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History of TNCs
The 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
 Cadbury-Schweppes
 Unilever
 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”
1950s: Banks
->Industrial
stocks
Shipping, transport
(especially by air),
computerization, and
communications
In 1906 there were two
or three leading firms
with assets of US$500
million
New advertising
capabilities helped
TNCs expand market
shares.
In 1971 there were 333
such corporations,
one-third of which had
assets of US$1 billion or
more.
TNCs had come to
control 70-80 per cent
of world trade outside
the centrally planned
economies
1970
Today
• 7,000 parent TNCs
• Jumped to 38,000. 90% of them are based
in the industrialized world----control over
207,000 foreign subsidiaries.
 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
TNCs: the embodiment of
modernity and the
prospect of wealth: full of
technology, rich in capital,
replete with skilled jobs.
Less-industrialized world:
burdened by debt, low
commodity prices,
structural adjustment, and
unemployment.
1992
1993
1994
• Over US$50 billion
• Jumped to US$71 billion
• US$80 billion
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 structure
 A 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 Model
 The most basic structural
models
 The subsidiaries are selfcontained units with their
own operations, finance and
human resource functions.
 Allowing them to respond to
local competitive conditions
and develop locally
responsive strategies
Subsidiary Model
 The major disadvantage
 The decentralization of strategic decisions that makes it
difficult for a unified approach to counter global
competitive attacks.
Product Division
 Each 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 Division
 The major disadvantage
 The lack of integral networks that may increase
duplication of efforts across countries.
Area Division
 Each 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 Division
 The major disadvantage
 Communication problems, internal conflicts and
duplication of costs
Functional Structure
 Functions 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 Structure
 The 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 Structure
 Overlap 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 Structure
 The 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 network
 Evolution 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 Century
 Globalization was largely
 Large multinational
driven by economies of the
developed world
 United States, Western
Europe and Japan
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
services
E.g.
 The Indian conglomerate Tata Sons' acquisition of UKbased 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 Steel
 Brazilian 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
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:
FedEx provides customers and
businesses worldwide with a
broad portfolio of
transportation, e-commerce
and business services.
Integrated business
applications through operating
companies competing
collectively and managed
collaboratively, under the
respected FedEx brand..
Functional Structure
 The FedEx Corporation is the parent company over all the
others, which provide support to all of the other
companies :








FedEx Express
FedEx Ground
FedEx Office
FedEx Freight
FedEx Custom Critical
FedEx Trade Networks
FedEx Supply Chain
FedEx Services
Details of Functional Structure
Units & Logos
The original
overnight courier
services, providing
next day air service
within the United
States and timedefinite international
service
Guaranteed daydefinite delivery
within Canada and
the United States at a
cost savings as
compared to timedefinite FedEx
Express.
Less than truckload
(LTL) and other
freight services.
Offers copying and digital
printing, professional
finishing, document
creation, Internet access,
computer rentals,
videoconferencing, signs
and graphics, direct mail,
Web-based printing, and
FedEx shipping.
Provides services relating
to customs, insurance, and
transportation advice.
Delivers urgent, valuable,
or hazardous items using
trucks and chartered
aircraft.
Provides logistics
services including
Critical Inventory
Logistics,
Transportation
Management
Services, Fulfillment
Services, etc.
Provides global
marketing, planning
and information
technology(IT)
services for the other
FedEx operating
companies.
FedEx Express:
A wholly owned company of
FedEx , which is divided into
five global regions:
Asia Pacific (APAC)
Canada
Europe, Middle East, Indian
Subcontinent and Africa (EMEA)
4. Latin American and the Caribbean
(LAC)
5. United States
1.
2.
3.
FedEx Ground Area
FedEx Timeline
1900-1969
• 1913:C.J. Tower & Sons began operation as a customs broker in Niagara Falls, N.Y.
• 1947: Roberts Cartage (now FedEx Custom Critical) is founded as a pickup and
delivery trucking company in Akron, Ohio.
• 1966: Viking Freight Inc. (now FedEx Freight West) is founded in San Jose, Calif.
1970-1979
• 1971: Federal Express Corporation is founded in Little Rock, Ark. 1973,relocatesd
operations to Memphis, Tenn.
• 1978: listed on the New York Stock Exchange; ticker symbol is FDX.
1980-1989
• 1983: FedEx becomes the first U.S. company to reach revenues of $1 billion without
merger or acquisition.
• 1989: FedEx purchases Flying Tigers to expand its international presence.
1990-1999
• 1990: FedEx becomes the first company to win the Malcolm Baldrige
National Quality Award in the service category.
• 1994:FedEx officially adopts "FedEx" as its brand for recognition as the
worldwide standard for fast, reliable service.
• 1998:FedEx acquires Caliber System Inc. and creates FDX Corporation
2000present
• 2000: Parent company FDX is renamed "FedEx Corporation." Services
are divided into companies that operate independently yet compete
collectively.
• 2007:FedEx Kinko’s introduces Print Online, an innovative Web-based
printing tool allowing customers to access the chain’s professional
printing services from anywhere in the United States.
Values
People: We value our
people and promote
diversity in our workplace
and in our thinking.
Service: Our absolutely,
positively spirit puts our
customers at the heart
of everything we do.
Loyalty: We earn the
respect and confidence
of our FedEx people,
customers and
investors every day, in
everything we do.
Responsibility: We
champion safe and
healthy environments for
the communities in
which we live and work.
Innovation: We invent
and inspire the services
and technologies that
improve the way we
work and live.
Integrity: We manage
our operations, finances
and services with
honesty, efficiency and
reliability.
Strategy
Compete collectively by standing as one
brand worldwide and speaking with one
voice.
Operate independently by focusing on
our independent networks to meet distinct
customer needs.
Manage collaboratively by working
together to sustain loyal relationships with
our workforce, customers and investors.
Business Profit and Development
Revenue
US$ 34 billion (2010)
Operating income
US$ 2.075 billion
(2008)
Net income
US$ 1.2 billion (2010)
Total assets
US$ 25.633 billion
(2008)
Total equity
US$ 14.526 billion
(2008)
Employees
280,000+ (2009)
Achievements
2001-2010:
• FedEx has ranked
among the top 20 in
the FORTUNE Most
Admired Companies
list.
03/2011
• FedEx ranks no.8
on FORTUNE’s
World’s Most
Admired
Companies List