Transnational business strategy is the need of today’s shrinking world. Transnational business can be defined as the business which a company does across the boundaries of different countries. These businesses are in the form of investment in foreign countries, which might be in assets or on an operational level. Transnational corporations have an alternative business model according to the country. The leadership and offices are set up in the concerned countries, and the decisions are made keeping the local atmosphere in mind. Though the main target is always making the company better and stronger, the model works on making the structure stable in different countries separately. It’s like many small companies operating under a big parent company.
Differentiating Transnational Business Than Other Business Models
Transnational businesses can sometimes be confused with International, multinational, and global business models. Global trade is the one in which the company delivers the same goods to different countries. It’s about the company’s product, rather than a Country’s requirements. International business is more about import and export in several countries. A multinational business model is about creating products according to the demand of a particular country. Transnational business is the same in the way that like all these business models, it also works in more than one country, but most other factors are different.
Power Of Transnational Companies
When a Transnational company decides to enter a new country, it has various advantages that other local small companies and vendors don’t. The sheer money and reach power is relatively apparent. The company can also study the demands of a country and take over the market with its efficiency and product quality. Competitors don’t generally have enough strength to compete with a well renowned foreign name. The Transnational companies can kill their competition by coming up with a cheap product, which other companies can’t afford. These companies generally work in the operational sector like extraction of natural resources or other precious things. Local companies don’t have machinery and quality to compete with them.
This business model also widens the market of the company, which eventually means more profit. A Transnational company doesn’t always need to be a massive company. Even relatively small companies can turn their business model into the Transnational model. The big economies of the world encourage their companies to take up this model as it helps the economy of the country immensely. Another benefit of being a Transnational company is that you can change your policy according to the regulations of a nation. The company can take advantage of the countries which have more relaxed laws. Also, sometimes it’s not feasible to create a product in a particular country, but its market is enormous. The company can manufacture the product in a country where the manufacturing cost would be less, and export it to the bigger market country.
Low-Cost Man Power
Labour cost is another important thing when we talk about manufacturing. Some countries in Asia have the lowest labour costs, so it will always be beneficial for the company to exploit the low labour charges. Taxation is another area in which this business model helps. You can skip the countries with higher tax for specific products, and move to lower-tax states.