IGNOU : M.COM : IBO 1 : UNIT 7 : Q - 2. Describe main features of TNC.

 

Ans. The main features of TNCs are as follows:

i)  TNCs are normally very large in size as measured by the value of their total sales. The average TNC has billions of US dollars as its total sales value which is often equivalent to more than the national incomes of one, two or three large developing countries. In the eighties, and nineties, however there has been a growth of smaller TNCs from Canada, Japan and the UK. Even the USA has now some small TNCs.

ii)  Many TNCs depend to a large extent on their foreign sales. There has been a steady growth of the share of foreign sales in total sales. Sales of TNCs exceed the value of world trade in goods and services.

iii)  TNCs are multi product enterprises something that gives them tremendous market power.

iv) The main strength of TNCs is their command of technology and innovation. They spend sizable amount on research and development (R & D). Most TNCs spend 5-6 percent of their sales value on R & D which amounts to billions of dollars. This is the reason for their tremendous market power.

v)  The affiliates of the TNCs arc responsive to a number of important environmental forces, including competitors, customers, suppliers, financial institutions and government.

vi) It draws on a common pool of resources including assets, patents trademarks, information and human resources.

vii) The affiliates of the TNCs are linked by a common strategic vision. Each TNC formulates its strategic plan so as to bring the affiliates together in a harmonious way.