A transnational corporation (TNC) is a company that operates in at least two countires. It is common for TNCs to have a hierarchical structure, with the headquarters and R&D department in the country of orignin, and manufacturing plants overseas. As the organisation becomes more global, regional headqaurters and R&D departments may develop in the manufacturing areas. TNCs take on many different forms and cover a wide range of companies involved in the following primary, secondary (manufacturing) and tertiary (service) activites:
· Resource extraction, particularly in the mining sector, for materials such as oil and gas
· Manufacturing in three sectors:
o High-tech industries such as computers, scientific instruments, microelectronics, pharmaceuticals
o Large-volume consumer goods such as motor vehicles, tyres, televisions and other electrical goods
o Mass-produced consumer goods such as cigarettes, drinks, breakfast cereals, cosmetics, branded goods
· Services such as banking/finance, advertising, freight transport, hotels and fast-food companies
TNCs are the driving force behind economic globalisation. As the rules regulating the movement of goods and investment have been relaxed and the sources and destinations of investment have become more diverse, such companies have extended their reach. There are now few parts of the world where the influence of TNCs is not felt and in many areas they are a powerful influence on the local economy. TNCs tend to be involved in a web of collaborative relationships with other companies across the globe.
The significance of TNCs
The modern pharmaceutrical industry is a lucrative one. The largest ten pharmaceutrical companies in the world each feature in the top 400 companies in the world. The geographical distibution is interesting: five have headquarters in the USA, two in Switzerland, one in France and two in the UK. They are all successful examples of globalisation. For example, Johnson & Johnson has more than 190 operating companies in 52 countries, selling products to 175 countries.
Positives and negatives
Pharmaceutricals can be sold under two broad categories: generic or branded. Branded medicines are more expensive than their generic counterparts. The generic and branded drugs are chemically the same. Branded drugs have a catchy name whereas the generic ones have the full chemical name. Branded drugs can be 30 times more expensive – this means the poorest people struggle to access the drugs.
WHO regularly publishes updated lists of ‘essential drugs’. These are generic durgs that can provide safe, effective treatment for most communicable and non-communicable diseases such as diarrhoea, tuberculosis and malaria. The lists are useful for increasin people’s awareness of drugs which could help them. The list is unpopular with countires which have strong pharmaceutrical industries – this can reduce the profits of the big pharmceutrical companies.
The largests profits in the pharamceutrical industry come from the sale of brandname drugs in developed countries. Research into tropical diseases affecting hundreds of millions of people in less developed countries receives only a small proportion of the sum spent on cancer research. Most money is spent on developing drugs to control ‘diseases of affluence’ such as CHD, cancer and high blood pressure. Patents for new drugs are viewed as ‘intellectual property’ and it is illegal to make generic ‘copies’ of them for 20 years. Therefore, many new drugs that WHO may regard as ‘essential’ are not avialable in generic form. Pharmaceutrical compnaies are criticised for this nut point out the enormous investment in R&D required to develop a new drug. The money to fiund this research comes partly from thier profits.
Marketing and distribtuion
Branded durgs are unusual among consumer goods in the developed world in that their consumers tend to have little choice in the drug they purchase and use. Patients tned to use what their doctor prescribes for them. Therefore, the industry heavily targets doctors with its marketing, providing free samples of drugs, giving away everday items (pens, calendars etc.), advertising in medical journals and arranging visits of sales representatives to surgeries and offices.
Another criticism aimed at pharmceutrical companies and WHO is thay they tend to treat symptoms rather than the root cause of the problem. For example, iron folate, a vitamin supplement, is on WHO’s list of essential drugs. It is included because of its abilty to prevent anaemia in pregnant women, a common problem in both the underdeveloped and develpoed world. However, a similar compound, with the same anaemia-preventing properties, is found in leafy green vegetables. It is possible that encouraging the growth of these vegetable would be more valid than promoting vitamn supplments.
Philip Morris, R.J. Reynolds and Bristish American Tobacco (BAT), the world’s largest non-state owned tobacco producing TNCs, own or lease plants in more than 60 countries. These three companies have a total revenue of more than US$70 billion, a sum gretaer than the combined GDP of Costa Rica, Lithuania, Senegal, Sri Lanka, Uganda and Zimbabwe.
Of the 1.2 billion smokers in the world, 800 million are in the developing world. Countries where consumption is growing the fastest are also among the world’s poorest, and it is these countries that the major tobacco TNCs are targetinh with their advertising and marketing campaigns. China’s increase in tobacco consumption has been the most dramatic. Nearly 70% of Chinese men smoke, compared with just 4% of Chinese women. This means that CHina alone accounts for 300 million smokers, almost the same number as in all the developed world.
BAT has targeted the expanding market in India. According to the International Non-Governmental Coalition Against Tobacco (INGCAT):
· Each day 55,000 children in India start using tobacco in some way
· About 5 million children in India under the age of 15 are already addicted to tobacco
· Although cigarettes form only 20% of the Indian tobacco market, BAT is engaged in campaigns to convert 250 million tobacco users, particularly the young, to cigarette
· The Indian government has relaxed investment rules so that TNCs can now have 100% ownership of their manufacturing plant (previously they had to be joint