Daily Management Review

Tough time for transnational companies


05/01/2017


During the past 20 years, the world capital markets, tech innovations and growth of new consumer markets around the world led to creation of large business platforms in the areas of finance, primary commodities, retail and information technology.



pixabay
pixabay
Scale of objects such as GE, Walmart, Google and Facebook have made the platforms not tied to any specific region – their activities extend on the world market.

Now, however, they risk to drown under its own weight, which will affect their development strategy in the world market.

First, the tax reform and a number of Trump’s protectionist measures can trigger retaliatory measures in other countries, primarily China. This can increase costs and reduce profits of international companies in all areas.

Secondly, governments are trying to intervene in order to regulate platforms of global companies, such as Airbnb and Uber. Trump is making modern information giants (Apple, Amazon, Google and Facebook) repatriate about $ one and half trillion offshore, European governments are suing monopolies over privacy policies, and China is tightening local requirements for data retention.

Further fate of such platforms will be much harder. Contrary to the popular view that global companies of America will experience the White House’s pressure, attractiveness of the global markets will force them to adapt to new conditions everywhere and consolidate their place in the market according to their internal needs. 

An example of such an eternal adaptation is Uber. The largest Chinese online taxi Didi Chuxing took over Chinese division of Uber. The latter was forced to agree in order to stop losing money and scrap together a capital for global investment.

Regional requirements and standards for data storage have an enormous impact, and world technology companies must obey new rules for source code or keeping more data inside the country. Given that Microsoft and Amazon compete for the market at the world level, degree of their compliance with regulatory requirements can determine outcome of each battle.

America has come late to a new policy of industrial landscape modeling, where emerging markets are becoming more sophisticated players. Trade under Trump and regulatory suggestions involve a much more aggressive fight in the global supply-side goals. Given that Trump intends to return production back to the US, the big export markets will employ non-tariff barriers to guarantee that goods sold in their markets are produced on their territory.

Indeed, the campaign #MakeInIndia forced the largest defense contractor of America Lockheed Martin to pull back to joint ventures to obtain lucrative contracts. Also, the bar was raised for Apple, which should obtain a license to open local flagship stores. Chinese Xiaomi and Indian MicroMax are developing momentum throughout Asia. There won’t be a surprise if soon Western business will strive to become part of the Chinese and Indian suppliers, and not vice versa.

There are many other consequences of more fragmented regulatory and legal regulation. After the US Congress didn’t manage to update the charter of the Export-Import Bank two years ago, GE brought several hundred jobs for production of turbines to France, having received the regulatory authorities’ approval to separate capacities.

Companies can also be encouraged by a more progressive regulatory framework. For example, Domino's Pizza in partnership with Flirtey drones’ operator began testing air delivery of pizza in New Zealand. These two American companies have focused on seven American markets with more inviting conditions.

Emerging markets are also looking for a loophole to break transnational transfer pricing as harshly as Congress and US watchdogs seek to deal with inversions. Be it Indonesia or India, states have stepped up audits, elevated capital gains taxes and required each country to report tax and profits revenues to strengthen its local presence. Almost every time, companies continued to maintain access to fast-developing markets. In effect, local governments want foreign business to act as private investment companies that fund local companies and work in joint ventures. 

source: qz.com






Science & Technology

Germany Introduces The First Ever Train To Run On 100% Hydrogen

Germany Plans On Cyber Security Research To End Reliance On U.S. Tech

Fuchsia will kill Android by 2023: Top 5 facts about the new OS

New Study Finds Goats Interact More With Happy People

More than 32 thousand "smart" houses under threat of hacker attack

Internet addiction and children: Global plague

Apple takes up to develop Apple Watch for health monitoring

Hyperloop is growing in Europe

Analysts: US gamers prefer mobile games

Google Assistant Winner Of Head-To-Head Test Of Digital Assistants, Beats Siri And Alexa

World Politics

World & Politics

Ex-Brexit Minister Said A ‘Reset’ Is Needed For Brexit Talks

10 countries with the best healthcare systems

Foreign Experts To Be Allowed By North Korea For Permanent Destruction Of Missile Sites

Ireland recovers €14.3 billion from Apple

Is China going to cancel its birth limit policy?

The US is ready to start negotiations with China

US and China start 5G race

Is Czech Republic posing a threat to the European Union?