The source of accumulation and high concentration of production leads to the formation of monopoly in capitalist production. The gradual development of simple cooperation, from craftsmen's workshops to handicraft workshops, from industrial workshops to modern industrial and commercial enterprises, to various types of companies, in which TNCs were born and developed.
According to C. Marx, the three stages of development of capitalism in industry take place from simple cooperation, to manual workshops and large-scale mechanical industry. This development is adapted to different levels of development of capitalist production, from small scale to large scale, from manual techniques to mechanical techniques. Cooperation and division of labor at all levels of development are always based on the concentration of means of production and socialization of production in the forms of cooperation and division of labor in each production facility as well as in the social scope. That is also the process of accumulation and concentration of production.
Modern industrial and commercial enterprises were formed in the mid-nineteenth century by combining large-scale production with national and international regional distribution into a single company (the enterprise includes many activities from industrial production to trade, services, finance, credit, etc.). It was formed and developed through two types of vertical and horizontal linkages: Horizontal-type integrated enterprises, mostly relatively small-scale enterprises of clans or individuals. In order to control output and increase prices, enterprises merged or linked together; Vertically integrated enterprises, usually enterprises using mass production methods and enterprises in vertical industries. In reality, in order to continue to develop in scale, it is necessary to increase vertical linkages both upward and downward, so vertical linkage is the main way to form modern industrial and commercial enterprises. Vertical integration is not only a competitive strategy of enterprises, but also a kind of innovative behavior in terms of regime. Modern industrial and commercial enterprises have the ability to transform
a social division of labor organized by the market, into internal divisions within enterprises to overcome market inefficiencies caused by the use of new techniques or the production of new products.
In terms of scale, complexity of management and scope of internal division of labor within modern industrial and commercial enterprises, no previous type of enterprise can compare. Its scope of division of labor is increasingly expanding to many fields of production of related or unrelated products, even contradictory, forming a multi-industry, mixed internal division of labor structure. From that, it can be affirmed that modern industrial and commercial enterprises are the seed of formation and development of TNCs.
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When the geographical scope of internal division of labor of modern industrial and commercial enterprises crosses national borders, TNCs are formed. When the hierarchical management system of modern industrial and commercial enterprises matures, the vast majority of these enterprises become giant TNCs and have a huge impact on the national and world economy.
Free competition not only increases the process of accumulation and concentration of production but also causes the birth of machine-based production, the emergence of the capitalist enterprise system and its increasingly perfecting. In turn, the emergence of the enterprise system promotes the division of labor to expand from the internal region to the national and international scope, causing production to increase to a high level, monopolies to appear, in which economic group models become popular.
Inheriting and developing the doctrine of C.Mac - F.Engels on the study of capitalism in the late 19th and early 20th centuries, VI Lenin wrote: "The concentration of production giving rise to monopolistic organizations is generally a common and fundamental law in the current stage of capitalism" 2 .
2 Lenin VI (1980), Imperialism, the final stage of capitalism, Lenin's complete works , Vol. 27, Tien Bo Publishing House, Moscow
According to Lenin, high accumulation and concentration of production leading to the formation of monopolies is the basic economic characteristic of imperialism. Monopoly alliances were initially formed by horizontal linkages (linkages between enterprises in the same industry) in the form of cartels, cyndicats, trusts. Then came vertical linkages, which are the linkages not only of large enterprises but also cyndicats, trusts... belonging to different industries but related to each other economically and technically, forming consortia. Since the mid-20th century, a new type of linkage has developed, multi-industry linkages, forming giant conglomerates and concerns that take over many companies and enterprises in many different industries and fields such as: transportation, banking, commerce, etc.
Second reason: Competition, association and profit maximization.
Competition for the goal of profit maximization is an inevitable rule of all enterprises in the market mechanism and will inevitably lead to two main trends:
(1) Winning enterprises in competition will attract defeated enterprises, making the scale of enterprises increasingly expand in all aspects. This situation occurs regularly and continuously throughout the development of capitalism and has especially developed strongly since World War II. Companies that operate effectively and win in competition take measures to acquire and merge companies that are in financial difficulty or at risk of bankruptcy. That process inevitably forms business models of corporations that are increasingly strong in all aspects. (2) If competition continues without a winner, those enterprises will join together or seek other partners to join in order to increase their competitiveness.
Third cause: The strong impact of scientific and technological advances.
As early as the end of the 19th century, the classics of Marxism-Leninism predicted: "Science will become a direct productive force".
The great achievements of the scientific and technological revolutions from the second half of the 19th century to the present have brought a completely new face to the whole world, prominently shown in the following aspects: (1) Emerging many new industries at high speed and accounting for a large proportion of the economy such as: atomic, space rockets, industry, electronics... The space industry alone has created about 3,000 new industries. In the 1980s, General Electric Company (USA) imported 70 new technological lines with a total value of nearly 10 billion USD 3 . From there, a requirement was set to create conditions to rejuvenate traditional, long-standing manufacturing industries. (2) Due to the requirements of modern technology and engineering and fierce competition in the market, the depreciation period of fixed capital occurs rapidly, in other words, the time for a new invention to be born is shortened and the scope of application is increasingly expanded. Therefore, business entities need to have connections to take advantage of scientific achievements.
(3) Scientific research itself requires huge financial investment, and at the same time requires the coordination of many economic entities and scientists from many countries to participate.
It can be seen that the development of science and technology has required enterprises to have a large amount of capital to reform the production structure, conduct experimental research and apply new achievements of science and technology. But it is difficult for a single monopoly company to do that. Therefore, the consolidation of many individual companies into powerful TNCs in all aspects, capable of investing, researching, developing science and technology and applying it to production and business has become an objective necessity of production, business and investment entities.
