The Transnational Media
Corporation and the economics
Of Global Competition

- The transnational corporation (TNC), as a system of organization, represents a natural evolution beyond the multinational corporation of the 1960s and 1970s.
- What distinguishes the transnational media corporation (TNMC) from other types of TNCs is that the principal commodity being sold is information and entertainment.
- The TNMC is the most powerful economic force for global media activity in the world today. As Herman and McChesney (1997) point out, transnational media are a necessary component of global capitalism.

The transnational media corporation

- The first myth is that such companies operate in most or all markets of the world. Although today’s TNMCs are highly global in their approach to business, few companies operate in all markets of the world.
- A second myth concerning TNMCs is that such companies are monolithic in their approach to business. In fact, just the opposite is true.

The purpose of a global media strategy

- Most companies do not set out with an established plan for becoming a major international company.
- In the beginning stages, the foreign office tends to be flexible and highly independent. As the firm gains experience, it may get involved in other facets of international business, such as licensing and manufacturing abroad.
- Historically, TNMC begins as a company that is especially strong in one or two areas.
- In Sum, most major corporations become foreign direct investors through a process of gradual evolution rather than by deliberate choice.

The globalization of markets

- The globalization of markets involves the full integration of transnational business, nation-states, and technologies operating at high speed.
- Globalization is being driven by a broad and powerful set of forces including worldwide deregulation and privatization trends, advancements in new technology, market integration and the fall of communism.

The rules of free market trade

- Today, there is only one economic system operating in the world and that system is called free market capitalism.
- The Cold War was a world of friends and enemies. The globalization world, by contrast, tends to turn all friends and enemies into competitors.
- A basic tenet of free market trade is that the private sector is the primary engine of growth.
- The rules of free market trade adhere to the principles of deregulation and privatization of business.
- Free market trade opens up banking and telecommunications systems to private ownership and competition, and provides a nation and its citizens with access to a wide variety of choices.
- It further attempts to eliminate, or at least reduce, tariffs and quotas on imported goods.
- In sum, free market trade in its varying forms provides the basic architecture for today’s global economy.

Foreign direct investment

- Foreign direct investment (FDI) refers to the ownership of a company in a foreign country.
- In a transnational economy, media decision making and FDI are largely based on economic efficiencies, with little regard for national boundaries.
- The five reasons why a company engages in FDI:
• Proprietary and physical assets
• Foreign market penetration
• Production and distribution efficiencies
• Overcoming regulatory barriers to entry
• Empire building

The risks associated with FDI

- The decision to invest in a foreign country can pose serious risks to the company operating abroad. The TNC is subject to the laws and regulations of the host country.
- There are the problems associated with political instability, including wars, revolutions, and coups.
- Changes in labor conditions and wage requirements are also relevant factors in terms of a company’s ability to do business abroad.
- Dymsza writes that FDI can occur only if the host country is perceived to be politically stable, provides sufficient economic investment opportunities, and has business regulations that considered reasonable.

Transnational media ownership

Mergers, acquisitions and strategic alliances

- Today’s TNMCs are taking advantage of deregulatory and privatization trends to make ever-larger combinations.
- In a merger transaction, two companies are combined into one company.
- An acquisition involves the purchase of one company by another company for the purpose of adding (or enhancing) the acquiring firm’s productive capacity.
- Strategic alliance is a business relationship in which two or more companies work to achieve a collective advantage.
- In sum, mergers, acquisition and strategic alliances are the most direct ways for a company to expand and diversify into new product lines without having to undergo the problems associated with a new startup.

When mergers and acquisition fail

- Not all mergers and acquisitions are successful.
- A failed merger or acquisition can be highly disruptive to both organizations in terms of lost revenue, capital debt and decrease in job performance.
- There are four reasons that help to explain why mergers and acquisitions can sometimes fail:
• The lack of a compelling strategic rationale.
• Failure to perform due diligence: the acquiring company only later discovers that the intended acquisition may not accomplish the desired objectives.
• Post-merger planning and integration failures
• Financing and the problem of excessive debt

Media and global finance

- The business of media and telecommunications is an industry characterized by high startup costs and high risk.
- In order to obtain the necessary financing, today’s media and telecommunication companies will either use their own money or seek the assistance of a financial lending institution.

The role of global capital markets

- A global capital market brings together those companies and individuals who want to invent money and those who want to borrow it.

Capital market loans

- Capital market loans are either equity loans or debt loans. An equity loan is made when a corporation sells stock to investors.
- Debt financing requires the corporation to repay a predetermined portion of the loan amount at regular intervals for a specified period of time.

Debt financing

- The TNMC, like any other company, needs to be able to invest in new product development as well as engage in potential mergers and acquisitions if and when it is deemed appropriate.
- The problem is that too much debt load can be highly destabilizing to an organization.

Business and planning strategies

- As today’s media and telecommunications companies continue to grow and expand, the challenges of staying globally competitive become increasingly more difficult.
- Strategic planning is the set of managerial decisions and actions that determine the long-term performance of a company or organization.
- Environmental scanning requires assessing the internal strengths and weaknesses of the organization as well as the external opportunities and threats to the organization.

Understanding core competency

- The principle of core competency suggests that a highly successful company is one that possesses a specialized production process, brand recognition or ownership of talent that enables it to achieve higher revenues and market dominance relative to its competitors.
- A company’s core competency is something the organization does especially well in comparison with its competitors.

Vertical integration (and cross media ownership)

- One common growth strategy is vertical integration, whereby, a company will control most or all of its operational phases.

Broadband communication

- The main driving force behind convergence is the digitalization of media and information technology.