The Transnational Media Corporation and the Economics of Global Competition

Detailed outline of Chapter Four

Transnational Corporation- (TNC), strategic decisions and allocation of resources based on economic goals and not national borders Transnational Media Corporation- (TNMC), commodity for sale news and entertainment, most powerful force in economy for global media activity, pivotal to global capitalism
- The Transnational Media Corporation
1 Mythsi. TNMCs operate in all markets of the world- TNMCs tend to choose preferred markets, usually home market
2 TNMCs have one singular business approach- TNMCs have different strategies depending on their leadership
- The Purpose of Global Media Strategy
1 Most TNMCs become foreign direct investors gradually and do not set out to do so at the beginning of their company
2 TNMCs begin ad strong co. in a couple of areas
- The Globalization of Markets
1 The Rules of free market tradei. Free market capitalism, deregulation, private sector = sources of growth, opening of domestic market., competition and choice
2 Foreign Direct Investmenti. FDI = the ownership of a company in a foreign country
- Five reasons for FDI
1. Proprietary and Physical Actiona. FDI for resources and assets instead of creating brand
2. Foreign Market Penetration
3. Production and Distribution Efficienciesa. Lower labor costs, tax relief, better tech. infrastructure
4. Overcoming Regulatory barriers to entrya. Invest abroad to enter a mkt that is heavily tariffed
5. Empire Buildinga. Competitiveness among media corps

Laws and rules of host country
Potential political instability
Socialist/nationalist govs. Anti-foreign businessiv.
Need to do a country risk assessment before investing
- Transnational Media Ownership
A. Types of business partnershipsi. Mergers- two companies combined into one (ex Time and Warner à Time Warner in 1989)
1. Acquisitions- one company buys another to add/ acquire the other’s productive capacity (Ex- Viacom buys CBS in 1999)
2. Strategic Alliances- business relationship btwn.
3. or more companies to work towards a collective advantage (Ex- Walt Disney licenses Tokyo Disneyland)
- When Mergers and Acquisitions Fail- lost revenue, capital debt, decrease in job performancei. Four reasons for failure
1. Lack of compelling strategic rationale (to merge in the first place)
2. Failure to perform due diligence- intended acquisition may not achieve objectives
3. Post-merger planning and integration failure
4. Financing and excessive debt
- Media and Global Finance-
- Media and telecommunication entails high start up costs and risk, size and reputation of TNC predict ability to raise capital in foreign market
1 The Role of Global Capital Mkts.i. Global capital market
2. Financial groups- intermediaries between borrowers and investors (J.P. Morgan, U.S. Bank, etc)
2 Capital Market. Loansi. Equity loans- corporation sells stock to investors
3. Debt loans- corporations must pay predetermined portion of loan amount at regular intervals
4 Debt Financingi. Need money to invest in product too much debt can be destabilizing
- Case study- News Corps.
1. Murdoch borrowed a lot to invest in new ventures to earn more and pay off what he borrowed
- Business and Planning Strategies
A. Core Competency- company has either a specialized product production, brand recognition, or ownership of talent enabling it to dominate market. over competition
B. Vertical Integration (Cross media ownership)
- Company controls most or all of the operational phases.
1. Case study- Time Warner (Time mergers with Warner, then buys Turner Broadcasting systems, then mergers with AOL)
C. Broadband Communicationi. Convergence of technologies and services
- Ability to distribute multi-channel info and entertainment services to the home
- Transnational Media and the Mktplace for ideas
1Transnational Media and Economic Consolidationi. Highly concentrated to entry
2 Single industry concentration (Ex- Microsoft has 80% of world PC mkt)
Cross-media ownership (Ex- Viacom in many areas like broadcast TV (CBS, UPN), cable (MTV, Nickelodeon), film (Paramount), and radio (Infinity Broadcasting).B. Deregulation paradoxi. Deregulation is meant to bring open mkt for new service providers but can actually cause lack of competition and oligopolies
C. The Market. place of ideas
1. Small number of dominant media co. control the mkt. place of ideas
2. Influences public opinion disproportionately
3 Global Competition and Diffusion of Authorityi. Economic Darwinism and pursuit of profits
4. Lowered standards of quality journalism, blurs entertainment with journalism
- TMNCs and Nation-states
1. TNMCs have power second only to nation-states
2. Benefits vs. downfalls of TNMCs (economic activity vs. cultural invasions and threat to pol. sovereignty)
3. TNMC and host nation share responsibility