One of the most modern approaches followed by almost all corporations in the 21st is internationalization, where a successful firm ventures into the foreign markets and decides to go global in approach, which in turn converts these flourishing domestic businesses into Multinational enterprises (MNE’s) and improves sales and build brand reputation. One of the key features of an MNE is that although it has the company headquarters in one country, the production and operational activities are set up in more than one country for a number of reasons such as cheap labour sources, obtaining raw materials, advantage of tax differences and the protectionist barriers.

There are several important characteristics that are adopted by MNE’s such as large size of the firms and its international activities which are centrally governed by the parent firms. Such organisations, as a result of their experience, are also better able to adapt and respond to micro and macro environmental factors such as suppliers, competitors, customers, the government and other stakeholders as well as the political setup of a country, its economic policies and systems and the local culture. It also aims to gain access to the natural resources of new, potentially unexplored markets as well as to assets, patents, human resource and technical and managerial knowhow. These aims are fulfilled through strategic alliances with local, domestic companies ready to share and work towards a common goal.

Why do firms go Multinational?

There are various reasons as to why a company decides to go international.The Dunning Eclectic theory or the OLI paradigm highlights the advantages of these multinational corporations going overseas. Some of these have been outlined in detail as follows:

Ownership Advantages: Ownership advantages are usually intangible and can be transferred within the multinational firms at a cheaper price. The firm would possess monopolistic advantages as they would get easy access to the resources which are scarce in the home country of the firm. The barriers to entry would also be high, due to high setup costs of the business. They also possess the share of technology and information from the countries in which the expansion takes place that helps the firm.