1.1.2. Characteristics of multinational corporations
3 Le Van Sang-Tran Quang Lam-Dao Le Minh (co-editors) (2002), Strategy and economic relations between the US-EU-Japan in the 21st century , Social Sciences Publishing House, Hanoi
First of all, transnational corporations are, by origin, monopoly capitalist companies, the product of alliances between the most powerful capitalists. This characteristic distinguishes transnational corporations in the era of financial capitalism (i.e. modern transnational corporations) from internationally operating companies that originated in the era of free competition capitalism and even the era of primitive accumulation capitalism. In today's era, when the internationalization of production is promoted, it is entirely possible and has happened that companies from developing countries (especially those from the group of newly industrialized countries) can expand their international competitive markets and, with the help of the state, they can expand their operations internationally, even establishing branches in developed capitalist countries. For example, the cases of Samsung, Hyundai (Korea), Formosa (Taiwan), Sime Darby (Malaysia). Although these companies are not owned by capitalist corporations in developed capitalist countries, they are still products of monopoly capitalism and bear the mark of the development of capitalism and the internationalization of economic life.
In general, multinational corporations are companies of international stature, with branches or systems of branches abroad with the aim of increasing profit margins through international expansion. They carry out the division of labor and the division of the world market (between capitalist companies in particular and industrial powers in general). This is a second important characteristic. Normally, only large companies can stand firm in the conditions of fierce international competition, while small companies, even if they can operate, will sooner or later depend on large companies in one form or another. However, in current conditions, there are still small companies that, thanks to their know-how, can exploit gaps in the world market that multinational companies have not yet fully occupied. That is
Market segments with distinct geographical, environmental, socio-cultural and customary factors create a certain level of competitive advantage for small companies compared to multinational companies. This is the case in particular with some companies from newly industrialized countries and territories in Asia. This second feature is a distinguishing feature from national monopolies, the most prominent of which is the branching out abroad, having at least one branch, and establishing a production facility in that country (this feature is not present in national monopolies).
A transnational corporation must first be formed from a national corporation, with the nationality of a country, and the capital owned by the parent company belongs to the capitalists of that country. That capital is established in the form of a joint venture (or mixed company). The mixed company form (in the form of joint stock) is currently the preferred form for many developing countries, and is also the form that transnational corporations prefer. Regardless of the form of foreign branches, the ownership of capital in the branches, whether in one form or another, is essentially part of a group, and the main control over investment, production and business still belongs to the capitalists of the parent country.
A multinational corporation typically has an organizational structure consisting of two basic parts: the parent company and one or more foreign subsidiaries.
- Parent Company or parent company. The term parent company refers to the origin of a transnational corporation. This company is usually headquartered in the country of which the company is a national. That country is called the parent country or home country. There are also cases where a multinational corporation has two command centers, but the main center that concentrates all power is still the parent company.
- The term branch company (subsidiary, branch...) can be understood to include all firms, enterprises, and companies abroad.
regardless of the level of dependence on the parent company. The country where the branch is located is called the host country. In theory as well as in practice, it has been shown that with the participation regime, there are not only level 1 branch companies but also level II, level III branch companies... In which the relationship between the branch companies and the parent company is not the same. Therefore, some authors have used the terms subsidiary, grandchild... to refer to them. However, the terms level II, III,... can also be used to refer to branch companies according to the level of dependence on the parent company and level II, III branch companies can be considered as network companies.
There is a dependent relationship between the parent company and its branches, in which the parent company plays a leading role, the branches are independent accounting units but financially and technically dependent on the parent company and all form a system. This system is a whole but always contains contradictions. In their vortex of operations, there are both centripetal and centrifugal forces. Centripetal forces connect the system of companies into a unified international economic complex through many connections, connections and dependencies to a certain extent. Meanwhile, centrifugal forces push economically weak companies out of business, weakening the foundation and disrupting the company's operating mechanism.
In terms of management, it is seen that the highlight is the control of the parent company over the branch companies in its own way, by using economic levers, implementing a certain level of centralization and controlling mainly vertically from the center to the periphery. According to that management method, the role of strategic orientation in economics, technology, financial provision, and credit of the parent company is very important, while the branch companies are relatively independent business units and become independent accounting units. Therefore, they are forced to be dynamic and have the conditions to promote dynamism.
1.2. BUSINESS STRATEGY OF TRANNSNATIONAL COMPANIES
1.2.1. General concept of the company's business strategy
“Strategy” (strategos) and tactics (aktikos) originate from the ancient Greek language. For the ancient Greeks, it meant “proper arrangement and adjustment”, it referred to the art of adjusting military strategy in war. This definition was used as a military term, and is still used today in many areas of social life, especially in the field of business operations of enterprises. Thus, it can be seen that the company's operating strategy (also known as business strategy, or business strategy), is the sum of the ways for how a business “deals” with other businesses and with the market both inside and outside the industry in the process of competition, in order to achieve the goal of maximizing profits in the long term . The company's strategy is the general strategy of the business, the issues raised with the strategy at this level are the long-term strategic orientations with the question: what will the business be like in the future? And a diversification of business activities of an enterprise means: what markets, regions, or products and services will the enterprise conduct business in, and how will it do business?
Strategy in the most general sense is understood as a " chain of goals ", "chain of measures", linked together as a " chain of cause and effect " to reach the goal of development 4 .
Strategy is attributed to both strategic intentions and actual strategies, so it is necessary to distinguish between intended strategies and implemented strategies ( or execution strategies ). In practice, it is difficult to perfectly implement intended strategies, so execution strategies always have tolerances compared to intended strategies. Here the effect
4 Nguyen Bach Khoa (2004), International business strategy , Statistical Publishing House, Hanoi, pp.22-23