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How Do Transnational Corporation (TNCs) Grow?

Updated on December 10, 2012

Transnational corporations or TNCs, grow in 5 main ways:

  1. Joint Ventures
  2. Franchising
  3. Acquisitions
  4. Diversification
  5. Glocalisation

Joint Ventures

This is when two companies work together for a period in order for one or both companies to develop. Companies usually use joint ventures to expand when they need local knowledge of the market in that area. Or to provide extra capital for the expansion.

An Example of a joint venture is in 2007 Walmart and the Indian company Bharti Enterprises announced the opening of Bharti Walmart Stores in India.

Franchising

This is a way of expanding with low costs. The owner of a brand or franchise allows another person to open a business under that brand, in a certain geographical area, in return for a cut of the profit.

The 'franchisee' benefits from the reputation of the brand as customers will trust the brand, as well as the 'franchisors' products, systems and help and support.

The 'franchisor' benefits from the profit without having to run an outlet themselves.

An example of this is McDonalds.

Acquisitions

This is when one company 'acquires' another buy buying the majority if not all of it's ownership stakes.

This can be friendly, where the company being bought sells its operations to the acquiring company. Or hostile, where the company being acquired is forced to sell large shares to the company taking over.

The company which as acquired the target company usually re-brands it under there own name or merges the companies.

An example of an acquisition is Walmart talking over ASDA UK in 1999.

Diversification

This is where a company moves away from it's traditional products or services and branches out into new markets. This helps it to grow and expand especially if it started with a niche market.

An Example of this would be Disney.

Disney started in 1928 with the 'Steam boat Willie'

In 1950 it started making live action films, 'Treasure Island' being the first.

In 1955 it opened the first Disneyland themepark.

Disney is now a recognised brand the world over.

Glocalisation

This is when a company "Thinks locally, acts globally."

The company may have many branches all over the world, but in those branches it tailors it's products to the local market. This means a company can have relevant products the world over.

McDonald's often glocalises their menu, in Germany McDonald's sells beer!

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