Branches: Branches may be defined as a divisions of a business enterprise (TNC) situated in different countries. Branches work under the direction and control of the head office. Every branch follows the laws and regulations of the country in which it is located.
Subsidiaries: A Transnational Corporation (TNC) may operate through its subsidiaries in different countries. A subsidiary may be defined as an incorporated enterprise in the host country in which TNC directly owns more than a half of shareholder’s voting power. A TNC controls the Board of Directors of the subsidiary company and the subsidiary follows the policies laid down by TNC. TNC undertakes responsibility for he management and working of the subsidiary.
Associate: An associate may be defined as an incorporated enterprise in the host country in which an investor (TNC) owns a total of at least 10%, but not more than 50% of the shareholder’s voting power.
Joint Venture: Under joint venture, a TNC makes available machinery, capital goods and technological expertise to the indigenous firm or agency on the basis of profit sharing. This form of organization is adopted in those countries where the law requires control by local nationals.
Franchise Holders: Under this arrangement, an affiliate firm produces or markets the produce of a TNC after obtaining a licence from that TNC. It is based on a formal contract between an affiliate firm and TNC.
Turn-key Projects: Under this arrangement a TNC undertakes to complete the project from scratch to the operational stage. When the project is ready, it is handed over to the host country.